CENTRAL COOPERATIVE EXCHANGE, INC., PETITIONER, VS. THE HONORABLE COURT OF TAX APPEALS AND THE HONORABLE COMMISSIONER OF INTERNAL REVENUE, RESPONDENTS.

Central Cooperative Exchange versus Court of Tax Appeals and Commissioner of Internal Revenue

The Case

This is a petition for review brought by the Central Cooperative Exchange, a federated cooperative association organized under Act Numbered Three Thousand Four Hundred Twenty-Five, against the Court of Tax Appeals and the Commissioner of Internal Revenue. The cooperative sought to recover a large sum it claimed to have paid erroneously as compensating and advance sales taxes on certain importations, invoking the tax exemption granted to cooperative marketing associations. The case matters because it fixes who the importer is for purposes of the sales tax on importations, and it teaches that the tax exemption of a cooperative does not travel with the goods when the importation was made in the name and in the right of another entity.

Procedural History

The cooperative filed several claims for refund with the Commissioner of Internal Revenue. Without waiting for the administrative action to be resolved, it filed a petition with the Court of Tax Appeals to compel the refund, and later filed an amended and supplemental petition covering the total claim. While the case was pending, the Commissioner refunded part of the amount, denied another part as filed beyond the prescriptive period, and denied the balance on the ground that the taxes had been paid by the Agricultural Credit and Cooperative Financing Administration, which was not exempt. The Court of Tax Appeals, in its decision of February 7, 1964, found that the Agricultural Credit and Cooperative Financing Administration was the importer and ruled that the cooperative was not entitled to the refund. After its motion for reconsideration was denied, the cooperative filed the present petition for review in the Supreme Court.

Facts

The Central Cooperative Exchange was a federated cooperative whose members were farmers, cooperative marketing associations, federations of such cooperatives, and the Agricultural Credit and Cooperative Financing Administration, a government agency. On various dates it filed claims for refund of compensating and advance sales taxes it said it had paid erroneously on importations made between September 1955 and March 1958, relying on the exemption in favor of cooperative marketing associations organized under Act Numbered Three Thousand Four Hundred Twenty-Five.

The cooperative insisted that it was the importer because it had paid the taxes, even though the receipts were issued in the name of the Agricultural Credit and Cooperative Financing Administration. It presented cancelled checks, vouchers, and debit memos to prove its payments.

The Court of Tax Appeals found otherwise. The shipping documents, the import licenses, the letters of credit, and the tax receipts were all in the name of the Agricultural Credit and Cooperative Financing Administration. The importation of seedlings and ramie textiles could by law be undertaken only by that agency. There was no evidence that the bills of lading were ever endorsed in favor of the cooperative, so the customs brokers who withdrew the goods acted for the agency, which owned the goods while they were in the customs area.

Issues

• Whether or not the Central Cooperative Exchange was the importer of the articles on which the compensating and advance sales taxes were paid, such that it may claim the refund.
• Whether or not the payment by the cooperative of the costs and expenses of the importations made it the real party to the transaction despite the documents being in the name of the Agricultural Credit and Cooperative Financing Administration.

Applicable Provisions

Section 48 of Act Numbered Three Thousand Four Hundred Twenty-Five, as amended, provides:

Cooperative marketing associations organized under this Act shall be exempt from the payment of the merchant's sales tax, the income tax, and all other percentage taxes of whatever nature and description.

This is the exemption the cooperative invoked, and its availability turns on whether the cooperative itself was the importer that paid the taxes.

Ruling

On the first issue, the Court held that the Agricultural Credit and Cooperative Financing Administration, not the cooperative, was the importer. The import licenses, letters of credit, bills of lading, invoices, and tax receipts were all in the agency's name; the agency was the consignee; and the bills of lading were never endorsed to the cooperative. The Court affirmed the finding of the Court of Tax Appeals:

From the evidence on record, we find that ACCFA is the importer. The shipping documents, such as bills of lading and invoices, are clear and satisfactory indications that ACCFA, not petitioner, is the importer of the goods in question. The ACCFA's status as importer is buttressed by the consideration that the import licenses, letters of credit and tax receipts are in its name.

On the second issue, the Court held that the cooperative's payment of costs and expenses did not make it the importer. At most, it showed that the cooperative paid in advance part of the price of articles it purchased from the agency, and that the agency used that money to pay the taxes as importer. The Court distinguished the earlier case of Tan Tiong Bio, where the buyer had acted as agent for a corporation in the process of incorporation; here there was no evidence that the agency acted as a mere agent of the cooperative. The Court declined to go beyond the documents, since the law and regulations allowed only the agency to import seedlings and ramie textiles.

Doctrine

The importer for purposes of the compensating and advance sales tax is the person in whose name the importation is made, as shown by the import licenses, letters of credit, bills of lading, invoices, and tax receipts, and who is the consignee of the goods. The fact that another entity advances the cost and expenses of the importation does not transfer the status of importer to that entity. A tax exemption granted to a cooperative marketing association under Act Numbered Three Thousand Four Hundred Twenty-Five applies only to taxes paid by that association as importer; it cannot be claimed for taxes paid by a different entity that does not enjoy the exemption.

Disposition

The Supreme Court affirmed the decision of the Court of Tax Appeals and denied the refund, with costs against the cooperative.

Remember This

The single line to memorize: the importer is the one in whose name the importation documents and tax receipts are issued, not the one who advances the payment. Examiners use this case to test the meaning of importer in sales tax on importations and the limits of a cooperative's tax exemption.