KER VS. LINGAD G.R. No. L-20871 (April 30, 1971)

Melecio R. Domingo, then Commissioner of Internal Revenue assessed Ker & Co. and found the sum of P20,272.33 as the commercial broker’s percentage tax, surcharge, and compromise penalty for the period from July 1, 1949 to December 31, 1953. Ker & Co petitioned that the request be cancelled, but the petitioned was turned down. Kr & Co. then filed a petition for review with the Court of Tax Appeals. Commissioner Domingo maintained his stand that the petitioner should be taxed in such amount as a commercial broker. The liability arose from a contract that Ker & Co. had with the United States Rubber International, where Ker & Co. was designated as the distributor and United States Rubber International as the company. Ker & Co., as Distributor, is required to exert every effort to have the shipment of the products in the maximum quantity and to promote in every way the sale thereof. The prices, discounts, terms of payment, terms of delivery and other conditions of sale were subject to change in the discretion of United States Rubber International. All specifications for the goods ordered were subject to acceptance of United States Rubber International and required to accept such goods shipped as well as to clear the same through customs and to arrange for delivery in its warehouse in Cebu City.

Whether or not the relationship created between Ker & Co. and United States Rubber International is one of vendor and vendee or broker and principal.

The relationship between Ker & Co. is one of brokerage or agency. According to the National Internal Revenue Code, a commercial broker “includes all persons, other than importers, manufacturers, producers, or bona fide employees, who, for compensation or profit, sell or bring about sales or 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 shippers, or consignors or consignees of freight carried by vessels or other means of transportation. The term includes commission merchants.” In the language of Justice J. B. L. Reyes, who penned the opinion: “Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the company’s control, the relationship between the company and the dealer is one of agency.” The relationship between Ker & Co. and United States Rubber International was not one of seller and purchaser, if that was the intention, then it would not have included covenants which in their totality would negate the concept of a firm acquiring as vendee goods from another. Instead, the stipulations were so worded as to lead to no other conclusion than that the control by the United States Rubber International over the goods in question is, in the language of the Constantino opinion, “pervasive”.

Digest Credit: Shem Gasatan


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