G.R. No. L-8799 August 31, 1956
THE CITY OF MANILA, plaintiff-appellee, vs. THE INTER-ISLAND GAS SERVICE, INC., defendant-appellant.

FACTS

The City of Manila filed an action to collect a deficiency municipal tax from Inter-Island Gas Service, Inc. The tax was assessed under Section 1, Group 2, of Ordinance No. 1925, as amended by Ordinance No. 3364, which imposes quarterly license fees on retail dealers in new merchandise based on gross sales. The defendant, during specified quarters from 1949 to 1951, sold cooking appliances and liquified petroleum gas at retail. It paid taxes based only on its sales of cooking appliances, not on its sales of liquified gas. The parties stipulated the amounts of sales and that the defendant had paid fees under a separate ordinance (No. 3259) regulating the storage, installation, use, and transportation of compressed and liquefied inflammable gases. The Court of First Instance of Manila ruled in favor of the City, ordering the defendant to pay the deficiency tax. The defendant appealed.

ISSUE

The main issue is whether liquified flammable gas falls within the scope of “merchandise” under Section 1, Group 2, of Ordinance No. 1925, as amended, thereby making retail dealers thereof subject to the license tax. Subsidiary issues are: (1) whether the ordinance, if applied to liquified gas, is within the Municipal Board’s legislative powers; (2) whether the tax imposed is a percentage tax requiring presidential approval; and (3) whether the imposition constitutes double taxation.

RULING

The Supreme Court affirmed the lower court’s decision.
1. Liquefied flammable gas is “merchandise” under the ordinance. The term “merchandise” ordinarily means objects of commerce, goods, or commodities bought and sold in trade. Since liquified gas is bought and sold, it qualifies. The ordinance’s enumeration of examples like hardware and cooking utensils is illustrative, not exclusive. The ordinance does not follow the exact classification of the City’s Revised Charter ( Republic Act No. 409 ), and the term “merchandise” therein is used in its general, unrestricted sense.
2. The City had the authority to impose the tax under its Charter, whether derived from the power to tax dealers in general merchandise or the power to tax the sale of highly combustible materials. The source of authority is immaterial since the power to tax dealers in liquified gas is conceded.
3. The tax is not a percentage tax but a graduated tax. The fee structure is based on fixed amounts corresponding to ranges of gross sales, not a constant ratio or percentage of the sales.
4. There is no unconstitutional double taxation. The fees paid under Ordinance No. 3259 were license fees charged under the police power for regulation (storage, installation, etc.), not a revenue tax. Furthermore, double taxation is not prohibited by the Constitution.
Therefore, the defendant is liable to pay the deficiency tax.