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Villanueva v City of Iloilo
(privilege tax)
 
Relying on the passage of RA 2264 or the Local AutonomyAct, Iloilo enacted Ordinance 11 Series of 1960, imposing amunicipal license tax on tenement houses in accordance withthe schedule of payment provided by therein.Villanueva and the other appellees are apartment owners fromwhom, the city collected license taxes by virtue of Ordinance11. Appellees aver that the said ordinance is unconstitutionalfor RA 2264 does not empower cities to impose apartmenttaxes; that the same is oppressive and unreasonable for itpenalizes those who fail to pay the apartment taxes; that itconstitutes not only double taxation but treble taxation; and,that it violates uniformity of taxation.
Issues:
1. Does the ordinance impose double taxation?2. Is Iloilo city empowered by RA 2264 to impose tenementtaxes?
Held:
1. While it is true that appellees are taxable under the NIRCas real estate dealers, and taxable under Ordinance 11,double taxation may not be invoked. This is because thesame tax may be imposed by the national government aswell as by the local government. The contention thatappellees are doubly taxed because they are paying realestate taxes and the tenement tax is also devoid of merit.A license tax may be levied upon a business or occupationalthough the land or property used in connection therewithis subject to property tax. In order to constitute doubletaxation, both taxes must be the same kind or character.Real estate taxes and tenement taxes are not of the samecharacter.2. RA 2264 confers local governments broad taxing powers.The imposition of the tenement taxes does not fall withinthe exceptions mentioned by the same law. It is arguedhowever that the said taxes are real estate taxes and thus,the imposition of more the 1 per centum real estate taxwhich is the limit provided by CA 158, makes the saidordinance ultra vires. The court ruled that the tax inquestion is not a real estate tax. It does not have theattributes of a real estate tax.
1
By the title and the terms of the ordinance, the tax is a municipal tax which means animposition or exaction on the right to use or dispose of property, to pursue a business, occupation or calling, or toexercise a privilege. Tenement houses being offered for rent or lease constitute a distinct form of business or calling and as such, the imposition of municipal tax findssupport in Section 2 of RA 2264.
1
It is not a tax on the land on which the tenement houses are erected, although both land andtenement houses may belong to the same owner. Te tax is not a fixed proportion of theassessed value of the tenement houses, and does not require the intervention of theassessors or appraisers. It is not payable at a designated time or date, and is not enforceableagainst the tenement houses either by sale or distraint.
Assoc. of Custom Brokers v Municipal Board
(privilege tax)
 Facts:
The disputed ordinance (Ordinance 3379) was passed by theMunicipal Board of the City of Manila under the authorityconferred by section 18(p) of RA 409 which confers upon themunicipal board the power “to tax motor and other vehiclesoperating within the City of Manila the provisions of anyexisting law to the contrary notwithstanding. “The plaintiff, an association composed of all brokers and publicservice operators of Motor Vehicles in the City of Manila filedthis petition for declaratory relief challenging the validity of theordinance on the following grounds; that it while it levies a so-called property tax, it is in reality a license fee which is beyondthe power of the board to impose; that the said ordinance goesagainst the rule on uniformity of taxation; and, that the saidimposition constitutes double taxation.
Issues: Can the city validly enact such ordinance?Held: No.
The Motor Vehicle Law (Section 70[b]) provides thatno fees may be exacted or demanded for the operation of anymotor vehicle other than those therein provided , the onlyexception being that which refers to property tax which may beimposed by municipal corporations. While the ordinance refersto property tax and it is fixed ad valorem, it is merely levied onmotor vehicles operating within the city of Manila with the mainpurpose of raising funds to be expanded exclusively for therepair, maintenance and improvement of streets and bridges insaid city. Because of this, the ordinance in question merelyimposes a license fee although under the cloak of being an advalorem tax to circumvent the prohibition provided by the Motor Vehicle Law.
2
 
2
If a tax is in its nature an excise, it does not become a property tax because it is proportionedin the amount to the value of the property used in connection with the occupation, privilege or act which is taxed. Every excise by necessarily must finally fall upon and be paid by propertyand so may be indirectly a tax upon property; but if it is really imposed upon the performanceof an act, enjoyment of a privilege, or the engaging in an occupation, it will be consideredexcise.
 
 
Philippine Acetylene Co., Inc. v CIR
(Indirect Tax;also in Nature of Tax Exemption)
 Facts:
Petitioner is a corporation engaged in the manufactureand sale of oxygen and acetylene gases. It made various salesof its product to the National Power Corporation (NPC) anagency of the government and to Voice of America (VOA) anagency of the US government. The respondent assessedagainst and demanded from the petitioner the payment of deficiency sales tax and surcharge as provided by Sections186 and 183 of the NIRC. Petitioner denied liability on thepayment of the tax based on the sales made to these agenciesstating that the same are exempt from taxation because theNPC is exempt from taxation by virtue of RA 947 Sec2 andbecause VOA is exempt as well because of the BasesAgreement.
Issue:
Is petitioner exempt from paying the percentage taxeson the sales made to NPC and VOA?
Held: No.
The percentage tax provided by Section 286 of theNIRC is a tax on the producer or manufacturer and not a tax onthe purchaser. Section 183 of the NIRC provide that sales taxshall be paid by the manufacturer or producer who must makea true and complete return of the amount of his or her or itsgross monthly sales, receipts or earnings or gross value of output actually removed from the factory or mill warehouse andwithin twenty days after the end of each month, pay the taxdue thereon.Since the tax imposed by section 186 is a tax on themanufacturer or producer and not a tax on the purchaser,petitioner could not be considered exempt.As regards VOA, petitioner is also not exempt from percentagetax because the Bases Agreement only exempts from tax salesmade “for exclusive use in the construction, maintenance andoperation or defense of the bases,” or sales to thequartermaster. Sales of goods to any other party even if it bean agency of the US, or even the quartermaster but for adifferent purpose are not exempt from tax.
It is a familiar learning in the American law of taxation thattax exemption must be strictly construed and that theexemption will not be held to be conferred unless theterms under which it is granted clearly and distinctly showthat such was the intention of the parties.
 
CIR v. Gotamco
(Indirect Tax ; Nature of Tax Exemption)
FACTS:
The World Health Organization entered into a HostAgreement between the Philippine government. Section 11 of that Agreement provides,
 
that "the Organization, its assets,income and other properties shall be: (a) exempt from all directand indirect taxes. It is understood, however, that theOrganization will not claim exemption from taxes which are, infact, no more than charges for public utility services; . . .
 
* When the WHO decided to construct a building for its office, itinformed the bidders that building to be constructed belongedto an organization with diplomatic status and thus exempt fromthe payment of all fees, licenses, and taxes, and that thereforetheir bids "must take this into account and should not includeitems for such taxes, licenses and other payments toGovernment agencies."* John Gotamco and Sons, Inc. won the bid.* CIR gave an Opinion that the 3% contractors tax was exemptbut CIR reversed his opinion and stated that "as the 3%contractor's tax is not a direct nor an indirect tax on the WHO,but a tax that is primarily due from the contractor, the same isnot covered by . . . the Host Agreement."* CIR demanded from Gotamco the 3% tax plus surcharge* CIR alleges that Host Agreement void. Even if valid,contractor’s tax is not indirect tax in view of the Agreeement.* Gotamco appealed to the CTA. CTA for Gotamco.
ISSUE:
WON Gotamco should pay the 3% contractor's taxunder Section 191 of NIRC on the gross receipts it realizedfrom the construction of the WHO office?
HELD: NO, contractor’s tax is indirect tax coming withinpurview of the Host Agreement.
As to the Agreement, it is valid since less formal types of international agreements may be entered into by the Chief Executive and become binding without the concurrence of thelegislative body. The Agreement comes within this category; itis a valid and binding international agreement even without theconcurrence of the Philippine Senate.As to the tax, as correctly held by CTA: In context,
directtaxes
are those that are demanded from the very person who,it is intended or desired, should pay them; while
indirect taxes
 are those that are demanded in the first instance from oneperson in the expectation and intention that he can shift theburden to someone else. (Pollock vs. Farmers, L & T Co.) The
contractor's tax
is of course payable by the contractor but inthe last analysis it is the owner of the building that shouldersthe burden of the tax because the same is shifted by thecontractor to the owner as a matter of self-preservation. Thus,it is an indirect tax. And it is an indirect tax on the WHObecause, although it is payable by the petitioner, the latter canshift its burden on the WHO. In the last analysis it is the WHOthat will pay the tax indirectly through the contractor and itcertainly cannot be said that 'this tax has no bearing upon theWorld Health Organization.Phil. Acetylene not applicable since the Host Agreement, inspecifically exempting the WHO from "indirect taxes,"contemplates taxes which, although not imposed upon or paidby the Organization directly, form part of the price paid or to bepaid by it. It is the clear intention of the Agreement to exemptthe WHO from "indirect" taxation.
 
 
Wells Fargo Bank v CIR
(Situs of Taxation)
 
Facts:
Birdie Lillian Eye, died on September 16, 1932 at Los AngelesCalifornia, the place of her alleged last residence and domicile.Among the properties she left was her one half conjugal sharesin 70,000 shares of stock in Benguet Consolidated MiningCompany, an anonymous partnership organized and existingunder the laws of the Philippines, with its principal office inManila. She left a will which was duly admitted to probate inCalifornia where her estate was administered and settled.Petitioner is the trustee of the trust created by the will. TheFederal and State of California’s inheritance taxes due on saidshares have been duly paid. The respondent now claims thatthe same shares of stocks are also subject to inheritance taxhere in the Philippines. Hence, this petition for declaratory judgment was instituted by plaintiff to ascertain whether theshares are still subject to inheritance tax.
Issue: May inheritance taxes be imposed on the saidshares?Held: Yes.
Originally the settled law in the US is thatintangibles have only one situs for the purpose of inheritancetax, and that such situs is in the domicile of the decedent at thetime of his death. But this rule has been relaxed due to (1) therecognition of the inherent power of each government to taxpersons, properties and rights within its jurisdiction andenjoying thus, the protection of its laws; and (2) upon theprinciple that as to intangibles, a single location in space ishardly possible considering the multiple, distinct relationshipswhich may be entered into with respect thereto.It is the identity or association of intangibles with the person of their owner at his domicile which gives jurisdiction to tax. Butwhen the taxpayer extends his activities with respect to hisintangibles, so as to avail himself of the protection and benefitof the laws of another state, in such a way as to bring hisperson or property within the reach of the tax gatherer there,the reason for a single place of taxation no longer obtains.In this case, the actual situs of the shares of stock is in thePhilippines, the corporation being domiciled therein. The owner residing in California has extended her activities with respect toher intangibles so as to avail herself of the protection andbenefit of the Philippine laws. The jurisdiction of the Philippinegovernment to impose tax must be upheld.
CIR v Japan Airlines (JAL)
(Situs of Taxation)
 
Facts:
JAL is a foreign corporation engaged in the business of International air carriage. Since mid-July of 1957, JAL hadmaintained an office at the Filipinas Hotel, Roxas BoulevardManila. The said office did not sell tickets but was merely for the promotion of the company. On July 17 1957, JALconstituted PAL as its agent in the Philippines. PAL sold ticketsfor and in behalf of JAL.On June 1972, JAL then received deficiency income taxassessments notices and a demand letter from petitioner for years 1959 through 1963. JAL protested against saidassessments alleging that as a non-resident foreigncorporation, it as taxable only on income from Philippinessources as determined by section 37 of the Tax Code, therebeing no income on said years, JAL is not liable for taxes.
Issue: WON proceeds from sales of JAL tickets sold in thePhilippines are taxable as income from sources within thePhilippines.Held: The ticket sales are taxable.
Citing the case of CIR v BOAC, the court reiterated that thesource of an income is the property, activity or service thatproduced the income. For the source of income to beconsidered as coming from the Philippines, it is sufficient thatthe income is derived from activity within the Philippines.The absence of flight operations to and from the Philippines isnot determinative of the source of income or the situs of income taxation. The test of taxability is the source, and thesource of the income is that activity which produced theincome. In this case, as JAL constitutes PAL as its agent, thesales of JAL tickets made by PAL is taxable.
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