CIR v American Rubber Company
GR No L-19667, November 29, 1966
FACTS:
American Rubber Company sold its rubber products locally and as prescribed by the Commissioner’s regulation, the company declared the same for tax purposes in which the Commissioner accordingly assessed. The company paid under protest the corresponding sales taxes thereon, claiming exemption under Section 188b of the Tax Code, and subsequently claimed refund. With the Commissioner refusing to do so, the case was brought before the Court of Tax Appeals, which upheld the Commissioner’s stand that the company is not entitled to recover the sales tax that had been separately billed to its customers, and paid by the latter.
ISSUE:
Whether plaintiff is or is not entitled to recover the sales tax paid by it, but passed on to and paid by the buyers of its products
RULING:
Refund is proper. The sales tax is by law imposed directly, not on the thing sold, but on the act (sale) of the manufacturer, producer or importer who is exclusively made liable for its time payment. There is no proof that the tax paid by plaintiff is the very money paid by its customers. Where the tax money paid by the plaintiff came from is really no concern of the Government. Anyway, once recovered, the plaintiff must hold the refund taxes in trust for the individual purchasers who advanced payment thereof, and whose names must appear in plaintiff’s records.
It would need to tend to perpetuate illegal taxation; for the individual customers to whom the tax is ultimately shifted will ordinarily not care to sue for its recovery, in view of the small amount paid by each and the high cost of litigation for the reclaiming of an illegal tax. Insofar, therefore, as it favors the imposition, collection and retention of illegal taxes, and encourages a multiplicity of suits, the tax court’s ruling under appeal violates morals and public policy.
FACTS:
American Rubber Company sold its rubber products locally and as prescribed by the Commissioner’s regulation, the company declared the same for tax purposes in which the Commissioner accordingly assessed. The company paid under protest the corresponding sales taxes thereon, claiming exemption under Section 188b of the Tax Code, and subsequently claimed refund. With the Commissioner refusing to do so, the case was brought before the Court of Tax Appeals, which upheld the Commissioner’s stand that the company is not entitled to recover the sales tax that had been separately billed to its customers, and paid by the latter.
ISSUE:
Whether plaintiff is or is not entitled to recover the sales tax paid by it, but passed on to and paid by the buyers of its products
RULING:
Refund is proper. The sales tax is by law imposed directly, not on the thing sold, but on the act (sale) of the manufacturer, producer or importer who is exclusively made liable for its time payment. There is no proof that the tax paid by plaintiff is the very money paid by its customers. Where the tax money paid by the plaintiff came from is really no concern of the Government. Anyway, once recovered, the plaintiff must hold the refund taxes in trust for the individual purchasers who advanced payment thereof, and whose names must appear in plaintiff’s records.
It would need to tend to perpetuate illegal taxation; for the individual customers to whom the tax is ultimately shifted will ordinarily not care to sue for its recovery, in view of the small amount paid by each and the high cost of litigation for the reclaiming of an illegal tax. Insofar, therefore, as it favors the imposition, collection and retention of illegal taxes, and encourages a multiplicity of suits, the tax court’s ruling under appeal violates morals and public policy.
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