Atty. Josabeth V. Alonso

October 24, 2002 SEC OPINION Atty. Josabeth V. Alonso Alonso Antonio and Partners 7th Flr. Kalaw-Ledesma Condominium, 117 Gamboa St., Legaspi Village, Makati City, M a d a m e : This refers to your query inquiring whether a sale by your client of its ceramic tile products to mall owners who shall use the same in the construction of malls is considered a sale by retail. Under Section 3(1) of RA 8762 the term "retail trade" is defined as follows: (1) " Retail Trade " shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption. The Supreme Court has ruled, in the case of Marsman & Co., Inc. v. First Coconut Central Co., Inc. (162 SCRA 206) that for a sale to be considered as retail, the following three (3) elements must concur: (1) The seller should be habitually engaged in selling; (2) The sale must be direct to the general public; (3) The object of the sale is limited to merchandise, commodities or goods for consumption. In other words, the goods must be "consumption goods" or "consumer goods." There is, additionally, a fourth element, viz. , that the sale should not be a sale under categories (e) and (f) of Section 2, Rule 1 of the Implementing Rules and Regulations of RA 8762: "Section 2: Sales Not Considered as Retail . The following sales are not considered as retail: xxx xxx xxx c. Industrial and commercial users or consumers who will use the consumer goods bought by them to render service to the general public; and/or produce or manufacture goods which are in turn sold by them; and f. The national government, its bureaus, offices, agencies, instrumentalities, and local government units, and government owned or controlled corporations." Under Section 2 of the implementing rules of RA 8762. The following sales are considered as retail: aCSHDI "(e) Sales to industrial and commercial users or consumers who use the products bought by them to render service to the general public and/or manufacture of goods which are in turn sold by them" Black, in his definition of a "retailer", based his assertions from the point of view of the end-user. According to him: "The essential distinction between a "wholesaler" and "retailer" as respects application of the Fair Labor Standards Act is that the person buying from the retailer is the ultimate user of consumer of the article or commodity or does not sell it again whereas the one buying from a wholesaler buys only for the purpose of selling the article again." In the situation before us, it is clear that the sale of ceramic tiles directly to the mall owners is considered as retail because the same will be used for consumption by the mall owners. Regardless of the fact that the said tiles will be used by the mall owners for the convenience of their customers, convenience by itself is not a service within the strict meaning of the term. Under Black's Law Dictionary, services refer to "Things purchased by consumers that do not have physical characteristics (e.g. Services of doctors, lawyers, dentists, repair personnel). Since the convenience of the mall's customers is not an intangible thing rendered by the mall, which is purchased by its customers or for which the mall is paid, it cannot be considered as a service within the meaning of the term. If it were something connected intrinsically to a service like a security device to be installed in the mall's parking lots for the security of the vehicles within and for which the mall is paid, then it is a factor in the mall's "service" but were it a security device installed by the malls for the protection of its own goods from theft or pilferage, then it is not a factor in the service rendered to the public because the beneficiary is the mall itself. The service contemplated in the implementing rules of RA 8762 which will put the sale of a product which factors in the production of said service outside the scope of retail should be that for which the one rendering it will be paid. Otherwise, sale of said products is within the scope of retail. Very truly yours, (SGD.) LILIA R. BAUTISTA Chairperson