DOJ Opinion No. 253, s. 1954

DOJ OPINION NO. 253 , s. 1954 2nd Indorsement September 24, 1954 Respectfully returned to the Honorable, the Secretary of Commerce and Industry, Manila. Opinion is requested as to the meaning of the term "retail business" used in Republic Act No. 1180, entitled "AN ACT TO REGULATE THE RETAIL BUSINESS." More specifically, the question is whether the Shell Company of the Philippines should be considered as engaged in the retail business within the purview of the Act so that it must register as a retailer under the provisions of Section 2 thereof. The Shell Company, which has been doing business in the Philippines for many years, imports gasoline, fuel and lubricating oils into the Philippines. More than 50% of its gross business is derived from direct sales of gasoline and fuel oil to large buyers , such as sugar centrals, airline companies, interisland and ocean-going vessels, manufacturing plants, etc., who need supplies in large quantities for their own consumption. These large buyers are charged wholesale prices by the Shell Company who delivers the products to their premises by road tank lorries, rail tank cars, barges, etc. These sales are made directly by the Shell Company and not through distributors because the latter are neither in a position to quote the low prices which such big orders justify, nor do they have the equipment which is required to handle large supplies. The Shell Company also sells fuel oil at wholesale prices to fishing vessels in practically the same manner that retail service stations sell gasoline and lubricating oil to land vehicles. In Manila, the Company sells fuel oil to fishing vessels from a converted LCM; in Cebu, it has a jetty where fishing vessels can tie up and have fuel oil piped directly to them; and in Iloilo, it has a jetty similar to that in Cebu and also a lighter barge, both of which are used to supply fuel oil to fishing vessels. Another activity of the Shell Company, which is not relevant to the query, consists in selling its products at wholesale to independent retailers who own or operate gasoline stations and who in turn resell the products for their own account to the ultimate small consumer. The term "retail business" is defined in Republic Act No. 1180, as follows: "Sec. 4. As used in this Act, the term `retail business' shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption, but shall not include: "(a) a manufacturer, processor, laborer or worker selling to the general public the products manufactured, processed or produced by him if his capital does not exceed five thousand pesos, or "(b) a farmer, or agriculturist selling the product of his farm." It can thus be seen that to constitute a retail business under the Act, the following requisites must be present; (a) habitually selling merchandise, commodities or goods, (b) direct to the general public, and (c) for consumption. Although the Shell Company habitually sells its products direct to large buyers for their own consumption and does not fall under the exceptions provided in the law, it claims that it should not be considered as engaged in the retail business because it does not sell to the "general public." It contends that by "general public," Congress meant the house-owner or members of his family who buy merchandise, commodities or goods for their personal consumption; and that as used in the Act, "general public" does not include the manufacturer who needs quantities of fuel oil to fun his plant, or the public utility operator who needs big quantities to propel ships, buses, and airlines. The Shell Company also contends that the history of the Act shows that those responsible for its passage were primarily concerned with the alien retailer who runs a shop, tienda, or sari-sari store. It would seem, however, that the Shell Company's customers are no less than the "general public," although they buy its products in bulk, in view of the fact that it sells said products indiscriminately to the public. The Company itself states that every consumer is a potential customer; and that since the end-users to whom bulk sales are made include electric light companies, bus companies, shipping companies, all manufacturing companies, mining companies, sugar central, agriculturists, etc., etc., it is impossible to give their number. As to the contention that by "general public" Congress meant only the house-owner or members of his family who buy merchandise, commodities or goods for their personal consumption, and not the manufacturer or public utility operator who buys quantities of fuel oil for his business, an examination of the explanatory note to H.B. No. 2523, which eventually became Republic Act No. 1180, the proceedings in Congress in connection therewith, and the Act itself, does not show that Congress intended to give to the term "general public" the restricted meaning which the Shell Company would attribute to it. On the contrary, retailing to the general public involves any kind of selling to consumers of goods or merchandise, whether for personal consumption or for business purposes. In fact even the sale of fish to a hotel by a vendor in a public market was held a sale at retail (Buenaventura v. Collector of Internal Revenue, 50 Phil. 875); and the sales of flour to bakeries by an importer were likewise held as sales at retail (Sy Kong v. Sarmiento, G.R. No. 12934, November 29, 1951.) In the final analysis, "it is the character of the purchaser and not the quantity of the commodity sold that determines if the sale is wholesale or retail. If the purchaser buys the commodity for his own consumption, the sale is considered retail, irrespective of the quantity of the commodity sold. If the purchaser buys the commodity for resale, the sale is deemed wholesale regardless of the quantity of the transaction." (By Kiong v. Sarmiento, supra. ) It may be true, as the Shell Company contents, that those responsible for the passage of Republic Act No. 1180 were primarily concerned with the alien retailer who runs a shop, tienda, or sari-sari store. But neither can it be said the Congress was unconcerned over the alien businessman who makes large sales of merchandise, commodities or goods, such as, for example, the owner of a department store or supermarket, who is obviously a retailer within the purview of the Act. Moreover, the Act itself makes no distinction between large and small sales. Lastly, it has been said that the opposite of "retail" is "wholesale" (Kentucky Consumers' Oil Co. v. Commonwealth, 233 S.W. 892); and a wholesale is one made to a retailer who resells to consumers; a wholesale is never made to the ultimate consumer. (68 C.J. 260-261; Sy Kiong v. Sarmiento v. Sarmiento, supra. ) Considering that the large buyers of the Shell Company's products are not retailers but ultimate consumers, its sales to them cannot be regarded as wholesale, but retail. And the ultimate proof that the Shell Company is a retailer consists in the fact that it sells fuel oil to fishing vessels in practically the same manner that retail service stations sell gasoline and lubricants to land vehicles. Premises considered, the undersigned is of the opinion that the query should be answered in the affirmative. (SGD.) PEDRO TUASON Secretary of Justice