This article was posted on the ChosunBiz RM Report site on June 17, 2025, at 9:40 a.m.
A company that produces the popular cosmetic 'snail cream' among soldiers has filed a lawsuit seeking to cancel the tax imposition related to military supply and has reportedly received a ruling from the Supreme Court after five years for dismissal.
The Supreme Court's third division, led by Chief Justice Lee Heung-gu, overturned the second trial's ruling in favor of A company regarding the appeal of the lawsuit against the imposition of value-added taxes by the Samsung Tax Office on May 15 last month and sent the case back to the Seoul High Court.
This case began in 2018 when the Samsung Tax Office imposed value-added taxes of approximately 1.032 billion won on A company. A company supplied cosmetics to the military welfare group operating military marts (PX). The transaction was conducted in a way that when A company supplied products worth 10,000 won, the military welfare group paid about 720 won under the name of the soldiers' welfare fund. The soldiers' welfare fund is used as a resource for housing support for soldiers.
The Samsung Tax Office imposed value-added taxes of approximately 1.032 billion won on the 2.976 billion won from the military welfare fund deducted from the price of A company's products. The intent was to determine value-added taxes based on the total price of the supplied goods.
In response, A company filed a lawsuit in May 2020, asserting that value-added taxes should only be imposed on the amount excluding the soldiers' welfare fund.
In the first trial, A company lost. The court stated, "Under the value-added taxes law, the products of A company sold at PX by the military welfare group should be regarded as directly supplied to soldiers by A company," adding, "The total amount received from soldiers as compensation for the product supply, including the soldiers' welfare fund, is subject to value-added taxes."
The second trial ruled conversely. The court said, "The tax authority has consistently stated since the 1990s that the supply received by the military welfare group for sale at PX does not fall under 'consignment sales,'" emphasizing that the imposition of taxes on the soldiers' welfare fund based on the premise that A company supplied products directly to soldiers through consignment sales is illegal.
This time, the Supreme Court overturned the second trial ruling. The Supreme Court noted, "Looking at the contract terms and settlement structure between A company and the military welfare group, it can be seen that A company entered into a contract to entrust the sale of products to soldiers visiting PX to the military welfare group." It added, "If A company is considered to have directly supplied products to soldiers, then the entire sales amount of the products in this case, including the soldiers' welfare fund, becomes subject to value-added taxes."