G.R. No. L-11962; August 27, 1918
PHILIP C. WHITAKER, plaintiff-appellee, vs. JAMES J. RAFFERTY, as Collector of Internal Revenue of the Philippine Islands, defendant-appellant.

FACTS:
On June 1, 1914, Philip C. Whitaker entered into a contract with “La Corporacion de Padres Agustinos Recoletos de la Provincia de San Nicolas de Tolentino en Filipinas,” transferring to him a lease of a hacienda (farm) including the cattle thereon. On March 31, 1915, Whitaker sold 1,000 head of cattle from that hacienda to Ricardo E. Barretto. The Collector of Internal Revenue assessed and collected a merchandise tax on the sale under Section 40 of Act No. 2339 . Whitaker paid the tax under protest. It was admitted that Whitaker also owned and operated another farm where he raised and occasionally sold cattle, but such sales were made only to clear his herds of undesirable stock.

ISSUE:
Whether Whitaker is a “merchant” as defined under Section 40 of Act No. 2339 and is therefore liable to pay the internal revenue tax on the sale of the cattle.

RULING:
No. The Supreme Court affirmed the lower court’s judgment, holding that Whitaker was not a “merchant” liable for the tax. Section 40 of Act No. 2339 imposed a tax on merchants engaged in the sale, barter, or exchange of personal property, defining a “merchant” as “a person engaged in the sale, barter, or exchange of personal property of whatever character.” The Court emphasized that to be “engaged” in such activity, a person must be occupied or employed in it habitually or as a business. A single or occasional salesuch as selling cattle acquired as part of a farm lease or to clear undesirable stockdoes not constitute being “engaged” in the sale of personal property as a merchant. Thus, the tax collected was illegal, and Whitaker was entitled to a refund.