G.R. No. L-13186; January 28, 1961
BISLIG BAY LUMBER COMPANY, INC., petitioner, vs. COLLECTOR OF INTERNAL REVENUE, respondent.

FACTS

The Collector of Internal Revenue assessed Bislig Bay Lumber Company, Inc. for deficiency sales tax and surcharge on its shipments of logs to buyers in Japan from June 14, 1951, to June 19, 1953. The petitioner contested the assessment, arguing that the sales were not subject to Philippine sales tax because title to the logs passed to the foreign buyers outside the Philippines. The sales were negotiated by the petitioner’s agent in Japan and were executed under F.O.B. Bislig or C. & I., Bislig terms. The shipping documents, including bills of lading consigned “to the order of the seller,” were endorsed in blank and presented to a Manila bank for collection under letters of credit opened by the buyers.
The Court of Tax Appeals upheld the assessment, ordering the petitioner to pay P175,681.30. The petitioner appealed to the Supreme Court, reiterating that title passed abroad, citing factors such as the consignment of logs to its order, the issuance of all export documents in its name as exporter, and the absence of the buyers’ legal representatives in the Philippines to receive delivery.

ISSUE

Whether the sales of logs shipped to Japan under F.O.B. and C. & I. terms are subject to the Philippine sales tax under Section 186 of the National Internal Revenue Code, as amended.

RULING

Yes, the sales are subject to tax. The Supreme Court affirmed the Tax Court’s decision, ruling that ownership of the logs passed in the Philippines. The legal logic hinges on the application of established principles governing the transfer of title in export sales. The Court found the factual circumstances indistinguishable from its prior rulings in Misamis Lumber Co., Inc. vs. Collector and Western Mindanao Lumber Development Co., Inc. vs. Court of Tax Appeals.
The critical determinative factors were that the freight charges were paid by the buyers, the shipments were insured for the buyers’ benefit (with any seller-taken policies endorsed in blank to them), and most importantly, the seller endorsed the bills of lading and other documents in blank and presented them to a local bank for payment under irrevocable letters of credit. This act of endorsing and delivering the documents of title to the bank as the buyers’ agent constituted constructive delivery of the logs to the buyers within the Philippines. The Court dismissed the petitioner’s cited formalities—such as the consignment clause and the exporter’s name on documents—as mere contractual schemes to secure payment, which do not alter the legal effect of the document transfer. Consequently, the transfer of ownership occurred domestically, making the transactions subject to the sales tax.