GR L 2934; (November, 1951) (Digest)
G.R. No. L-2934 November 29, 1951
SY KIONG, petitioner-appellee, vs. MARCELINO SARMIENTO, in his capacity as Treasurer of the City of Manila, respondent-appellant.
FACTS
Petitioner Sy Kiong, the owner of a duly licensed grocery store in Manila and an importer of flour, sells flour either to bakeries or to retail dealers for resale. In September 1948, the City Treasurer of Manila assessed against him a deficiency municipal license tax of P566.50, claiming it was due on his gross sales of flour to retail dealers for resale under Ordinance No. 2723, as amended. Instead of paying, Sy Kiong filed an action for declaratory relief to determine his liability for the tax. The respondent City Treasurer admitted the factual allegations but contended the sales were retail sales subject to the ordinance. The case was submitted on questions of law, and the Court of First Instance of Manila ruled in favor of Sy Kiong, declaring him not liable for the tax. The City Treasurer appealed.
ISSUE
Whether the sales of flour made by petitioner to bakeries (to be manufactured into bread) are considered retail or wholesale for purposes of the municipal license tax under Ordinance No. 2723 of Manila.
RULING
The Supreme Court reversed the decision of the lower court, holding that the sales of flour to bakeries are retail sales subject to the municipal license tax. The Court applied the criterion established in City of Manila vs. Manila Blue Printing Co., which determines whether a sale is retail or wholesale based on the character of the purchaser: if the purchaser buys for his own consumption, it is retail; if for resale, it is wholesale. The Court found that a bakery purchasing flour to manufacture into bread is a consumer, not a reseller of the flour itself, because the flour undergoes a physical or chemical process and is sold in an altered form (as bread). The Court noted the absence of any statutory definition of “retail gross sales” in the ordinance or the National Internal Revenue Code. It relied by analogy on Buenaventura vs. Collector of Internal Revenue, which held that sales of fish to a hotel (to be prepared as food) are retail sales, as the hotel is not a reseller of the fish in its original form. The Court acknowledged that in many U.S. states, such sales to manufacturers are considered wholesale by express statutory provisions, but absent similar Philippine law, it declined to extend such interpretations judicially. Thus, the sales were deemed retail, making Sy Kiong liable for the tax.