Opinion No. 13-07 Re:Retail Trade

Republic of the Philippines Department of Finance Securities and Exchange Commission SEC Building, EDSA, Greenhills, Mandaluyong City

Office of the General Counsel

SEC-OGC Opinion No. 13-07 30 July 2013 Re: Retail Trade

Atty. Rosario S. Bernaldo Managing Partner Bernaldo Directo & Po Law Offices Unit 1807 Cityland Condominium 10-Tower 1, 6815 Ayala Avenue cor. H.V. Dela Costa St. Makati City

Dear Madam;

door control, automatic and revolving door, glass fittings and systems, room dividing systems, etc. to a real estate developer do not constitute retail trade/business pursuant to Section 4(c) of Republic Act No. 1180, as amended by Presidential Decree No. 714, otherwise known as the "Retail Trade Nationalization Law" (RTNL)'. The said provision excludes the sale of a manufacturer to industrial and commercial users or consumers who utilize the products purchased to render service to the general public and/or to produce or manufacture goods for sale in the purview of "retail business." This refers to your letter of 18 April 2013 requesting for confirmation that the sales of

8762 or the "Retail Trade Liberalization Act of 2000" (RTLA) as of 25 March 2000. Please be informed that the RTNL has already been repealed by Republic Act No.

mirroring that of "retail business" in the RTNL, provides for a new enumeration of exceptions, to wit: Section 3(1) of the RTLA provides for the definition of "retail trade" which, though

selling direct to the general public merchandise, commodities or goods for consumption, but shall not include: 1 Section 4. As used in this Act, the term 'retail business' shall mean any act, occupation or calling of habitually

manufactured, processed, or produced by him if his capital does not exceed five thousand pesos. (a) a manufacturer, processor, laborer or worker selling to the general public the products

(b) a farmer or agriculturist selling the product of his farm.

(c) a manufacturer or processor selling to the industria! and. commercial users consumers who use the products bought by them to render service to the general public and/or to produce or manufacture goods which are in turn sold to them. (emphasis ours.)

that the restaurant is necessarily included in, or incidental to, the hotel business. (d) a hotel-owner or keeper operating a restaurant irrespective of the amount of capital, provided

BERNALDO DIRECTO & PO LAW OFFICES (Atty. Rosario S. Bernaldo) Re: Retail Trade Page 2 of 4

"Sec. 3. Definition. - As used in this Act:

(l) "Retail Trade" shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption, but the restriction of this law shall not apply to the following:

capital does not exceed One Hundred Thousand Pesos (P100,000.00); (a) Sales by a manufacturer, processor, laborer, or worker, to the general public the products manufactured, processed or produced by him if his

(b) Sales by a farmer or agriculturist selling the products of his farm:

(c) Sales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital: Provided, that the restaurant is incidental to the hotel business; and

(d) Sales which are limited only to products manufactured, processed o assembled by a manufacturer through a single outlet, irrespective of capitalization.xxx"

list of exceptions as follows: The Rules and Regulations Implementing the RTLA (IRR) provides for an expanded

retail: "Sec. 2. Sales Not Considered As Retail. -- The following sales are not considered as

capital does not exceed One hundred thousand pesos (100,000.00); (a) Sales of a manufacturer, processor, laborer, or worker of products manufactured, processed or produced by him to the general public whose

(b) Sales by a farmer or agriculturist selling the products of his farm regardless of capital;

incidental to the hotel business irrespective of the amount of capital, provided, that the restaurant is (c) Sales arising from restaurant operations by a hotel owner or inn-keeper

(d) Sales through a single outlet owned by a manufacturer of products capitalization; manufactured, processed or assembled in the Philippines, irrespective of

(e) Sales to industrial and commercial users or consumers who use the products bought by them to render service to the general public them; or (emphasis ours) and/or produce or manufacture of goods which are in turn sold by

(f) Sales to the government and/or its agencies and government-owned and controlled corporations."

door, glass fittings and systems, room dividing systems, etc. to a real estate developer falls within Sec. 2(e) of the IRR of the RTLA. The said section embodies the exception in Section Notably, the particular business of the sale of door control, automatic and revolving

BERNALDO DIRECTO & PO LAW OFFICES (Atty. Rosario S. Bernaldo) Re: Retail Trade Page 3 of 4

Marsman & Company, Inc. vs. First Coconut Central Company, Inc., G.R. No. L-39841, 20 4(c) of the RTNL which was the subject of the ruling of the Supreme Court in the case of June 1988 stating as follows:

within the intendment of said nationalization law to include within its scope 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 sales made to industrial or commercial users of consumers." scope of the Retail Trade Nationalization Law is further confirmed by "That the sales to industrial or commercial users do not fall within the

shouid concur: Further, for a sale transaction to be considered as "retail", the following elements

3. The object of the sale is limited to merchandise, commodities or goods for 2. The sale must be direct to the general public; 1. The seller should be habitually engaged in selling; consumption

and differentiated consumer goods from producer goods, to wit: Citing, once more, the case of Marsman above-quoted, the Supreme Court defined

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 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 consumption. "...The last element refers to the subject of the retailer's activities or what he is

resell.- Hence, tools and equipment which will be used for business purposes', not for auxillary goods, instrumental goods, intermediate goods." They are by their very nature not retailers or jobbers rather than to consumers or a sale in large quantity to one who intends to goods. ' factors in the production of other goods and that satisfy wants only indirectly-called also 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 personal, family or household purposes, are considered as "producer goods', not as 'consumer "Producer goods have been defined as "goods (as tools and raw material) that are

2 Marsman & Company, Inc. vs. First Coconut Central Company, Inc., G.R. No. L-39841, June 20, 1988, as stated in SEC Opinion dated 15 January 1996 addressed to Sycip Salazar Hernandez & Gatmaitan, and SEC Opinion dated 28 October 1998 addressed to Atty. Demosthenes B. Donato. Soberano. Company, Inc. vs. First Coconut Central Company, Inc., G.R. No, L-39841, June 20, 1988. 4 Ibid citing Marsman & Company, Inc. vs. First Coconut Central Company, Inc., G.R. No. L-39841, June 20, SEC Opinion dated 15 January 1996 addressed to Sycip Salazar Hernandez & Gatmaitan, citing Marsman & 1988 Ibid; SEC Opinion dated 22 February 2001 addressed to Atty. Remigio Noval and Atty. Ma. Georgina J.

Page 4 of 4 BERNALDO DIRECTO & PO LAW OFFICES (Atty. Rosario S. Bernaldo) Re: Retail Trade

in the construction of buildings and other infrastructure. Hence, the sale of such are not needed for home and daily life. On the other hand, the products to be sold subject of this opinion - door control, automatic and revolving door, glass fittings and systems, room final and end (uses) of a product which directly satisfy human wants and desires and are dividing systems, etc. -- are producer goods which shall be used by the real estate developer considered retail. Pursuant to the foregoing, goods for consumption should be construed to refer to the

not be used in the nature of a standing rule binding upon the Commission in other cases or investigation, it will be disclosed that the facts relied upon are different, this opinion shall be and circumstances disclosed and relevant solely to the particular issue raised therein and shall upon the courts whether of similar or dissimilar circumstances. If, upon further inquiry and rendered void. It shall be understood that the foregoing opinion is rendered based solely on the facts

Please be guided accordingly.

Very truly yours,

CAMLOS.CORREA General Counsel

% SEC-OGC Opinion No. 32-06 dated 02 August 2006 addressed to Cayetano Sebastian Ata Dado & Cruz. 7 Paragraph 7, SEC Memorandum Circular No. 15, Series of 2003.