Facts:

• Joaquin Perez, a licensed commission merchant, acted as an agent for hemp growers in 1917.
• Perez sold various quantities of hemp in Manila on behalf of the hemp growers, with a total value of P154,042.
• Perez did not deduct any commission from the sales because he received a fixed salary of P3,860 per annum from each of his principals.
• James J. Rafferty, the Collector of Internal Revenue, collected a tax of 1% of the total amount of sales from Perez.
• Rafferty claimed that the tax was legal under section 1614 of Act No. 2657, which required merchants to pay a tax on the gross value of commodities sold.

Issue:

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Ruling:

• The Supreme Court ruled in favor of James J. Rafferty, the Collector of Internal Revenue.
• The court held that Joaquin Perez, as a commission merchant, was not exe...(Unlock)

Ratio:

• The court held that the form of compensation, whether a fixed salary or a commission, was immaterial in determining the liability to pay the tax.
• The court emphasized that if commission merchants were exempt from the tax simply because they received a fixed salary, it would be easy to evade the tax by collecting the commission in th...continue reading