Facundo v. Posadas
REITERATIONFacts
1. The Antecedents: The plaintiff, Irineo Facundo, was assessed a sales tax and surcharge of P1,519.26 by the Acting Collector of Internal Revenue, Juan Posadas, Jr., for alleged sales made to W. Kauffeldt during the second quarter of 1923. Facundo contended that he was merely an employee of Kauffeldt, managing his provincial agents, and that no sales were made by him. He paid the tax under protest and sought a refund, arguing the assessment was illegal. 2. Procedural History: The case originated with Facundo's complaint against the Collector of Internal Revenue. After an agreed statement of facts was submitted, the trial court initially ruled in favor of the plaintiff. However, upon the defendant's motion for reconsideration, the court reversed its decision and ruled for the defendant. Facundo then filed a motion for a new trial, which was overruled, leading to this appeal. 3. The Petition: The plaintiff-appellant, Irineo Facundo, appeals the lower court's decision, assigning four errors. Primarily, he argues that the lower court erred in not finding that he was a mere employee of W. Kauffeldt and not acting as a commission merchant or commercial broker. He also contends the court erred in finding that he sold copra to Kauffeldt, that he possessed an establishment for keeping and disposing of goods, and that he was not merely representing Kauffeldt, who was the sole possessor and user of the establishment where the copra was kept and disposed of.
Issue(s)
Whether the plaintiff, Irineo Facundo, was acting as a mere employee or as a commission merchant/commercial broker in the transactions involving copra purchases. Whether the plaintiff was liable for merchant's sales tax and surcharge on the copra transactions.
Ruling
The Supreme Court reversed the judgment of the lower court, ordering a judgment for the plaintiff as prayed for in his complaint, without costs. The assessment and collection of the merchant's sales tax and surcharge were deemed illegal.
Ratio Decidendi
On the issue of whether the plaintiff was acting as a mere employee or as a commission merchant/commercial broker: The Court found that, based on the stipulated facts, Facundo was acting as an agent and representative of W. Kauffeldt. His duties were confined to supervising Kauffeldt's provincial agents, overseeing the weighing and checking of copra purchased by these agents, and disbursing Kauffeldt's money for these purchases. All copra was purchased in Kauffeldt's name, paid for with Kauffeldt's money, and delivered directly to Kauffeldt's warehouse. Facundo received a fixed annual salary of P7,500 for these services. The Court distinguished this case from Lee Chan Lam vs. Trinidad, noting the absence of evidence that Facundo had his own establishment for the keeping and disposal of goods or that he effected any sales or exchanges. Therefore, Facundo was not acting as a commission merchant or commercial broker. On the issue of whether the plaintiff was liable for merchant's sales tax and surcharge: Since Facundo was determined to be a mere agent and not a commission merchant or commercial broker, he was not the party liable for the merchant's sales tax. The tax was levied on transactions where he acted solely on behalf of Kauffeldt. Furthermore, it was stipulated that W. Kauffeldt, the actual purchaser and owner of the copra, had already sold the copra and paid the internal revenue percentage tax on such sale. Consequently, the assessment and demand for sales tax from Facundo were illegal, and his payment under protest entitled him to a refund.
Main Doctrine
An individual acting solely as an agent or representative of another in purchasing goods, even if compensated by a salary and supervising provincial agents, is not considered a commission merchant or commercial broker liable for sales tax on those transactions, especially when the goods are delivered directly to the principal and the principal pays the corresponding taxes.