SEC Opinion No. 21-06: Retail Trade Law; Water Filtration Services

In SEC-OGC Opinion No. 21-06, the Securities and Exchange Commission (“SEC”) was requested to confirm whether or not the Retail Trade Liberalization Act of 2000 (“RTLA”) shall be applicable to a foreign company which provides water filtration system services.

The core business of Waterlogic will focus on utilizing its own patented water filtration system at offices, businesses, or households of its customers who wish to avail the same. In consideration thereof, Waterlogic will charge its customers a monthly subscription or service fee. It was stated that the ownership of the system installed by Waterlogic as well as the machineries and equipment related thereto shall remain with the company. 

The SEC opined that Waterlogic will not be engaged in retail trade as defined under the RTLA. It clarified that the RTLA defines “retail trade” as any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption. Thus, for sale transactions to be considered as “retail”, the following elements must be present:

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

As disclosed, Waterlogic is engaged merely in the sale of water filtration services. While machineries and equipment will be installed at the location of its clients, the same shall never be owned by said client and will be returned to Waterlogic upon termination of services. Since Waterlogic is a service enterprise, and does not sell goods to its clients, the SEC said that it is not considered as engaged in retail trade as defined under the RTLA.