GR L 11530; (June, 1960) (Digest)
G.R. No. L-11530; June 30, 1960
J. M. TUASON & CO., INC., petitioner, vs. COLLECTOR OF INTERNAL REVENUE, respondent.
FACTS
Petitioner J. M. Tuason & Co., Inc., a corporation engaged in developing subdivisions and promoting sales, entered into a contract with Varsity Hills, Inc. on November 6, 1951. Under this contract, Tuason & Co. was to subdivide Varsity Hills’ residential land in Quezon City, develop it with streets, utilities, etc., recommend sales prices, sign sales/lease contracts, collect accounts, and handle administrative expenses. In compensation, Tuason & Co. was entitled to a 10% commission on all sales and an additional 8% “administration fee” on gross collections. From the fourth quarter of 1951 to the second quarter of 1953, Tuason & Co. received P116,331.21 as this administration fee. The Collector of Internal Revenue assessed a broker’s tax on this administration fee, amounting to P8,724.84 (plus surcharge). Tuason & Co. paid under protest, sought a refund, and, upon denial, appealed to the Court of Tax Appeals, which sustained the assessment.
ISSUE
Whether the 8% “administration fee” received by Tuason & Co. under its contract with Varsity Hills, Inc. is subject to the broker’s percentage tax, considering the nature of the services rendered.
RULING
Yes, the administration fee is subject to the broker’s tax. The Supreme Court affirmed the decision of the Court of Tax Appeals. The contract, though involving multiple prestations (subdivision development, sales documentation, collection, etc.), is an indivisible contract of brokerage. The consideration for all services is single, entire, and indivisible because compensation (both the 10% commission and the 8% administration fee) was contingent upon and derived from the proceeds of the sale or lease of the subdivided lots. The subdivision development was a necessary incident and preparatory step to the sale of lots, while the documentation and collection were integral parts of the sales negotiations. The parties did not apportion the fees for each distinct service, making the entire compensation part of a brokerage relationship. Therefore, the entire compensation, including the administration fee, is subject to the broker’s tax.