G.R. No. L-25653, 28 February 1985

FACTS:

It appears that during the tax period in question, respondent taxpayer realized an income of P630,635.62 from both its activities as sales representative and as distributor of American manufacturers/suppliers and paid thereon P37,837.94 as broker’s percentage tax on the assumption that the income consisted entirely of commissions.

Later however respondent sought a partial refund of P21,620.36 on the ground that of the total income of P630,635.62, P360,339.35 was not broker’s commission but simply overprice or profit (plus exchange income on overprice) realized from ordinary sales of machineries and equipment it had purchased from American companies. The respondent ask for a refund because it found out that it was overprice during the sales.

ISSUE:

Whether the amount earned by respondent taxpayer in its capacity “as distributor” of American machineries and equipment should be considered as commission?

RULING:

One of the purposes of petitioner corporation, as stated in its articles of incorporation, is “to make and enter into all kinds of contracts, agreements, and obligation with any persons, corporation or corporations, or other associations for the purchasing, acquiring, selling, or otherwise disposing of goods, wares, and merchandise of all kinds, either as principal or agent, upon commission, consignment, or indent orders.” (BIR rec., pp. 43- 48.)

Petitioner is, therefore, authorized to act either as principal or agent in the transaction of its business.

However, the evidence of record regarding petitioner’s transactions which gave rise to the income in question indicates the status of petitioner as an independent dealer and not as a commercial broker. Petitioner’s contracts with several U.S. manufacturers indubitably show that it acted as an independent dealer. A Commercial broker includes persons other than importers, manufacturer, producers, or bona fide employees, who, for compensation or profit, sell or bring about sales for purchases of merchandise for other persons, or bring proposed buyers and sellers together, or negotiate freights or other business for owners of vessels, or other means of transportation, or for the skippers, or consignors or consignees of freight carried by vessels or other means of transportation. The term includes commission merchants.

*Case digest by Jan Robert M. Corre, JD-4, Andres Bonifacio Law School, SY 2019-2020