Tazaro v. Collector of Internal Revenue
REITERATIONFacts
The Antecedents: Victor Tazaro, a butcher in Iloilo City, sold hides of cows and carabaos, valued at P17,901.33, to See Yngco & Co. between January 1, 1925, and August 31, 1928. These hides were part of the animals slaughtered at the public slaughterhouse, with all salable portions, including hides, being taken to his market stall for sale. Procedural History: The Collector of Internal Revenue, through his deputy, assessed and collected a tax of P343.66 from Tazaro on the sales of these hides. Tazaro paid the tax under protest. The Appeal: The Collector of Internal Revenue appealed the decision of the Court of First Instance of Iloilo, which had ruled in favor of Tazaro, ordering the refund of the tax. The core issue on appeal was whether the hides sold by Tazaro were exempt from the percentage tax on merchants' sales under Section 1459(a) of the Administrative Code, which exempts persons selling 'food products' at retail in public markets.
Issue(s)
Whether the hides of slaughtered cattle sold by a butcher are considered 'food products' exempt from the percentage tax on merchants' sales under Section 1459(a) of the Administrative Code.
Ruling
The Supreme Court reversed the decision of the lower court. It held that the tax assessed and collected was proper and absolved the defendant from the complaint. The plaintiff was not entitled to recover the taxes paid under protest.
Ratio Decidendi
On Issue 1: The Supreme Court ruled that the hides of slaughtered cattle are not 'food products' within the meaning of Section 1459(a) of the Administrative Code, and thus are not exempt from the percentage tax on merchants' sales. The Court emphasized that the term 'food products' must be interpreted in its common and ordinary sense, referring to articles that are adapted for human consumption and customarily used as food. While acknowledging that hides could theoretically sustain life under extreme conditions or be consumed in accordance with peculiar local customs, their primary and general use is for the making of leather. The Court presumed that the hides sold by the plaintiff were intended for industrial use, and the burden was on the plaintiff to prove otherwise if they were sold for human consumption, a fact that was not even suggested. Therefore, the tax was correctly assessed and collected.
Main Doctrine
The Supreme Court held that hides of slaughtered cattle are not considered 'food products' for the purpose of exemption from the percentage tax on merchants' sales under Section 1459(a) of the Administrative Code. The Court emphasized that the term 'food products' must be understood in its common and proper sense, referring to articles adapted to human consumption and customarily used as food. Hides, primarily used for leather production, do not meet this definition, and the burden of proof to establish otherwise for exemption purposes lies with the taxpayer.