G.R. No. and Date: G.R. Nos. L-11457 and L-11458, March 31, 1917

FACTS:
Two criminal cases were filed against Sixto Laxa in the Court of First Instance of Pampanga. In the first case (No. 1697), he was charged with violating Article 169 in relation to Section 45(p) of Act No. 2339 (the Internal Revenue Law) for engaging in the business of selling fish without first paying the required license tax. In the second case (No. 1698), he was charged with violating Section 169(a) in relation to Sections 39 and 40 of the same Act for failing to file the required return of his business receipts for the purpose of paying the percentage tax on sales.

Laxa pleaded not guilty to both charges. During the joint trial, he admitted that he owned three fishponds in Sexmoan, Pampanga, from which he sold fish directly to buyers at the ponds and, at times, through his children or servants in the market. He stated he had never refused to pay any tax but believed he was not covered by the tax laws on merchants, as he considered fish from his ponds to be agricultural products. Consequently, he had not paid the merchant’s license tax or filed the corresponding return.

The trial court found him guilty in both cases and sentenced him to pay a fine and the required tax. Laxa appealed, arguing that fish from his ponds were agricultural products, that he was not a merchant, that he was exempt under the law, and that the law violated constitutional uniformity in taxation.

ISSUE:
1. Whether fish raised in fishponds are “agricultural products,” exempting the owner from the merchant’s tax under the Internal Revenue Law.
2. Whether an owner who sells fish from his own fishponds is a “merchant” subject to the percentage tax on sales.
3. Whether the Internal Revenue Law, by imposing a merchant’s tax on fishpond owners who are also subject to a land tax, violates the constitutional requirement of uniformity of taxation.

RULING:
1. Fish are not agricultural products. The Supreme Court held that fish raised in fishponds cannot be considered products of the land. For something to be a product of the land, there must be a direct relation where the product exists and reproduces by virtue of the soil itself. Fish in ponds feed on moss or verdure growing in the water, not from the soil. Products of the land are those that sprout and grow in it, such as grasses, trees, or cultivated plants. The Court clarified that prior rulings classifying fishponds as “agricultural lands” for purposes of public land classification under the Act of Congress of July 1, 1902, did not mean that fish are agricultural products. That classification was based on the land being neither timber nor mineral, not on the nature of its produce.

2. The owner is a “merchant” subject to tax. The Court ruled that Laxa, by regularly selling fish from his ponds, was engaged in the business of a merchant as defined by the Internal Revenue Law ( Act No. 2339 , and later the Administrative Code). The law imposed a percentage tax on merchants, which included persons selling the products of their own fisheries. The fact that he sold the fish at the ponds or through agents in the market constituted engaging in business. Therefore, he was required to pay the corresponding license tax and file the required return.

However, regarding the first case (No. 1697), the Court found that the specific charge under Section 45(p) for acting as a “peddler of merchandise traveling from place to place” did not apply to Laxa, as he sold at his ponds or through agents in the market and was not a traveling peddler. Thus, he was acquitted of that specific charge.

3. No violation of uniformity of taxation. The Court held that the tax system did not violate constitutional uniformity. Uniformity exists when taxes are levied equally upon all persons or property within the same class. The land tax (a tax on property) and the merchant’s percentage tax (a tax on occupation or business) are distinct and based on different classifications. Fishpond owners, like Laxa, who engage in selling their fish, belong to the class of merchants and are treated the same as other merchants. The legislature has the discretion to create different tax classifications, such as imposing both a property tax and an occupation tax on the same individual, provided the classification is reasonable.

DISPOSITIVE PORTION:
In G.R. No. L-11458 (Case No. 1698): The judgment of conviction for failure to file the required return is AFFIRMED.
In G.R. No. L-11457 (Case No. 1697): The judgment of conviction for engaging in business without a license as a peddler is REVERSED, and the defendant is ACQUITTED.

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