MANILA TRADING AND SUPPLY CO., plaintiff-appellee, vs. CITY OF MANILA, ET AL., defendants-appellants.
FACTS
On December 5, 1950, the Municipal Board of Manila approved Ordinance No. 3420, imposing a quarterly municipal tax on wholesale dealers in general merchandise based on their quarterly sales. This was amended on May 4, 1954, by Ordinance No. 3634 to include wholesale dealers of automobiles and other motor vehicles. Pursuant to the ordinance, the city treasurer demanded payment of the tax from Manila Trading and Supply Co. on March 17, 1955, claiming it was a wholesale dealer under the ordinance. The plaintiff protested on March 22, 1955, arguing it was not a wholesale dealer but a manufacturer of cars and trucks, and did not sell its products at a store but at its main office. The protest was denied, and the plaintiff paid the tax under protest. It then filed an action in the Court of First Instance of Manila for recovery of the tax. After amending its complaint to seek a refund specifically for wholesale taxes on its sales of assembled motor vehicles amounting to P121,983.47, the lower court ruled in favor of the plaintiff, ordering the defendants to refund said amount. The defendants appealed.
The plaintiff is a domestic corporation with its principal office and establishment in Port Area, Manila, consisting of four buildings on adjacent leased lots. Building No. 1 houses its assembly plant; Building No. 2 is a warehouse; Building No. 3 contains executive, sales, and accounting offices; and Building No. 4 houses the service department. Previously an importer and seller of finished vehicles, the plaintiff shifted to importing spare parts in completely knock-down condition and assembling them into motor vehicles. It follows a detailed manufacturing process involving welding, finishing, painting, oven-drying, assembly of frames, axles, engines, and final inspection. The plaintiff does not maintain a wholesale store or display vehicles for sale. It imports raw materials and assembles vehicles only upon receiving purchase orders from customers and does not keep stock on hand for wholesale sale.
ISSUE
Should the plaintiff be considered a wholesale dealer in motor vehicles subject to the municipal tax under Ordinance No. 3420, as amended by Ordinance No. 3634, pursuant to the Revised Charter of the City of Manila, or is it a manufacturer not included within the term “dealers”?
RULING
The Supreme Court affirmed the lower court’s decision, holding that the plaintiff is a manufacturer and not a wholesale dealer under the ordinance. The authority to tax under Section 18(o) of the Revised Charter of the City of Manila (Republic Act No. 409) expressly includes “importers and indentors” within the term “dealers in general merchandise” but does not include “manufacturers.” The terms “dealer” and “manufacturer” are distinct. A dealer is one who buys and sells goods without altering their condition, acting as an intermediary between producer and consumer. A manufacturer, on the other hand, converts raw materials into a different product through skill and labor. Citing Central Azucarera Don Pedro vs. City of Manila, the Court reiterated that a manufacturer who sells its products directly from its office or warehouse without maintaining a separate store for selling does not engage in the business of a dealer. Since the plaintiff assembles vehicles only upon customer orders, does not keep a wholesale stock, and sells directly from its premises without a separate store, it is a manufacturer. Therefore, it is not subject to the wholesale dealer tax imposed by the ordinance. The refund of P121,983.47 was properly ordered.
