TITLE: VEGETABLE OIL CORPORATION, Plaintiff-Appellee,

vs.
WINCESLAO TRINIDAD, Collector of Internal Revenue of the Philippine
Islands, Defendant-Appellant.
G.R. No. 21475 , March 26, 1924 , 45 Phil. 822

FACTS:
In 1922, Vegetable Oil Corporation (VOC), a foreign corporation engaged in the
purchase of copra for the manufacture of coconut oil sold in the US, filed a refund
claim for the merchants’ percentage taxes levied on consignments under section
1459 of Act No. 2711. VOC paid the tax dues under protest, all of which were
overruled by the CIR.

The lower court ruled in favor of Vegetable Oil for the recovery of the payments
made. CIR appealed the decision, stating, among others, that “the tax upon
things consigned abroad shall be refunded upon satisfactory proof of the return
thereof to the Philippine Islands unsold.”t.

ISSUE/S:

Whether or not it was proper to issue the merchants’ percentage tax on plaintiff?

RULING:

Yes.

The SC held that VOC is a merchant within the purview of the statute and is
liable for the taxes levied. The tax on consignments is “a privilege tax pure and
simple;” it is a tax on the business of consigning commodities abroad from these
Islands.

The definition of the word “merchant” as a person who is engaged in the sale,
barter, or exchange of personal property is merely descriptive of the persons who
are required to pay the tax and does not mean that, in order to exact from them
the payment of the consignment tax, the government must also be in position to
impose taxes on their sales, barter, or exchange.

Finally, although the Philippine government cannot collect privilege taxes on

sales taking place in foreign countries, it can nonetheless, with the approval of
Congress, legally levy taxes on consignments from Philippine ports.

DOCTRINE/PRINCIPLE:

TAX ON CONSIGNMENT, NOT A SALES TAX. — The tax on consignment is

not a sales tax properly speaking though it provided for in the same section of the
Law as the sales tax.
CONSIGNMENT OF GOODS NOT FOR SALE. — Merchants may be required to
pay the tax on consignments though it does not appear that the commodities,
goods, wares, and merchandise consigned are destined for sale.