G.R. No. L-64768 November 5, 1987
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF TAX APPEALS and WINTHROP-STEARNS, INC., respondents.

FACTS

Winthrop-Stearns, Inc., a domestic corporation, manufactured and sold various “Tussy” products, including Lemon Hand and Body Lotion, Hand and Body Lotion, Lemon Moisturizer, and Lemon Cleansing Cream. For sales from the fourth quarter of 1975 to the fourth quarter of 1976, the corporation paid a 70% sales tax under Section 184(b) of the 1939 National Internal Revenue Code, which applies to toilet preparations. It later filed a claim for refund, contending these products were actually “medicinal preparations” subject only to a 7% sales tax under Section 186 of the same Code.
The corporation argued before the Court of Tax Appeals (CTA) that the products contained medicinal ingredients like allantoin and Vitamin A and were certified as “medicated.” The CTA ruled in favor of Winthrop-Stearns, declaring the products to be medicinal preparations and ordering a tax credit for the overpayment. The Commissioner of Internal Revenue appealed this decision to the Supreme Court.

ISSUE

Whether the “Tussy” products in question are taxable as “toilet preparations” under Section 184(b) of the Tax Code or as “medicinal preparations” under Section 186.

RULING

The Supreme Court reversed the CTA decision, ruling that the “Tussy” products are toilet preparations subject to the 70% sales tax. The Court applied the definition of “medicinal preparations” established in La Tondeña Inc. v. Collector of Internal Revenue, which requires that such articles are of use, or are fairly and honestly believed by the prescriber or user to be of use, in curing, alleviating, palliating, or preventing some disease or affliction of the human body.
Examining the products’ characteristics and marketing, the Court found they were principally represented to the public as items for cleansing, moisturizing, lubricating, and improving skin appearance—making skin soft, smooth, and fragrant. Their function was to enhance bodily appearance and skin health, not to treat a specific disease or affliction. The Court held they fell squarely within the definition of a “toilet preparation,” which is any preparation intended to affect and improve bodily appearance. The manufacturer’s own marketing strategy, aimed at attracting the general buying public with beauty-oriented claims rather than medical therapeutic claims, substantiated this classification. The perception built by the manufacturer over time lent substance to the claim that the products were toilet articles.