Opinion No. 11-34 RE : Retail trade; Incidental to primary purpose

I � Republic of the Philippines >� Department of Finance Securities and Exchange Commission SEC Building, EDSA, Greenhills, Mandaluyong Cil~ I GRice ofrhe General Counsel i I 03 August ~011 I I ! SEC-OGC Opinion No. 111,34 Retail trade~ Incidental to primary ! I purpose PICAZO BUYCO TAN FIDER & SANTOS LAW OFFICES: 18th, 19th & 1ih Floors , Liberty Center , 104 H.V. dela Costa Street, Salcedo Village, Makati City 1227 ATTN: Atty. Ma. Adelina S. Gatdula Madam: This refers to your letter dated 23 Mar<::h2011 written on behalf of your client Fitness First Philippines, Inc. ('FFPI'j, requesting the confirmation by the Commission of your opinion "that the sale of drinks, sundry apparel and articles of hygiene solely within gym premises owned and/or operated by FFPI :and exclusively to persons who have enrolled as gym members in order to avail of the facilities in the gym premises, is incidental to the business of FFPI and! would not be considered retail trade." The primary purpose of FFPI is: "To provide fully integrated sports facility management services or total club management services which shall include i but not lilmited to providing consultancy service to a diverse range of development prGjects like hotel health clubs, gyms, large-scale residential faciliti~s, hotels, executive clubs and specialty sports facilities such as tennis ~Iubs and i!ce rinks, providing an effective and total management service extiending to all aspects of club operations like administration and finance, rmarketing, necreation strategy and food and beverage management, providing a compl~ment of specialized services such as sports coaching, fitness testing, personal training, pro shops, beauty and massage treatments and food and beverage facilities, and selling (except on retail) club equipment and proGlucts like fitness equipment, tennis, squash and golf installation, sports surtaces and ancillary court products, recreational and playground equipment and sport simulation devices to governmental bodies, commerdal Qperators al1d private developers. 11

� 10 Ii In Sec. 3(1) of the Republic Act No. 8762" also ktwn as t~e ~etail Trade Liberalization Act of 2000, the term "retail trade" is defineb as "any pet, occupation or calling of habitually selling direct to the general public rherchandis~, commodities or goods for consumption ..." Rule I, Sec. l(b) of the tImplementing Rules and Regulations (IRR) of the Act defines "consumption" as th~ "utilizati~n :af economic goods in the satisfaction of want resulting in immediate 1estruction'lgt.adual decay or deterioration or transformation into other goods." ! i As you have correctly pointed out, the Commission has previo sly issued an f opinion addressed to your Firm, that the act of "engaging in .he selling of merchandise as an incident to the primary purpose of I a corpora~ioh does not constitute retail trade.,,2 This was based on an interpr~tation of !the exception granted under Republic Act No. 11803, and replicat~d in the! Retail Trade Liberalization Act, that excluded "sales in restaurant operations by a Inotel owner or inn-keeper irrespective of the amount of capital: Provideti, That the restaurant is incidental to the hotel business xxx" from the coverage of the term "retail trade" (Emphasis supplied). : : Since Cl gym operation, by its nature, involves trans~cting with! gym members or guests that need to be attired properly, require hydration and rehydration, and make use of the shower facilities of the gym, the sale of the drinks, 'sundry apparel and hygiene articles is incidental to the primary purpose pf a opera~ing and is not itself pursued by the FFPI as an independent business.: Thus, the contemplated activity is not considered retail trade. , , This Opinion is based solely on the facts disclosed lin the query and relevant solely to the particular issues raised therein. It shall likewi~e be understood that the foregoing shall not be used in the nature of a standihg rule binding upon the Commission in other cases or upon the courts. If, upon investig~tion, it will be disclosed that the facts relied upon are different, this opiniQn shall be rendered void. Please be guided accordingly. I VESPE~J CIA qfficer in 1 An Aet Liberalizing the Retail Trade Business, Repealing for the Purpdse Republic AetNo. 1180, as Amended, and for Other Purposes (2000). 2 SEC Opinion No. 11-02, 13 November 2002. 3 An Aet to Regulate the Retail Business (1954).