Sycip Salazar Hernandez & Gatmaitan

January 15, 1996 Sycip Salazar Hernandez & Gatmaitan 105 Paseo de Roxas, 1200 City of Makati Attention : Atty . Maria Teresa D . Mercado M a d a m : This refers to your letter dated January 4, 1996 requesting opinion whether or not the following activities of your client would constitute retail business under the Retail Trade Law. As stated, your client, a wholly-owned subsidiary of a Liechtenstein corporation intends to sell tools and equipment directly to construction companies, engineers, designers, architects, consultants, special contractors and such other persons who would use the tools and equipment in rendering services to the general public . The quantity of tools and equipment which the Company would sell would vary from one buyer to another. Section 4 of the Retail Trade Law defines "retail business" as follows: SECTION 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 good for consumption , but shall not include: . . . . "(Emphasis provided) Thus, for sale transactions to be considered as " retail ", the following elements should 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 the case of Marsman & Company, Inc. vs. First Coconut Central Company, Inc., GR. No. L-39841, June 20, 1988, the Supreme Court ruled that: . . . The last element refers to the subject of the retailer's activities or what he is selling, i.e., consumption goods or consumer goods. Consumer goods may be defined as "goods" which are used or bought for use primarily for personal, family or household purposes . Such goods are not intended for resale or further use in the production of other products. In other words, consumer goods are goods which by their very nature are ready for consumption. Producer goods have been defined as "goods (as tools and raw material) that are factors in the production of other goods and that satisfy wants only indirectly called also auxiliary goods, instrumental goods, intermediate goods." They are by their very nature not sold to the public for consumption. As such, the sale of producer goods used for industry or business is classified as a wholesale transaction . Wholesaling has been defined as "selling to retailers or jobbers rather to consumers or a sale in large quantity to one who intends to resell." xxx xxx xxx. That the sales to industrial or commercial users do not fall within the scope of the Retail Trade Nationalization Law is further confirmed by Presidential Decree No. 714 promulgated on May 28, 1975 amending said law when the latter provided in its preamble that " Whereas, it is believed to be not within the intendment of said nationalization law to include within its scope sales made to industrial or commercial users or consumers ." (Emphasis supplied) On the basis of the above ruling, the Commission previously opined that tools and equipment which will be used for " business purposes ", not for personal, family or household purposes, are considered as "producer goods ", not as " consumer goods ". Accordingly, the sale thereof does not constitute as retail transaction since the third element required for a sale to be considered as retail is absent. (SEC Opinion addressed to Mr. Moises Villanueva, dated July 11, 1995) In the present case, since the goods are to be sold to entities, firms or persons who in turn will use the same for business purposes , particularly in rendering infrastructures and construction services to the public, they may be considered as producer goods , not as consumer goods. Consequently, the above-proposed activity, regardless of the quantity of the goods involved, does not constitute "retail transaction" as contemplated under the Retail Trade Law. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner