BIR Ruling

September 14, 1966 3rd Indorsement Returned to the Revenue Operations Head (Assessment) the within docket relative to the proposed imposition of advance sales tax on the importation of Volkswagen cars by D.M.G. Inc. for sale to tax-exempt U.S. Military personnel. The records disclose that the Department of Finance with the concurrence of the Central Bank permitted D.M.G. Inc. to import cars (Volkswagen) from Germany. The imported articles were sold to U.S. Military servicemen who were considered as tax-exempt under the law. This privilege to import these articles without pre-payment of tax was granted on the recommendation of a committee composed of the representatives of the Department of Finance, Bureau of Customs, Bureau of Internal Revenue and the Central Bank after arriving at the conclusion that the matter "will benefit Philippines economy in the form of increased dollar reserves and increased sales of cars to U.S. base personnel, heretofore monopolized by Hongkong car dealers and that the increase of sales of D.M.G. will eventually lead to the increase of the income tax due from said firm". The arrangement is however, subject to the following conditions: aisadc (1) Upon arrival in the Philippines of these vehicles, they have to be stored in a bonded warehouse under warehousing entry, that is not an extension of the Customs piers; (2) That the cars will have to be sold to tax exempt personnel of the U.S. Military bases in the Philippines; (3) That said purchasers will pay the CIF value of said vehicles in U.S. dollars to be turned over to the Central Bank, which in turn remit the same to the wholesaler or agency in West Germany; (4) That the purchasers shall pay the D.M.G. an indentor's commission in dollars, which shall be paid to a local bank, which in turn will have to give D.M.G. its equivalent in pesos; (5) Cars shall only be withdrawn from the bonded warehouse upon presentation of an authority for tax-free release of the Department of Finance, which screens and processes applications for release of these cars; (6) Cars that are not sold under this arrangement shall be re-exported after 2 or 3 years, as the case may be, from the date of the acceptance by the Bureau of Customs of warehousing entry thereof. On August 10, 1965, the Bureau's examiners in their memorandum claimed that, according to the facts found by them, D.M.G. Inc. is the importer of the Volkswagen cars and should therefore, be liable for the advance sales tax thereon. The question now posed for resolution is either or not D.M.G. Inc. should be considered an importer of the Volkswagen cars. "Importer" when known in connection with the imposition of duties upon all goods imported, is the consignee of the goods, treated as owner or importer. (Meredith & Ellicott v. U.S., 38 U.S. (13 Peters) 486,493,10 L ed U.S. 258,262). However, this principle does not apply as a rule, such as in the case of an indention agreement. Its absoluteness, that consignees were to be regarded as importer is laxed when used in connection with a factor or indentor. The term "consignee" is synonymous with a "factor" a person to whom goods are sent for sale or safe-keeping; not synonymous with the "owner" of the imported goods, though owner may often be the consignee thereof. (Lyon v. Alvord, 18 Conn. 66,80). Under the terms and conditions of the agreement, it is apparent that D.M.G. Inc. imported the cars in the capacity of a mere indentor. While it appears in the shipping documents that it is the consignee, nevertheless, the consignment to it of the cars was for the tax-exempt persons to whom they are exclusively to be delivered. This was in fact the set-up contemplated by the arrangement. Under the arrangement, however, DMG, was constituted a commercial broker, and as such, it stands liable for the payment of the broker's fixed and percentage taxes. In the light of the foregoing, this Office believes and so holds that the arrangement is in accordance with law and may not therefore, be disturbed. prll (SGD.) MISAEL P. VERA Commissioner of Internal Revenue