G.R. No. L-5896; August 31, 1955
A. SORIANO Y CIA., petitioner-appellant, vs. COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
FACTS
Petitioner A. Soriano y Cia. was engaged in selling surplus goods acquired from the Foreign Liquidation Commission. In 1947, it sold 57 tractors to the United Africa Co., Ltd. The tractors were located in various U.S. military bases in the Philippines. The buyer’s representative, Tex Taylor, selected the tractors at the bases, and petitioner secured their release. The tractors were moved to petitioner’s yards (Pieco Yard and Sta. Mesa Yard) in Manila for inspection, testing, and reconditioning. Those approved by Taylor were invoiced. Petitioner delivered the tractors to the pier in Manila f.a.s. (free alongside ship), and they were shipped to East Africa. The Collector of Internal Revenue assessed a sales tax and surcharge on the gross sales, which was affirmed by the Board of Tax Appeals. Petitioner contested the liability, arguing the sale was not domestic.
ISSUE
Whether petitioner is liable for the sales tax under Section 186 of the National Internal Revenue Code on its gross sales of the 57 tractors to the United Africa Co., Ltd.
RULING
Yes, petitioner is liable for the sales tax. The Supreme Court affirmed the decision of the Board of Tax Appeals. The Court held that petitioner was an importer of the tractors, as it acquired title to surplus equipment from U.S. bases within the Philippines and brought them out. The sale was an original domestic sale subject to tax. Title to the tractors passed to the buyer not at the army bases but only upon delivery f.a.s. at the pier in Manila, as evidenced by: (1) petitioner’s admission that delivery was f.a.s. Manila; (2) the rule that property passes on delivery at the wharf under an f.a.s. contract; (3) petitioner’s letters stating the buyer’s representative had no authority to accept delivery, only to inspect condition; (4) petitioner paid delivery charges from the bases to the pier; (5) invoices described tractors with petitioner’s unit numbers from its yards; and (6) inspection and acceptance occurred at petitioner’s yards. The tax is on the sales transaction, not the property, and the situs of the sale was the Philippines. The repeal of the consignment tax on exports (Section 187) did not repeal the sales tax (Section 186), and the legislative policy to encourage exports applies to locally produced or manufactured goods, not to the exportation of imported surplus tractors needed for domestic agriculture.