G.R. No. L-48466; August 30, 1943
Case Parties/Title: THE CITY OF MANILA, plaintiff-appellee, vs. MANILA BLUE PRINTING CO., INC., defendant-appellant.

FACTS

The City of Manila sued Manila Blue Printing Co., Inc. for unpaid quarterly license fees for the years 1938, 1939, and the first quarter of 1940 under City Ordinance No. 1925, as amended. The ordinance imposed license fees on “retail dealers” based on their gross sales per quarter. The defendant, engaged in selling stationery and office supplies, reported and paid fees only on its sales to private persons and entities. It excluded from its reported gross sales its substantial sales to the Commonwealth of the Philippines (through the Division of Purchase and Supply), which ranged from about thirty-one thousand to fifty-two thousand pesos per quarter, arguing these sales were “wholesale” and thus exempt from the retail license fee. The defendant sold these supplies to the Government at prices 10% to 50% lower than its prices to private purchasers. The trial court held that sales to the Government, being made directly to the consumer and not to a dealer for resale, were retail sales subject to the license fee.

ISSUE

Whether the sales made by the defendant-appellant to the Government are “retail” or “wholesale” within the meaning of the enabling law (Section 2444(m-2) of the Revised Administrative Code, as amended) and the implementing city ordinance, for the purpose of determining the license fee based on gross sales.

RULING

The Supreme Court affirmed the trial court’s judgment, holding that the defendant’s sales to the Government were retail sales and must be included in the gross sales subject to the license fee.
The Court rejected the defendant’s contention that sales in large quantities are wholesale. It identified two possible criteria for distinguishing retail from wholesale sales: (1) the quantity sold (small vs. large), and (2) the nature of the buyer (consumer vs. merchant who resells). The Court held that the Legislature (in the enabling Act) and the Municipal Board (in the ordinance) intended the second criterion—the nature of the buyer.
The Court reasoned:
1. Merchants are generally classified as wholesalers (who sell in large quantities to retailers) or retailers (who sell directly to consumers). All sales by a merchant classified as a “retail dealer” are presumed to be retail sales, regardless of quantity.
2. Adopting the quantity criterion would make the ordinance illusory and impracticable, as terms like “large” and “small” are relative and no definite quantitative standard was set in the ordinance. If the intent was to exclude large sales, the ordinance would have specified a monetary threshold.
3. The license fee is a tax on the seller (the retail dealer), not on the individual sales. The amount of each sale is immaterial; what matters is the nature of the seller’s business. All sales made by a retail dealer must be included in the gross sales for computing the fee.
4. The Division of Purchase and Supply is not an independent mercantile establishment but a government office purchasing supplies for the Government’s consumption. Sales made to it are sales to the ultimate consumer.
The Court also denied the appellee’s (City’s) prayer in its brief to increase the judgment amount, as the City had agreed to a reduced amount before the trial court and did not appeal the judgment.
The judgment of the trial court was affirmed, with costs against the appellant.