Myline Cordial

Rattan Art and Decorations, Inc. vs Commissioner of Internal Revenue, et.al.
G.R. No. L-17744, April 30, 1965

FACTS:
Petitioner has been engaged in the manufacture and sale of articles made of rattan including rattan round pieces. The Collector of Internal Revenue assessed petitioner with deficiency sales tax on round rattan pieces, surcharge and penalty thereon, for the period from September 4, 1951 to January 24, 1952. These articles were sold to foreign buyers on F. O. B. Manila.

Petitioner asked for the cancellation of the demand for payment of tax, claiming that the transaction was considered by it as an export and thus free from sales tax, title to said articles passing only to the buyers upon arrival in the States and after inspection.

ISSUE:
Whether or not sale of articles to foreign buyers on terms F.O.B. Manila were export sales which were consummated outside of the Philippines and therefore exempt from sales tax.

RULING:
NO. The articles sold by a local manufacturer to foreign buyers were shipped abroad under terms F. O. B. Manila. Under these terms – the expenses of packing and preparing the articles for shipment were charged to the buyers; the freight charges were paid by the buyers at destination; the shipments abroad were insured by the buyers; in those cases where the shipments insured by the petitioner, the insurance policies were indorsed to the buyers; and the payments for said shipments were made through drafts or letters of credit drawn against local banks. With these circumstances, sold articles were transferred to the foreign buyers from the moment they were placed on board the carrying vessels. The sales were, therefore, consummated in the Philippines and must be treated as domestic sales subject to the sales tax. The fact that the sales were paid in dollars, did not make them foreign sales exempted from the payment of the sales tax.

NOTES:
Sales Tax
The tax is imposed on sales consummated in the Philippines. A sale is deemed made or consummated at the place where title to the article sold passes from the seller to the buyer.

Full Text: Rattan Art and Decorations, Inc. vs CIR, et.al. G.R. No. L-17744 April 30, 1965