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Meeting 2 17 November TAX 2

A. LOCAL TAXATION AND REAL PROPERTY TAXATION


I. Local Taxation
1. PHILIPPINE PETROLEUM V MUNICIPALITY OF PILILLA Topic: Local Taxation Taxing Powers of LGUs Legal Basis Ponente: Paras, J. Date: June 3, 1991 DOCTRINES: The exercise by local governments of the power to tax is ordained by the present Constitution. LIMITATION: Under Section 5, Article X of the 1987 Constitution, only guidelines and limitations that may be established by Congress can define and limit such power of local governments. WAIVER BY THE MAYOR: Since the power to tax includes the power to exempt thereof which is essentially a legislative prerogative, it follows that a municipal mayor who is an executive officer may not unilaterally withdraw such an expression of a policy thru the enactment of a tax. The waiver partakes of the nature of an exemption. It is an ancient rule that exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. QUICK FACTS: Phil Petroleum, based in Pililla, Rizal, a manufacturer of oil products, questions Municipal Ordinance No. 1 of Pililla which requires them to pay (a) tax on business

and (b) storage fees, as well as mayor's permit and sanitary inspection fee, considering ( a) they are already subject to specific tax under the NIRC, and (b) Provincial Circular No. 677, issued by the Secretary of Finance which directed all city and municipal treasurers to refrain from collecting the socalled storage fee on flammable or combustible materials imposed under the local tax ordinance of their respective locality. FACTS: Tax: Unpaid business taxes, storage permit fee, mayors permit fee, sanitary inspection fee Philippine Petroleum Corporation (PPC) which manufactures lubricated oil basestock (petroleum product), maintains an oil refinery including 49 storage tanks for its petroleum products in Malaya, Pililla, Rizal. Under Section 142 of the National Internal Revenue Code of 1939, manufactured oils and other fuels are subject to specific tax. On June 1973, PD No. 231, otherwise known as the Local Tax Code was issued by former President Ferdinand E. Marcos, authorizing municipalities to impose on business, except on those for which fixed taxes are provided on manufacturers, importers or producers. On Dec. 1973, the Finance Secretary issued Provincial Circular No. 26-73 which directed all provincial, city and municipal treasurers to refrain from collecting any local tax imposed in old or new tax ordinances in the business of manufacturing, wholesaling, retailing, or dealing in petroleum products subject to the specific tax under the NIRC. Also, Provincial Circular No. 26 A-73 was issued to bolster the same. On June 1974, the Municipality of Pililla (MoP), Rizal enacted Municipal Tax Ordinance No. 1, (The Pililla Tax Code of 1974) which imposed a tax on business, except for those for which fixed taxes are provided in the Local Tax Code on manufacturers, etc., as well as mayor's permit, sanitary

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inspection fee and storage permit fee for flammable, combustible or explosive substances. After due approval, however, this was suspended because of Provincial Circular Nos. 26-73 and 26 A-73. On April 1986, MoP filed a civil case against PPC for the collection of the business tax from 1979 to 1986; storage permit fees from 1975 to 1986; mayor's permit and sanitary inspection fees from 1975 to 1984 PPC. TC PPC should pay the MoP the Tax on Business due from 1979 to 1983, storage permit fee from 1975 to 1986, Mayor's Permit Fee due from 1975 to 1984, sanitary inspection fee from 1975 to 1984 plus costs of suit. PPCs Contention: (a) Provincial Circular No. 26-73 declared as contrary to national economic policy the imposition of local taxes on the manufacture of petroleum products as they are already subject to specific tax under the National Internal Revenue Code; (b) the above declaration covers not only old tax ordinances but new ones, as well as those which may be enacted in the future; (c) both Provincial Circulars (PC) 26-73 and 26 A-73 are still effective; and (d) Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum products. ISSUE: WON PPC is liable to pay tax on business and mayors permit, storage fees, and sanitary inspection fee? HELD: Yes, PPC is liable to pay unpaid business taxes, mayors permit fee and sanitary inspection fee but NOT storage permit fee due from 1976 to 1986 only. RATIO: The exercise by local governments of the power to tax is ordained by the present Constitution. To allow the continuous effectivity of the prohibition set forth in PC No. 26-73 would be tantamount to restricting their power to tax by mere administrative issuances. Under Section 5, Article X of the 1987 Constitution, only guidelines and limitations that may be established by Congress can define and limit such power of local governments. P.D. No. 426 amending the Local Tax Code is deemed to have repealed Provincial Circular Nos. 26-73 and 26 A-73 issued by the Secretary of Finance when Sections 19 and 19 (a), were carried over into P.D. No. 426 and no exemptions were given to manufacturers, wholesalers, retailers, or dealers in petroleum products. Furthermore, while Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as amended by P.D. 426, wherein the municipality is granted the right to levy taxes on business of manufacturers, importers, producers of any article of commerce of whatever kind or nature. A tax on business is distinct from a tax on the article itself. Thus, if the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared national policy, it should have been expressly stated in P.D. No. 436. As to the authority of the mayor to waive payment of the mayor's permit and sanitary inspection fees: in the absence of a clear and express exemption from the payment of said fees, the waiver cannot be recognized. It is the law-making body, and not an executive like the mayor, who can make an exemption. However, The storage permit fee being imposed by MoP's tax ordinance is a fee for the installation and keeping in storage of any flammable, combustible or explosive substances but since the tanks are owned by PPC and not by MoP, the same is obviously not a charge for any service rendered by the municipality as what is envisioned in Section 37 of the MoPs Tax Code. The Local Tax Code does not provide the prescriptive period for collection of local taxes, hence, Article 1143 of the Civil Code applies. Said law provides that an action upon an obligation created by law prescribes within ten (10) years

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from the time the right of action accrues. The Municipality of Pililla can therefore enforce the collection of the tax on business of petitioner PPC due from 1976 to 1986, and NOT the tax that had accrued prior to 1976. 2. MACTAN MARCOS CEBU INTL AIRPORT AUTHORITY V

FACTS: Tax: Real taxes. Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No. 6958, mandated to principally undertake the economical, efficient and effective control, management and supervision of Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its Charter: Sec. 14. Tax Exemptions. -- The Authority shall be exempt from realty taxes imposed by the National Government or any of its political subdivisions, agencies and instrumentalities x x x. In 1994, however, the Officer-in-Charge, Office of the Treasurer of the City of Cebu, demanded payment for realty taxes on several parcels of land belonging to the MCIAA. MCIAA objected to such demand for payment as baseless and unjustified. MCIAAs contention: Claims in its favor the aforecited Section 14 of RA 6958 which exempts it from payment of realty taxes. It further asserts that it is instrumentality of the government performing governmental functions, citing Section 133 of LGC which puts limitations on the taxing powers of local government units. Citys contention: MCIAA is not an instrumentality of the government but merely a government-owned corporation performing proprietary functions. As such, all exemptions previously granted to it were deemed withdrawn by operation of law, as provided under Sections 193 and 234 of LGC.

Topic: Power to Create Sources of Fund Ponente: Davide, J. Date: September 11, 1996 DOCTRINE: Since under Section 232 local government units have the power to levy real property tax, except those exempted therefrom under Section 234, then Section 232 must be deemed to qualify Section 133. As a general rule and as laid down by Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person, as provided in item (a) of the first paragraph of Section 234. QUICK FACTS: RTC dismisses the petition for declaratory relief case filed by MCIAA. MCIAA contends that it enjoyed the privilege of exemption from payment of realty taxes in accordance with its Charter. It further asserts as reason the fact that it is an instrumentality of the government performing governmental functions, citing S ection 133 of LGC which puts limitations on the taxing powers of local government units.

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As the City of Cebu was about to issue a warrant of levy against itsproperties, MCIAA paid under protest and thereafter filed a Petition for Declaratory Relief RTC. RTC: Dismissed petition. ISSUE: WON City can assess MCIAA with realty taxes. HELD: YES. Affirmed RTC. RATIO: Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units as follows: SEC. 133. Common Limitations on the Taxing Power of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: (o) TAXES, FEES OR CHARGES OF ANY KIND ON THE NATIONAL GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES, AND LOCAL GOVERNMENT UNITS. (emphasis supplied) Among the taxes enumerated in the LGC is real property tax, which is governed by Section 232. It reads as follows: SEC. 232. Power to Levy Real Property Tax . A province or city or a municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvements not hereafter specifically exempted. Section 234 of the LGC provides for the exemptions from payment of real property taxes and withdraws previous exemptions therefrom granted to natural and juridical persons, including government-owned and controlled corporations, except as provided therein. The foregoing sections of the LGC speak of: (a) the limitations on the taxing powers of local government units and the exceptions to such limitations; and (b) the rule on tax exemptions and the exceptions thereto. Since under Section 232 local government units have the power to levy real property tax, except those exempted therefrom under Section 234, then Section 232 must be deemed to qualify Section 133. Thus, reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person, as provided in item (a) of the first paragraph of Section 234. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Moreover, the petitioner cannot claim that it was never a taxable person under its Charter. It was only exempted These exemptions are based on the ownership, character, and use of the property. Section 193 of the LGC is the general provision on withdrawal of tax exemption privileges. On the other hand, the LGC authorizes local government units to grant tax exemption privileges.

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from the payment of real property taxes . The grant of the privilege only in respect of this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except real property tax. Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in light of the foregoing disquisitions, it had already become, even if it be conceded to be an agency or instrumentality of the Government, a taxable person for such purpose in view of the withdrawal in the last paragraph of Section 234 of exemptions from the payment of real property taxes, which, as earlier adverted to, applies to the petitioner. 3. NPC V CITY OF CABANATUAN Topic: Taxing Powers of LGUs; Power to Create Sources of Funds Ponente: Puno, J. Date: April 9, 2003 DOCTRINE: One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and agencies of the national government from the coverage of local taxation. Although as a general rule, LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, this rule now admits an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities. QUICK FACTS: NPC refused to pay franchise tax assessed by the City contending that being a government instrumentality, as well as a non-profit organization, it is exempted from all taxes and duties notwithstanding withdrawal of exemptions under LGC. FACTS: Tax: Franchise Tax. 75% of 1% of the NPC's gross receipts for preceding year. CA resolution finding petitioner National Power Corporation (NPC) liable to pay franchise tax to respondent City of Cabanatuan. NPC a government-owned and controlled corporation created under Commonwealth Act No. 120 For many years now, NPC sells electric power to the residents of Cabanatuan City. Pursuant to an Ordinance, the City assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the latter's gross receipts for the preceding year. NPC, whose capital stock was subscribed and paid wholly by the Philippine Government, refused to pay the tax assessment. NPCs contention: Being a government entity and a nonprofit organization, it is exempted from the payment of all forms of taxes, charges, duties or fees in accordance with sec. RA 6395. Citys contention: NPC's exemption from local taxes has been repealed by section 193 of Rep. Act No. 7160. RTC - Dismissed case. In favor of NPC. Tax exemption privileges granted to NPC subsist despite the passage of LGC for the following reasons: (1) Rep. Act No. 6395 is a particular law and it may not be repealed by Rep. Act No. 7160 which is a general law; (2) section 193 of Rep. Act No. 7160 is in the nature of an implied repeal which is not favored; and (3) local governments have no power to tax instrumentalities of the national government.

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CA - Reversed. In favor of City. LGC, expressly withdrew the exemptions granted to the NPC. ISSUE: WON city has the power to assess NPC for franchise tax. HELD: Yes. Affirmed CA. LGC expressly withdrew NPCs exemption. In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has become a tool to realize social justice and the equitable distribution of wealth, economic progress and the protection of local industries as well as public welfare and similar objectives. The power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges 34 pursuant to Article X, section 5 of the 1987 Constitution. This paradigm shift results from the realization that genuine development can be achieved only by strengthening local autonomy and promoting decentralization of governance. Considered as the most revolutionary piece of legislation on local autonomy,42 the LGC effectively deals with the fiscal constraints faced by LGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous laws such as the imposition of taxes on forest products, forest concessionaires, mineral products, mining operations, and the like. One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and agencies of the national government from the coverage of local taxation. Although as a general rule, LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, this rule now admits an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities.

In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the respondent city government to impose on the petitioner the franchise tax in question. RATIO: Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. As this Court observed in the Mactan case, "the original reasons for the withdrawal of tax exemption privileges granted to government-owned or controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises." With the added burden of devolution, it is even more imperative for government entities to share in the requirements of development, fiscal or otherwise, by paying taxes or other charges due from them. 4. CITY OF SAN PABLO V REYES Topic: Power to create Sources of Fund Ponente: Gonzaga-Reyes Date: 25 March 1999 DOCTRINE: Power to create sources of Fund: The power to tax is primarily vested in Congress. However, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution.

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Sec. 5 Each Local Government unit shall have the power to create its own sources of revenue and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the Local Governments. The important legal effect of Section 5 is that henceforth, in interpreting statutory provision on municipal fiscal powers, doubts will have to resolved in favor of municipal corporations QUICK FACTS: City of San Pablo imposed a tax on business enjoying a franchise at a rate of 50% of 1% of the gross annual receipts. MERALCO filed an action with the RTC to declare Ordinance 56 null and void insofar as it imposes franchise tax upon MERALCO and to claim for refund. FACTS: Tax: local franchise tax Act 3648 granted the Escudero Electric Service Company a legislative franchise to maintain and operate an electric light and power system in the City of San Pablo and nearby municipalities. Escudero's franchise was transferred to MERALCO under RA 2340. PD No. 551 was enacted on 11 Sep 74 providing under Section 1 1 that the franchise tax payable by all grantees of
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franchise to generate, distribute and sell electric current for light, heat and power shall be 2% of their gross receipts. RA 7160 (LGC) took effect in 1 Jan 92. It authorizes the province/city to impose a tax on business enjoying a franchise at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year realized within its jurisdiction. Ordinance 56 known as the Revenue Code of the City of San Pablo took effect on 30 Oct 1992. It imposes a tax on business enjoying a franchise at a rate of 50% of 1% of the gross annual receipts.. The City Treasurer then sent to MERALCO a letter demanding payment of the aforesaid franchise tax. The latter paid the tax under protest MERALCO filed an action with the RTC to declare Ordinance 56 null and void insofar as it imposes franchise tax upon MERALCO and to claim for refund. RTC ifo of MERALCO; LGC did not expressly or impliedly repeal the tax exemption/incentive enjoyed by it under its charter The Citys MR is denied. It filed a petition under R45 ROC to review RTC decision. MERALCOs contention (court did not expound on this) 1. in lieu of provision is not in the nature of an exemption; it refers to a commutative tax. 2. Non-impairment clause

Sec. 1. Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax payable by all grantees of franchise to generate, distribute and sell electric current for light, heat and power shall be two percent (2%) of their gross receipts received from the sale of electric current and from transactions incident to the generation, distribution and sale of electric current. Such franchise tax shall be payable to the Commissioner of Internal Revenue of his duly authorized representative on or before the

twentieth day of the month following the end of each calendar quarter or month as may be provided in the respective franchise or pertinent municipal regulation and shall, any provision of the Local Tax Code or any other law to the contrary notwithstanding, be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on earnings, receipts, income and privilege of generation, distribution and sale of electric current.

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Citys contention 1. RA 7160 expressly repealed Act 3648, RA 2340, and PD 551 and pursuant to Sections 137 and 193 of LGC, the province or city now has the power to impose a franchise tax on a business enjoying a franchise 2. Mactan Cebu v Marcos held that the exemption from real property tax granted under its charter has been withdrawn by the LGC 3. BLGF of DOF interpretation: holders of franchise which contain the phrase "in lieu of all taxes" proviso are exempt from the payment of any kind of tax is no longer applicable upon the effectivity of the LGC in view of the withdrawal of tax exemption privileges as provided in Sections 193 and 234 thereof. ISSUE: WON City may impose a local franchise tax upon MERALCO which pays a tax equal to 2% of gross receipts in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on savings or income. HELD: YES. RATIO: Pertinent Provisions (LGC) Sec. 137 Franchise Tax Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on business enjoying a franchise, at a rate not exceeding fifty percent 50% of one percent 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts, or realized, within its territorial jurisdiction. . . . Sec. 151 Scope of Taxing Powers Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose... Sec. 193 Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non- stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. Sec. 534 (f) Repealing Clause All general and special law, acts, city charters, decrees, executive orders, proclamation and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this code are hereby repealed or modified accordingly. 1. Implied Repeal. there was an implied repeal by Republic Act No. 7160 of the MERALCO franchise insofar as the latter imposes a 2% tax "in lieu of all taxes and assessments of whatever nature" 2. Exemption is withdrawn. Section 137 is explicit in its authorization of the province to impose franchise tax "notwithstanding any exemption granted by any law or other special law" is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws. 3. Sec. 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise provided in this Code, tax exemptions or incentives granted to or presently enjoyed by all persons whether natural or juridical, including government-owned or controlled corporations except 1) local water districts, 2) cooperatives duly registered under R.A. 6938, (3) nonstock and non-profit hospitals and educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities.

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4. Sect 137 and 193 together allows local government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts realized within its territorial jurisdiction 5. It is true that the phrase "in lieu of all taxes" found in special franchises has been held in several cases to exempt the franchise holder from payment of tax on its corporate franchise imposed of the Internal Revenue Code, as the charter is in the nature of a private contract and the exemption is part of the inducement for the acceptance of the franchise, and that the imposition of another franchise tax by the local authority would constitute an impairment of contract between the government and the corporation. BUT these "magic words" contained in the phrase "shall be in lieu of all taxes'' have to give way to the peremptory language of the LGC specifically providing for the withdrawal of such exemption privileges 6. Mactan Cebu International Airport Authority vs. Marcos held that Section 193 of the LGC prescribes the general rule, viz., the tax exemption or incentives, granted to or presently enjoyed by natural or juridical persons are withdrawn 7. On MERALCOs argument that in lieu of provision is a commutative tax. Congress could impair petitioner's legislative franchise by making it liable for income tax from which heretofore it was exempted by virtue of the exemption provided for in section 3 of its franchise. . . Republic Act No. 5431, in amending section 24 of the Tax Code by subjecting to income tax all corporate tax payers not expressly exempted therein and in section 27 of the Code, had the effect of withdrawing petitioner's exemption from income tax (Cagayan Electric Power v CIR) 8. Re non-impairment clause. LGC was enacted in pursuance of the constitutional policy to ensure autonomy to LGUs and to enable them to attain fullest development as selfreliant communities. nothing can prevent Congress from decreeing that even instrumentalities or agencies of the Government performing governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom. (Mactan case) a. Act. No. 3648 provided that the franchise is granted upon the condition that it shall be subject to amendment, or repeal by the Congress of the United States. Under the 1935, the 1973, and the 1987 Constitutions, no franchise or right shall be granted except under the condition that it shall be subject to amendment, alteration or repeal by the National Assembly when the public interest so requires. With or without the reservation clause, franchises are subject to alterations through a reasonable exercise of the police power; they are also subject to alteration by the power to tax, which like police power cannot be contracted away. 9. The power to tax is primarily vested in Congress. However, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution. The important legal effect of Section 5 is that henceforth, in interpreting statutory provision on municipal fiscal powers, doubts will have to resolved in favor of municipal corporations. RTC decision is reversed. MERALCOs petition is dismissed. 5. ILOILO BOTTLERS INC V CITY OF ILOILO Topic: Local Government Taxes Ponente: Cortes, J. Date: 19 August 1998

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DOCTRINE: A bottling company located in one LGU may be taxed by another LGU for its other activities which it conducts (selling and distributing) in the other LGU. QUICK FACTS: Iloilo Bottlers, Inc. is engaged in the business of bottling softdrinks with a bottling plant situated at Barrio Ungca Municipality of Pavia, Iloilo, which is outside the jurisdiction of defendant City of Iloilo. On July 12,1972, Iloilo Bottlers, Inc. filed a complaint with CFI Iloilo for the recovery of the sum of P3,329.20, which amount allegedly constituted payments of municipal license taxes under Ordinance No. 5 series of 1960, as amended, that the company paid under protest. SC held that plaintiff is liable for the municipal taxes on the basis of its selling activities in Iloilo City (but not for its bottling operations which was conducted elsewhere). FACTS: Tax: Municipal license taxes under Series of 1960 which ordinance was successively amended by Ordinance No. 28, Series of 1960; Ordinance No. 15, Series of 1964; and Ordinance No. 45, Series of 1964; which provides as follows: Section l. Any person, firm or corporation engaged in the distribution, manufacture or bottling of coca-cola, pepsi cola, tru-orange, seven-up and other soft drinks within the jurisdiction of the City of Iloilo, shall pay a municipal license tax of ten (P0.10) centavos for every case of twenty-four bottles; PROVIDED, HOWEVER, that softdrinks sold to the public at not more than five (P0.05) centavos per bottle shall pay a tax of one and one half (P0.015) (centavos) per case of twenty four bottles. Section 1-AFor purposes of this Ordinance, all deliveries and/or dispatches emanating or made at the plant and all goods or stocks taken out of the plant for distribution, sale or exchange irrespective (of) where it would take place shall be covered by the operation of this Ordinance. Facts: Santiago Syjuco Inc., owned and operated a bottling plant at Muelle Loney Street, Iloilo City, which was doing business under the name of Seven-up Bottling Company of the Philippines and bottled the soft-drinks Pepsi-Cola and 7up. In September 1966, Santiago Syjuco, Inc., informed all its employees that it was closing its Iloilo Plant due to financial losses and in fact closed the same and later sold the plant to plaintiff Iloilo Bottlers, Inc. Thereafter, plaintiff operated the said plant. However, sometime in July 1968, plaintiff closed said bottling plant at Muelle Loney, and transferred its bottling operations to its new plant in Barrio Ungca, Municipality of Pavia, Province of Iloilo, and which is outside the jurisdiction of the City of Iloilo. The bottling company under Santiago Syjuco Inc. had been religiously paying the defendant City of Iloilo the abovementioned municipal license tax but plaintiff Iloilo Bottlers stopped paying the municipal license tax after October 21, 1968 when it transferred its plant to Barrio Ungca Municipality of Pavia. Nonetheless, defendant City of Iloilo demanded from the plaintiff the payment of the municipal license tax, which plaintiff reluctantly paid. On July 12, 1972, plaintiff Iloilo Bottlers filed a complaint with the CFI of Iloilo praying for the recovery of the sum of P3,329.20, which amount allegedly constituted payments of municipal license taxes that the company paid under protest. Iloilo Bottlers Contention: Iloilo Bottlers, Inc. disclaims liability on two grounds: First, it contends that since it is not engaged in the independent business of distributing softdrinks, but that its activity of selling is merely an incident to, or is a necessary consequence of its main or principal business of bottling, then it is NOT liable under the city tax ordinance. Second, it claims that only manufacturers or bottlers having their plants inside the territorial jurisdiction of the city are covered by the ordinance. (In case Maam asks, it was mentioned in the case that plaintiff is already paying the National Government a percentage Tax of 71/t, as manufacturer's sales tax on all the softdrinks it manufactures

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In several cases2, this Court had occasion to distinguish two marketing systems. Under the first system, the manufacturer enters into sales transactions and invoices the sales at its main office where purchase orders are received and approved before delivery orders are sent to the company's warehouses, where in turn actual deliveries are made. No warehouse sales are made; nor are separate stores maintained where products may be sold independently from the main office. The warehouses only serve as storage sites and delivery points of the products earlier sold at the main office. Under the second system, sales transactions are entered into and perfected at stores or warehouses maintained by the company. Any one who desires to purchase the product may go to the store or warehouse and there purchase the merchandise. The stores and warehouses serve as selling centers. Entities operating under the first system are NOT considered engaged in the separate business of selling or dealing in their products, independent of their manufacturing business. Entities operating under the second system are considered engaged in the separate business of selling. In the case at bar, the company distributed its softdrinks by means of a fleet of delivery trucks which went directly to customers in the different places in lloilo province. Sales transactions with customers were entered into and sales were perfected and consummated by route salesmen. Truck sales were made independently of transactions in the main office. The delivery trucks were not used solely for the purpose of delivering softdrinks previously sold at Pavia. They served as selling units. They were what were called, until recently, "rolling stores". The delivery trucks were therefore much the same as the stores and warehouses
Cases distinguishing marketing systems: Central Azucarera de Don Pedro v. City of Manila and Sarmiento, supra; Cebu Portland Cement Co. v. City of Manila and the City Treasurer, 108 Phil. 1063 (1960); Caltex (Philippines), Inc. v. City of Manila and Cudiamat, supra
2

TC IFO Iloilo Bottlers and ordered reimbursement of municipal taxes paid. CA Certified case to SC.

ISSUE: WoN Iloilo Bottlers, Inc. distributes softdrinks within the jurisdiction of defendant City of Iloilo and is thus liable under Iloilo City tax Ordinance No. 5, series of 1960, as amended, which imposes a municipal license tax on distributors of soft-drinks. Note: The tax ordinance imposes a tax on persons, firms, and corporations engaged in the business of: (1) distribution of soft-drinks; (2) manufacture of soft-drinks, and; (3) bottling of softdrinks within the territorial jurisdiction of the City of Iloilo. There is no question that after it transferred its plant to Pavia, plaintiff no longer manufactured/bottled its softdrinks within Iloilo City. Thus, it cannot be taxed as one falling under the second or the third type of business. HELD: Yes. SC reversed CFI of Iloilo. The tax imposed under Ordinance No. 5 is an excise tax. Sales were made by Iloilo Bottlers, Inc. in Iloilo City. Thus, the company is liable under the tax ordinance. RATIO: For tax purposes, a manufacturer does not necessarily become engaged in the separate business of selling simply because it sells the products it manufactures. In certain cases, however, a manufacturer may also be considered as engaged in the separate business of selling its products.To determine whether an entity engaged in the principal business of manufacturing, is likewise engaged in the separate business of selling, its marketing system or sales operations must be looked into.

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under the second marketing system. Iloilo Bottlers, Inc. thus falls under the second category above. That is, the corporation was engaged in the separate business of selling or distributing soft-drinks, independently of its business of bottling them. 6. PEPSI-COLA BOTTLING CO V CITY OF CABANATUAN Topic: Fundamental Principles Ponente: Concepcion, C.J. Date: August 28, 1968 DOCTRINE: For a valid classification, the following must be satisfied: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally all those who belong to the same class. QUICK FACTS: Ordinance was passed imposing a tax on "any agent and/or consignee" of any dealer "engaged in selling liquors, imported or local, in the City of Butuan. Pepsi argued that the ordinance is null and void for it partakes of the nature of an import tax and that it is discriminatory. SC ruled ifo Pepsi. FACTS: Tax: P 0.10 per case of 24 bottles of Pepsi, based on municipal ordinance Facts: Pepsi-Cola Bottling Co. assails the validity of a Municipal Ordinance in Butuan City which imposes a tax on "any agent and/or consignee" of any dealer "engaged in selling liquors, imported or local, in the City," of P0.10 per case of 24 bottles of Pepsi-Cola. Pepsi paid under protest the amount of P4,926.63 and the amount of P9,250.40. Pepsis Contention: tax imposed is excessive and that it is unconstitutional. Disputed ordinance is null and void because: (1) it partakes of the nature of an import tax; (2) it amounts to double taxation; (3) it is excessive, oppressive and confiscatory; (4) it is highly unjust and discriminatory; and (5) section 2 of Republic Act No. 2264, upon the authority of which it was enacted, is an unconstitutional delegation of legislative powers. TC CA City of Butuan won. N/A. Appeal direct to SC.

ISSUE: WON the ordinance is null and void HELD: YES. SC reversed TC and ordered the refund of the amount paid. RATIO: Only the first and fourth grounds were viewed by the SC with merit. Double taxation In general, it is not forbidden by our fundamental law. Excessive, oppressive and confiscatory No, considering that the tax will be less than P0.0042 per bottle. Unconstitutional delegation of legislative powers The general principle against delegation of legislative powers, in consequence of the theory of separation of powers is subject to one well-established exception, namely: legislative powers may be delegated to local governments to which said theory does not apply in respect of matters of local concern.

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Partakes of the nature of an import tax YES. The merchants engaged in the sale of soft drink or carbonated drinks, are not subject to the tax, unless they are agents and/or consignees of another dealer, who, in the very nature of things, must be one engaged in business outside the City. Besides, the tax would not be applicable to such agent and/or consignee, if less than 1,000 cases of soft drinks are consigned or shipped to him every month. When we consider, also, that the tax "shall be based and computed from the cargo manifest or bill of lading ... showing the number of cases" not sold but "received" by the taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated drinks brought into the City from outside thereof becomes apparent. Viewed from this angle, the tax partakes of the nature of an import duty, which is beyond defendant's authority to impose by express provision of law. Discriminatory Even if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers would be subject to the tax. Requisites of a valid classification It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally all those who belong to the same class. 7. CITY OF BAGUIO V DE LEON Topic: Fundamental Principles Ponente: Fernando, J Date: 31 October 1968 DOCTRINES: 1. A city government has the power to tax, to license and to regulate provided that the subjects affected be one of those included in the charter. 2.Double Taxation may not be invoked where one tax is imposed by the state and the other by the city, it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof. Where congress has clearly expressed its intention, the statue must be sustained even though double taxation results. 3. Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. QUICK FACTS: Fortunato de Leon was held liable as a real estate dealer with a property therein worth more than P10,000, but not in excess of P50,000. He was obligated to pay under such ordinance the P50 annual fee. FACTS: Tax: Ordinance No. 9 - License fee: A real estate dealer who leases property worth P50,000 or above must pay an annual fee of P100. If the property is worth P10,000 but not over

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P50,000, then he pays P50 and P24 if the value is less than P10,000. On 15 July 1948, Republic Act No. 329 was enacted amending the charter of Baguio adding to its power to license the power to tax and to regulate "businesses, trades and occupations as may be established or practiced in the City." Pursuant to said RA, the City of Baguio passed Ordinance No. 99 in order to increase the revenues of the city. With this Ordinance, a real estate dealer who leases property worth P50,000 or above must pay an annual fee of P100. If the property is worth P10,000 but not over P50,000, then he pays P50 and P24 if the value is less than P10,000, to which Fortunato de Leon was held liable. Case was brought by the City Atty of Baguio before the City Court of Baguio against de Leon for his failure to pay an amount of Php300.00 as license fee covering 1stQ 1958 to 4Q1962 despite repeated demands. On de Leon's part, he challenged the validity on constitutional grounds that the Ordinance imposed double taxation, which is repugnant to the due process clause, and that it violated the requirement of uniformity. He also challenged the jurisdiction of the City Court. TC 19 December 1964 - the lower court declared the ordinance as amended, valid and subsisting. It held de Leon liable for the fees therein prescribed as a real estate dealer. ISSUE #1: WON Ordinance No.99 is valid HELD: Yes RATIO: The source of authority for the challenged ordinance is supplied by Republic Act No. 329, empowering the City of Baguio to fix the license fee and regulate "businesses, trades and occupations as may be established or practiced in the City." ISSUE #2: WON the double taxation Violated due process HELD: No RATIO: Citing Fort Smith Lumber Co. v. Arkansas, "The objection to the taxation as double may be laid down on one side. .. The 14th Amendment the due process clause no more forbids double taxation than it does doubling the amount of a tax, short of confiscation or proceedings unconstitutional on other grounds." The above decision was rendered at a time when American sovereignty in the Philippines was recognized. As such, it possesses more than just a persuasive effect. To some, it delivered the coup de grace to the bogey of double taxation as a constitutional bar to the exercise of the taxing power. It would seem though that in the United States, as with the Philippines, its ghost as noted by an eminent critic, still stalks the juridical state. In a 1947 decision (Wise & Co. v. Meer ), however, the Supreme Court quoted with approval this excerpt from a leading American decision: "Where, as here, Congress has clearly expressed its intention, the statute must be sustained even though double taxation results." At any rate, it has been expressly affirmed that such an "argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city ..., it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof."

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DOCTRINE: Uniformity of taxation applied to local taxation provides that the tax burden must be distributed to all those benefited by the it. QUICK FACTS: Declaratory relief of Ordinance No. 3379 RATIO: Citing Phil Trust Company v. Yatco, "A tax is considered uniform when it operates with the same force and effect in every place where the subject may be found Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation MINOR ISSUE: Relevant laws: WON the city court has jurisdiction? Yes. Where the principal issue is collection for a sum of money and the city court has already acquired jurisdiction over the suit, the mere fact that the issue of constitutionality is raised does not suffice to oust the City Court of Jurisdiction. Since the city Court is possessed of judicial power and it is likewise axiomatic that the judicial power embraces the ascertainment of the facts and application of the Law, the Constitution as the highest law superseding any statute or ordinance in conflict therewith, it cannot be said that a City Court is bereft of competence to proceed on the matter. 8. ASSOCIATION OF CUSTOMS BROKERS V MUNICIPAL BOARD Topic: Local Taxation; Taxing Power of LGUs; Fundamental Principles Ponente: Bautista Angelo Date: May 22, 1953 a. Section 18(p) of RA No. 409 (Revised Charter of Manila) provides that the municipal board "to tax motor and other vehicles operating within the City of Manila the provisions of any existing law to the contrary notwithstanding. b. RA No. 3992 (Motor Vehicles Law) provides that no other fees may be exacted by public highways or for the operation of any motor vehicle therein except local or municipal property tax c. Now, the Ordinance in question is entitled An Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the City of Manila. It imposes a 1% ad valorem tax per annum. This tax shall accrue shall accrue to the Streets and Bridges Funds of the City and shall be expended exclusively for the repair, maintenance and improvement of its streets and bridges. Arguments of the Association and G. Manlapit, Inc.: FACTS: Tax: Ordinance No. 3379 passed by the Municipal Board of the City of Manila on March 24, 1950. This is a declaratory relief filed by the Association, composed of all brokers and public service operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said Association involving the said Ordinance.

ISSUE #3: WON there violation of the rule of uniformity HELD: NO

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a. while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila; b. said ordinance offends against the rule of uniformity of taxation; and c. it constitutes double taxation. Arguments of the City: a. the challenged ordinance imposes a property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of Republic Act No. 409], b. it does not violate the rule of uniformity of taxation, c. it does not constitute double taxation. TC Ordinance is valid ISSUE 1: WON the tax levied by the Ordinance is a property tax (hence valid) or a license tax (invalid) HELD: It is a license tax, hence invalid. RATIO: It is a license tax General rule: ad valorem tax is a property tax. However, this is not absolute when the ad valorem tax is levied upon persons on account of their businesses. While the Ordinance calles it property tax and it is fixed ad valorem, it cannot be denied that it is levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. i. This is what the Motor Vehicle Law intends to prevent, because under the municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway. This is to avoid duplication in the imposition of fees for the same purpose.

ISSUE 2: WON the Ordinance violated uniformity of taxation HELD: It violated uniformity of taxation RATIO: It violated uniformity of taxation The Ordinance exacts the tax upon all motor vehicles operating within the City of Manila, without distinguishing between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish between a motor vehicle registered in the City of Manila and one registered in another place but occasionally comes to Manila and uses its streets and public highways. The fact that they are benefited by their use they should also be made to share the corresponding burden. 9. ORMOC SUGAR COMPANY V ORMOC CITY Topic: Fundamental Principles Ponente: Bengzon, JP., J. Date: February 17, 1968 DOCTRINE: An ordinance taxing only one specific entity violates the equal protection clause. It is irrelevant that at the time of the passage of the ordinance, Ormoc Sugar is the only sugar central in the city because to be reasonable, the terms of the ordinance should be applicable to future conditions and should not be singular and exclusive as to exclude any subsequently established sugar central of the same class as Ormoc Sugar. QUICK FACTS: Ormoc Sugar Company, Inc. questions the constitutionality of the ordinance passed imposing a 1% municipal tax per export sale of products milled at Ormoc Sugar Company. FACTS:

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Tax: Ordinance 4, Series of 1964, imposing a 1% municipal tax per export sale to foreign countries of any products of centrifugal sugar milled at Ormoc Sugar Company, Inc. In Jan 1964, the municipal board of Ormoc City passed Ordinance 4 imposing a 1% municipal tax per export sale to foreign countries of any products of centrifugal sugar milled at Ormoc Sugar Company, Inc (Ormoc Sugar). Ormoc Sugar paid the taxes under protest on March and April 1964 then filed a complaint before the CFI of Leyte on Jun1964. Ormoc Sugars Contention: The ordinance is unconstitutional for being: (1) violative of the equal protection clause and the rule of uniformity of taxation; (2) an export tax forbidden under Sec2287 of the Revised Administrative Code 3; and (3)imposed without authorization or outside the scope of power of the city as provided under RA 2264, Local Autonomy Act - as it was allegedly neither a production nor a license tax. Ormoc Citys Contention: The ordinance is not violative of the constitutional limitations and within its power ( yan lang talaga yung defense niya) CFI IFO Ormoc City upholding the constitutionality of the ordinance. The Local Autonomy Act broadened the citys taxing power to include all other forms of taxes, licenses or fees not excluded in its charter. ISSUE: WoN the ordinance violates the constitutional limits on power of taxation, ie equal protection clause and rule of uniformity of taxation?
It shall not be in the power of the municipal council to impose a tax in any form whatever, upon goods and merchandise carried into the municipality, or out of the same, and any attempt to impose an import or export
3 tax upon such goods in the guise of an unreasonable charge for wharfage use of bridges or otherwise, shall be void.

HELD: Yes. SC Reversed CFI and ruled IFO Ormoc Sugar Company because the ordinance failed to meet the requisites for a reasonable classification in violation of the equal protection of the laws. RATIO: Equal protection clause applies only to persons or things identically situated and does not bar a reasonable classification of the subject legislation. Requisites for a reasonable classification: 1. substantial distinctions 2. distinction is germane to the purpose of the law 3. classification applies not only to present conditions but also to future conditions which are substantially identical to those of the present 4. classification applies only to those who belong to the same class In the case at bar, the ordinance taxes only centrifugal sugar produced and exported by the Ormoc Sugar Company and none other in violation of the equal protection clause. It is irrelevant that at the time of the passage of the ordinance, Ormoc Sugar is the only sugar central in the city because to be reasonable, the terms of the ordinance should be applicable to future conditions and should not be singular and exclusive as to exclude any subsequently established sugar central of the same class as Ormoc Sugar. MINOR ISSUE: WoN City of Ormoc has the power to issue the Ordinance? YES. Although Sec 2287 of the Revised Administrative Code denies from the municipal councils the power to impose an export tax, Sec 2 of RA 2264 (a later law) gave chartered cities, municipalities and municipal districts authority to levy for public purposes just and uniform taxes, licenses or fees, thus, repealing the former (NIN Bay Mining Co v Municipality of Roxas].

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2. Stabilization fees collected are considered government funds under the Government Auditing Code 3. The transfer of shares of stock from PHILSUCOM to the sugar producers would be irregular, if not illegal ISSUE: WoN the stabilization fees are in the nature of a tax. HELD: YES. DOCTRINE: Revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons QUICK FACTS: Sugar producers and millers want the shares of stock of Republic Planters Bank in the name of PHILSUCOM to be transferred and distributed to them since the funds used in purchasing these stocks came from deductions imposed on them. FACTS: Tax: PD 388 (which created Philippines Sugar Company) mandated the collection of stabilization fee of P1.00 for every picul of sugar produced and milled from the sugar producers. Under PD 388, stabilization fees were collected for the purpose of financing the growth and development of the sugar industry. PHILSUCOM bought shares of stock of Republic Planters Bank using the Stabilization fund. Gaston et al (sugar producers, sugarcane planters and millers), filed a writ of mandamus to compel the Bank to transfer and distribute the shares of stock held by PHILSUCOM. Gaston et als Contention: The investment of the proceeds from the stabilization fund in subscriptions to the capital stock of the Bank were being made for and on their behalf. PHILSUCOMs Contention: 1. No trust results from Section 7 of P.D. No. 388 The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose that of "financing the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market the fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them state funds, even though they are held for a special purpose. Having been levied for a special purpose, the revenues collected are to be treated as a special fund, to be, in the language of the statute, "administered in trust' for the purpose intended. Once the purpose has been fulfilled or abandoned, the balance, if any, is to be transferred to the general funds of the Government. That is the essence of the trust intended. The character of the Stabilization Fund as a special fund is emphasized by the fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an RATIO: The stabilization fees collected are in the nature of a tax, which is within the power of the State to impose for the promotion of the sugar industry. They constitute sugar liens. The collections made accrue to a "Special Fund," a "Development and Stabilization Fund." The tax collected is not in a pure exercise of the taxing power. It is levied with a regulatory purpose, to provide means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State

10. GASTON V REPUBLIC PLANTERS BANK Topic: Local Taxation Taxing Powers of LGUs Fundamental Principles Ponente: Melencio-Herrera, J. Date: March 15, 1988

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appropriation made by law (1987) Constitution, Article VI, Sec. 29. That the fees were collected from sugar producers, planters and millers, and that the funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fired for their benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the fees be collected from them since it is also they who are to be benefited from the expenditure of the funds derived from it. The investment in shares of respondent Bank is not alien to the purpose intended because of the Bank's character as a commodity bank for sugar conceived for the industry's growth and development. Furthermore, of note is the fact that one-half, (1/2) or PO.50 per picul, of the amount levied under P.D. No. 388 is to be utilized for the "payment of salaries and wages of personnel, fringe benefits and allowances of officers and employees of PHILSUCOM" thereby immediately negating the claim that the entire amount levied is in trust for sugar, producers, planters and millers. To rule in Gaston et al's favor would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. The Stabilization Fund is to be utilized for the benefit of the entire sugar industry, "and all its components, stabilization of the domestic market," including the foreign market the industry being of vital importance to the country's economy and to national interest. MINOR ISSUE: FACTS: WoN the stabilization fees collected from sugar planters and millers are funds in trust for them. NO. It is not clearly shown from the statute itself that the PHILSUCOM imposed on itself the obligation of holding the stabilization fund for the benefit of the sugar producers. It must be categorically demonstrated that the very Tax: Supervision fee of 10% (later, 5% as amended) of the gross receipts from stall rentals as provided by the Market Code of Quezon City (Ordinance No. 7997, later amended by Ordinance No. 9236). administrative agency which is the source of such regulation would place a burden on itself 11. PROGRESSIVE DEVELOPMENT CORP. V QUEZON CITY Topic: Local Taxation Taxing Powers of LGUs Fundamental Principles Ponente: Feliciano, J. Date: April 24, 1989 DOCTRINE: Republic Act No. 2264 (Local Autonomy Act, later, Local Government Code) confers upon local governments broad taxing authority extending to almost "everything, excepting those which are mentioned therein," provided that the tax levied is "for public purposes, just and uniform," does not transgress any constitutional provision and is not repugnant to a controlling statute. Further, an ordinance carries with it the presumption of validity unless there is a determination that the amount is so excessive as to be prohibitory, arbitrary, unreasonable, oppressive, or confiscatory. QUICK FACTS: The City Council of Quezon City imposed ordinances imposing a supervision fee based on a percentage of the gross receipts on the lease of space in privately-owned public markets in the said city. Progressive Development Corp., owner and operator of Farmers Market & Shopping Center, argued that the said fee is, in reality, a tax on income which Quezon City is prohibited from imposing.

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In 1968, the City Council of Quezon City adopted Ordinance No. 7997, also known as the Market Code of Quezon City which imposed a supervision fee of 10% of the gross receipts from stall rentals of privately-owned and operated public markets. The Code was later amended by Ordinance No. 9236, which reduced the rate to 5% in 1972. Shortly after the amendment, Progressive Development Corp. (PDC), owner and operator of Farmers Market & Shopping Center, filed a Petition for Prohibition with Preliminary Injunction against Quezon City before the Court of First Instance of Rizal. Petitioners Contention: PDC argued that the cited supervision fee was in reality a tax on income which Quezon City is prohibited from imposing as provided by RA 2264 (Local Autonomy Act) because the amount was unreasonable large more consistent with a revenue measure instead of a regulatory measure. Respondents Contention: The tax on gross receipts was not a tax on income but one imposed for the enjoyment of the privilege to engage in a particular trade or business which was within the power of Quezon City to impose. TC Quezon City won. PDCs petition was dismissed because the questioned imposition is not a tax on income, but rather a privilege tax or license fee which local governments, like Quezon City, are empowered to impose and collect. CA n/a: direct Petition for Review before the SC. ISSUE: WoN the supervision fee imposed was unreasonable large as to characterize it as a revenue measure instead of a regulatory mechanism. HELD: No. SC affirmed the CFI. Ruled for Quezon City RATIO: E2014: Arnel, Teph, Zoe, Azy, VJ, Marshall, Jayson, Shiree, Bern, Floyd, Rubb, Diega, Jessie, Macel, Rod, Bianca, Dotty, Raj, Bobby, Jasper, Leslie| 20

While it is true that the amount imposed by the questioned ordinances may be considered in determining whether the exaction is really one for revenue or prohibition, instead of one of regulation under the police power, it nevertheless will be presumed to be reasonable. Local governments are allowed wide discretion in determining the rates of imposable license fees even in cases of purely police power measures, in the absence of proof as to particular municipal conditions and the nature of the business being taxed as well as other detailed factors relevant to the issue of arbitrariness or unreasonableness of the questioned rates. PDC has not shown that the rate of the gross receipts tax is so unreasonably large and excessive and so grossly disproportionate to the costs of the regulatory service being performed by the respondent as to compel the Court to characterize the imposition as a revenue measure exclusively. The lower court correctly held that the gross receipts from stall rentals have been used only as a basis for computing the fees or taxes due respondent to cover the latter's administrative expenses, i.e., for regulation and supervision of the sale of foodstuffs to the public. The use of the gross amount of stall rentals as basis for determining the collectible amount of license tax, does not by itself, upon the one hand, convert or render the license tax into a prohibited city tax on income. On the other hand, it has not been suggested that such basis has no reasonable relationship to the probable costs of regulation and supervision of the petitioner's kind of business. For, ordinarily, the higher the amount of stall rentals, the higher the aggregate volume of foodstuffs and related items sold in PDCs privately owned market; and the higher the volume of goods sold in such private market, the greater the extent and frequency of inspection and supervision that may be reasonably required in the interest of the buying public.

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share of individual partner in the net profits of taxable partnership, (f) adjusted gross income. Petitioner as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers. He characterizes the above sction as arbitrary amounting to class legislation, oppressive and capricious in character . ISSUE: Whether the imposition of a higher tax rate on taxable net income derived from business or profession than on compensation is constitutionally infirm. HELD: NO. RATIO: The power to tax is an attribute of sovereignty. It is the strongest of all the powers of of government. It is, of course, to be admitted that for all its plenitude, the power to tax is not unconfined. There are restrictions. The Constitution sets forth such limits. Adversely affecting as it does property rights, both the due process and equal protection clauses may properly be invoked to invalidate, in appropriate cases, a revenue measure. It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property. That would be a clear abuse of power. It then becomes the duty of this Court to say that such an arbitrary act amounted to the exercise of an authority not conferred. That properly calls for the application of the Holmes dictum. It has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to attack on due process grounds.

12. SISON V ANCHETA Topic: Taxing Power of LGUs Fundamental Priniciples Ponente: Fernando, C.J. Date: July 25, 1984 DOCTRINE: The power to tax is an attribute of sovereignty. It is the strongest of all the powers of of government. It is, of course, to be admitted that for all its plenitude, the power to tax is not unconfined. There are restrictions. The Constitution sets forth such limits. Adversely affecting as it does property rights, both the due process and equal protection clauses may properly be invoked to invalidate, in appropriate cases, a revenue measure. QUICK FACTS: Petitioner Antero Sison as taxpayer alleges that by virtue of Sec. 1 of BP 135 he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers. There is, therefore, a transgression of both the equal protection and due process clauses of the Constitution as well as of the rule requiring uniformity in taxation. FACTS: Tax: Tax on compensation income vs Tax on net income derived from business/profession Facts: Petitioner Sison is challenging the validity of Section I of BP Blg. 135 which amended Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements, (e) dividends and

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Now for equal protection. The applicable standard to avoid the charge that there is a denial of this constitutional mandate whether the assailed act is in the exercise of the police power or the power of eminent domain is to demonstrate that the governmental act assailed, far from being inspired by the attainment of the common welfare was prompted by the spirit of hostility, or at the very least, discrimination that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances which if not identical are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest. That same formulation applies as well to taxation measures. What misled petitioner is his failure to take into consideration the distinction between a tax rate and a tax base. There is no legal objection to a broader tax base or taxable income by eliminating all deductible items and at the same time reducing the applicable tax rate. Taxpayers may be classified into different categories. To repeat, it is enough that the classification must rest upon substantial distinctions that make real differences. In the case of the gross income taxation embodied in BP Blg. 135, the, discernible basis of classification is the susceptibility of the income to the application of generalized rules removing all deductible items for all taxpayers within the class and fixing a set of reduced tax rates to be applied to all of them. Taxpayers who are recipients of compensation income are set apart as a class. As there is practically no overhead expense, these taxpayers are e not entitled to make deductions for income tax purposes because they are in the same situation more or less. On the other hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in the costs or expenses necessary to produce their income. It would not be just then to disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on the basis of gross income. There is ample justification then for the BP to adopt the gross system of income taxation to compensation income, while continuing the system of net income taxation as regards professional and business income. 13. MATALIN COCONUT CO. V MUNICIPAL COUNCIL OF MALABANG, et. al. Topic: Fundamental Principles, Taxing power of LGUs Ponente: Yap, J. Date: August 13, 1986 DOCTRINE: A police inspection fee partakes of the nature of a tax because the main purpose is to raise revenue. QUICK FACTS: Matalin Coconut Co. questions the validity of Municipal Ordinance no. 45-46 imposing a police inspection fee of P0.30/sack of cassava starch produced and shipped out of the Municipality of Malabang. FACTS: Tax: Police inspection fee = P0.30 / sack of cassava starch produced and shipped out of the mun of Malabang The Municipal Council of Malabang enacted Municipal Ordianance no. 45-46 imposing a police inspection fee of P0.30/sack of cassava starch produced and shipped out of the municipality, to be paid by the shipper before the starch is transported or shipped outside the municipality. Petitioners Contention:

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The ordinance is null and void for being: 1) ultra vires, violative of of RA 2264 or the Local Autonomy Act 2) unreasonable, oppressive and confiscatory Prayed refund of the amounts paid by Matalin. Respondents Contention: Ordinance is valid pursuant to Sec. 2 of RA 2264. TC Ordinance null and void; ordered Municipal Treasurer to refund the payments of Matalin CA SC no decision; municipality appealed straight to in question, the policemen of said municipality are not competent to determine if the cassava flour starch are fit for human consumption. The further pretention of respondents that the trucks of the petitioner hauling the bags of cassava flour starch from the mill to the bodega at the beach of Malabang are escorted by a policeman from the police checkpoint to the beach for the purpose of protecting the truck and its cargoes from molestation by undesirable elements could not also be given credence by the Court because it has been shown, beyond doubt, that the petitioner has not asked for the said police protection because there has been no occasion where its trucks have been molested, even for once, by bad elements from the police checkpoint to the bodega at the beach, it is solely for the purpose of verifying the correct number of bags of cassava flour starch loaded on the trucks of the petitioner as stated in the trip tickets, when unloaded at its bodega at the beach. The imposition, therefore, of a police inspection fee of P.30 per bag, imposed by said ordinance is unjust and unreasonable. 3) It is excessive and confiscatory. It has been shown by the petitioner, Matalin Coconut Company, Inc., that it is merely realizing a marginal average profit of P0.40, per bag, of cassava flour starch shipped out from the Municipality of Malabang because the average production is P15.60 per bag, including transportation costs, while the prevailing market price is P16.00 per bag. The further imposition, therefore, of the tax of P0.30 per bag, by the ordinance in question would force the petitioner to close or stop its cassava flour starch milling business considering that it is maintaining a big labor force in its operation, including a force of security guards to guard its properties. The ordinance, therefore, has an adverse effect on the economic growth of the Municipality of Malabang, in particular, and of the

ISSUE: WoN Ordinance is valid HELD: NO. Affirmed TC decision RATIO: 1) Police inspection fee partakes of the nature of a tax because its undeniable purpose is to raise revenue. 2) It is unjust and unreasonable. It has been proven that the only service rendered by the Municipality of Malabang, by way of inspection, is for the policeman to verify from the driver of the trucks of the petitioner passing by at the police checkpoint the number of bags loaded per trip which are to be shipped out of the municipality based on the trip tickets for the purpose of computing the total amount of tax to be collect (sic) and for no other purpose. The pretention of respondents that the police, aside from counting the number of bags shipped out, is also inspecting the cassava flour starch contained in the bags to find out if the said cassava flour starch is fit for human consumption could not be given credence by the Court because, aside from the fact that said purpose is not so stated in the ordinance

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nation, in general, and is contrary to the economic policy of the government. NOTES: Court held it is not a percentage tax, but a fixed tax. Therefore, the argument of Matalin that the ordinance violates RA 2246 is untenable. 14. VILLANUEVA V CITY OF ILOILO Topic: Fundamental Principles (LGC 130-132) Ponente: Castro, J. DOCTRINE: Tenement tax or apartment tax is not among the exceptions listed in the Local Autonomy Act. On the other hand, the act provides that chartered cities have the authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or exercising privileges within their respective territories, and otherwise levy for public purposes, just and uniform taxes, licenses, or fees. In addition, the uniformity rule does not require that taxes for the same purpose should be imposed in different territorial subdivisions at the same time. So long as the burden of the tax falls equally and impartially on all owners or operators of tenement houses similarly classified or situated, equality and uniformity of taxation is accomplished. QUICK FACTS: City of Iloilo enacted an ordinance imposing tenement tax on owners of tenement houses or apartments. Spouses Villanueva assailed it as invalid and unconstitutional because it is not within the power of the city to impose said tax and it violates the uniformity rule, among other grounds. TAX: Municipal License Tax on Persons Engaged in the Business of Operating Tenement Houses FACTS: In 1946, City of Iloilo enacted an ordinance imposing license tax fees on owners of tenement houses. Villanueva spouses, who are owners of tenement houses (34 apartments), questioned the validity and constitutionality of said ordinance. SC declared the ordinance ultra vires it not appearing that the power to tax owners of tenement houses is one of among those clearly and expressly granted to the city by its charter. In 1960, after the passage of the Local Autonomy Act, the city again enacted an ordinance taxing the same persons with the belief that the passage of the said act granted them the authority to enact said ordinance. By virtue of said ordinance, the city collected tenement or apartment taxes from the Villanuevas, who are also paying real property taxes. In 1962, the Villanuevas filed a complaint wanting to declare said ordinance invalid for being beyond the powers of the city to enact, unconstitutional for being violative of the uniformity rule and equal protection clause. (They say its a real property tax, not an excise tax.) TC Ordinance illegal. The Local Autonomy Act does not empower cities to impose apartment taxes. The ordinance is also oppressive and unreasonable, constitutes double taxation, and violative of the uniformity rule (no such tax in other cities, LGUs). ISSUES 1: WON the city was empowered by the Local Autonomy Act to impose apartment taxes. HELD: YES. RATIO: Call it tenement tax or apartment tax, either is not among the exceptions listed in the Local Autonomy Act. On the other hand, the act provides that chartered cities have the authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or exercising privileges within their respective territories, and otherwise

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levy for public purposes, just and uniform taxes, licenses, or fees. ISSUE 2: WON the ordinance is illegal because it imposes double taxation. HELD: NO. RATIO: License fees or taxes with respect to the same occupation, calling or activity may be imposed by both the State and a political subdivision. In addition, a license tax may be levied upon a business or occupation although the land or property used in connection therewith is subject to property tax. The State may collect an ad valorem tax on property used in calling and at the same time impose a license tax on that calling. Real estate tax and tenement tax, though taxed by the same authority, are not of the same kind or character. Anyway, double taxation is not prohibited by the constitution permissible provided that constitutional requirement is not violated such as the uniformity rule. ISSUE 3: WON the ordinance is oppressive and unreasonable because it carries a penal clause. HELD: NO. RATIO: The tenement tax is neither a poll tax nor a debt where a person may not be imprisoned for not paying. Therefore it is not oppressive like the TC puts it. On the other hand, the Charter of the city empowers its city council to fix penalties for violations of ordinances, which shall not exceed a fine of P200 or 6 months imprisonment. ISSUE 4: WON the ordinance is violative of the uniformity rule. HELD: NO. RATIO: Tenement houses constitute a distinct class of property. Taxes are uniform and equal when imposed upon all property of the same class or character within the taxing authority. The fact that owners of other types of buildings do not pay tenement taxes does not mean that the tax is against uniformity and equality. In addition, the uniformity rule does not require that taxes for the same purpose should be imposed in different territorial subdivisions at the same time. So long as the burden of the tax falls equally and impartially on all owners or operators of tenement houses similarly classified or situated, equality and uniformity of taxation is accomplished. NOTES: 1. The provision in the Local Autonomy Act (similar to Sec. 133 of LGC) confers to LGUs broad taxing authority which extends to almost everything except those mentioned therein, provided that the tax so levied is for public purposes, just and uniform. The true nature of the tax: The tax in question is not a real property tax. One, it is not a tax on the land where the tenements are erected. Two, the tax is not a fixed proportion of the assessed value of the tenement houses. Three, it is not payable at a designated time or date and is not enforceable either by sale or distraint. On the contrary, the context of the ordinance declares that its intention is to impose a license tax on the operation of tenement houses. Tenement houses constitute a distinct form of business or calling, being necessarily offered for rent or lease by their very nature and essence. 2. No res judicata. The previous case and this case do not have the same subject matter or cause of action. 3. The decision of TC was reversed.

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15. ERICSSON TELECOMMUNICATIONS V CITY OF PASIG Topic: Local Taxation; Taxing Powers of LGUs; Fundamental Principles Ponente: Austria-Martinez, J. Date: 22 November 2007 DOCTRINE: The imposition of local business tax based on petitioners (Ericsson Telecom) gross revenue will inevitably result in the constitutionally proscribed double taxation taxing of the same person twice by the same jurisdiction for the same thing inasmuch as its revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid. QUICK FACTS: The City of Pasig assessed deficiency taxes on Ericsson, for the years 1997-2000, based on Ericssons gross revenue. Both assessments were protested by Ericsson, claiming that the computation of the local business tax should be based on gross receipts and not on gross revenue. FACTS: Petitioner Ericsson Telecommunications, Inc. (Ericsson) was given assessment notices issued by the respondent City Treasurer of Pasig City (City Treasurer) for business tax deficiencies based on its gross revenues as reported in its audited financial statements for the years 1997 and 1998 and for the years 1999 and 2000. Ericsson then filed a Protest claiming that the computation of the local business tax should be based on gross receipts and not on gross revenue. When its protests were denied, Ericsson filed a petition for review with the Regional Trial Court (RTC) of Pasig praying for the annulment and cancellation of its deficiency local business taxes. RTC cancelled and set aside the assessments made by respondent Pasig City, represented by its City Treasurer. CA reversed RTC decision. Ericsson contends that only the portion of the revenues, which were actually and constructively received, should be considered in determining its tax base (Note: Basically, they wanted to be taxed based on their gross receipts.) ISSUE: WON the local business tax on contractors should be based on gross receipts or gross revenue. HELD: It should be based on gross receipts. RATIO: The City of Pasig is authorized to levy business taxes under Section 143 in relation to Section 151 of the Local Government Code. Section 143 of the LGC covering contractors and other independent contractors which relates to Ericsson, specifically it refers to gross receipts which is defined under Section 131 of the LGC, as follows: (n) Gross Sales or Receipts include the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged or materials supplied with the services and the deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding discounts if determinable at the time of sales, sales return, excise tax, and value-added tax (VAT); The law and jurisprudence (CIR v BPI) show that gross receipts include money or its equivalent actually or constructively received in consideration of services rendered or articles sold, exchanged or leased, whether actual or constructive. The concept of a withholding tax on income obviously and necessarily implies that the amount of the tax withheld

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comes from the income earned by the taxpayer. Since the amount of the tax withheld constitutes income earned by the taxpayer, then that amount manifestly forms part of the taxpayers gross receipts. Receipt of income may be actual or constructive. The rules on actual and constructive possession are provided in Articles 531 and 532 of our Civil Code. In our withholding tax system, possession is acquired by the payor as the withholding agent of the government, because the taxpayer ratifies the very act of possession for the government. There is thus constructive receipt. The processes of bookkeeping and accounting for interest on deposits and yield on deposit substitutes that are subjected to FWT are indeedfor legal purposestantamount to delivery, receipt or remittance. Revenue Regulations No. 16-2005 dated September 1, 2005[20] defined and gave examples of constructive receipt, to wit: SEC. 4. 108-4. Definition of Gross Receipts. -- x xx Constructive receipt occurs when the money consideration or its equivalent is placed at the control of the person who rendered the service without restrictions by the payor. The following are examples of constructive receipts: (1) Deposit in banks, which are made available to the seller of services without restrictions; (2) Issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for services rendered; and (3) Transfer of the amounts retained by the payor to the account of the contractor. There is, therefore, constructive receipt, when the consideration for the articles sold, exchanged or leased, or the services rendered has already been placed under the control of the person who sold the goods or rendered the services without any restriction by the payor. In contrast, gross revenue covers money or its equivalent actually or constructively received, including the value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be received. The imposition of local business tax based on petitioners gross revenue will inevitably result in the constitutionally proscribed double taxation taxing of the same person twice by the same jurisdiction for the same thing inasmuch as petitioners revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid. 16. ORMOC SUGAR COMPANY V MUNICIPAL BOARD OF ORMOC Topic: Taxing powers of LGU - Fundamental principles Ponente: Fernando Date: July 21, 1967 DOCTRINE: .With the Local Autonomy Act was enacted, the sphere of autonomy of a chartered city in the enactment of taxing measures has been considerably enlarged. FACTS (short case): Appeal from a decision of the CFI of Leyte, Fifth Branch, in a declaratory relief proceeding to test the validity of a Municipal Ordinance of the City of Ormoc stating: Tax: SECTION 1. City Tax. There shall be paid to the City Treasurer on any and all productions of centrifugal sugar (BSugar locally sold or sold within the Philippines a city tax of Twenty Centavos (P0.20) per picul and one percentum (1%) on the gross sale of its derivatives and by-products produced

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by the Ormoc Sugar Company, Incorporated, or by any other sugar mills [sic] in Ormoc City. The above amendatory ordinance was enacted on October 28, 1964 and took effect immediately after approval. CFI sustained its validity in its decision of January 28, 1965. (no ratio given) ISSUE: Is the ordinance valid? HELD: YES. (Note: This is the 1967 case. See the 1968 case.) RATIO: a. The question before SC is one of power. When the Local Autonomy Act was enacted in 1959, the sphere of autonomy of a chartered city in the enactment of taxing measures has been considerably enlarged. In the language of the statute: SECTION 2. Taxation. Any provision of law to the contrary notwithstanding, all chartered cities, municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or exercising, privileges in chartered cities, municipalities or municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city, the municipal council of the municipality, or the municipal district council of the municipal district; to collect fees and charges for services rendered by the city, municipality or municipal district; to regulate and impose reasonable fees for services rendered in connection with any business, profession or occupation being conducted within the city, municipality or municipal district and otherwise to levy for public purposes, just and uniform taxes, licenses or fees: Provided, That municipalities and municipal districts shall, in no case impose any percentage tax on sales or other taxes in any form based thereon nor impose taxes on articles subject to specific tax, except gasoline, under the provisions of the National Internal Revenue Code x x x . Hodges v. Municipal Board restated the controlling doctrine in this wise: X x x we have announced the doctrine that the grant of the power to tax to chartered cities under Section 2 of the Local Autonomy Act is sufficiently plenary to cover "everything, excepting those which are mentioned" therein, subject only to the limitation that the tax so levied is for "public purposes, just and uniform" (Nin Bay Mining Company vs. Municipality of Roxas, Province of Palawan, G.R. No. L-20125, July 20, 1965). There is no showing, and we do not believe it is possible to show, that the tax levied, called by any name, percentage tax or sales tax comes under any of the specific exceptions listed in section 2 of the Local Autonomy Act. X x x Since its public purpose, justness and uniformity of application are not disputed, the tax so levied must be sustained as valid.
In the light of the above, it cannot be said that the ordinance suffers from a constitutional or statutory infirmity as claimed in the first alleged error.

b. Ormoc Sugar Company assails the said ordinance as being in restraint of trade. In the absence of a clear and specific showing that a constitutional or statutory provision was violated, such allegation is unmeritorious. Considering the indubitable policy expressly set forth in the Local Autonomy Act, the invocation of such a talismanic formula as "restraint of trade" without more no longer suffices, assuming it ever did, to nullify a taxing ordinance, otherwise valid. 17. BAGATSING V RAMIREZ

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Topic: LOCAL TAXATION; FUNDAMENTAL PRINCIPLES Ponente: Martin, J Date: Dec 17,1976 DOCTRINE: a general provision must give way to a particular provision. Special provision governs. This is especially true where the law containing the particular provision was enacted later than the one containing the general provision. The City Charter of Manila was promulgated on 18 June 1949 as against the Local Tax Code which was decreed on 1 June 1973 QUICK FACTS: The chief question to be decided in this case is what law shall govern the publication of a tax ordinance enacted by the Municipal Board of Manila, the Revised City Charter (R.A. 409, as amended), which requires publication of the ordinance before its enactment and after its approval, or the Local Tax Code (P.D. No. 231), which only demands publication after approval. FACTS: On 12 June 1974, the Municipal Board of Manila enacted Ordinance No. 7522, An ordinance regulating the operation of public markets and prescribing fees for the rentals of stalls and providing penalties for violation thereof and for other purposes. The Federation of Manila Market Vendors Inc. commenced civil case seeking the declaration of nullity of the said ordinance for the reason that (a) the publication requirement under the Revised Charter of the City of Manila has not been complied with; (b) the Market Committee was not given any participation in the enactment of the ordinance, as envisioned by RA 6039; (c) Section 3 (e) of the Anti-Graft and Corrupt Practices Act has been violated; and (d) the ordinance would violate PD 7 of 30 September 1972 prescribing the collection of fees and charges on livestock and animal products.

TC - Respondent Judge declared Ordinance No. 7522 null and void for non-compliance with the requirement of publication under the Revised City Charter. Petitioners moved for reconsideration of the adverse decision, stressing that (a) only a post-publication is required by the Local Tax Code; and (b) the Federation failed to exhaust all administrative remedies before instituting an action in court. When TC denied MR, petitioners brought the matter to Us through the present petition for review on certiorari. ISSUE: WoN Ordinance No. 7522 is valid HELD: Yes, Ordinance No. 7522 was validly enacted. RATIO: The Revised Charter of Manila requires publication before the enactment of the ordinance and after the approval thereof. On the other hand, the Local Tax Code only prescribes for publication after the approval of ordinances levying or imposing taxes, fees or other charges. The Revised Charter of the City of Manila is a special act since it relates only to the City of Manila, whereas the Local Tax Code is a general law because it applies universally to all local governments. A prior special law is not ordinarily repealed by a subsequent general law. The fact that one is special and the other general creates a presumption that the special is to be considered as remaining an exception of the general; one as a general law of the land and the other as the law of a particular case. However, the rule readily yields to a situation where the special statute refers to a subject in general, which the general statute treats in particular. This is exactly the circumstance obtaining in the present case. Section 17 of the Revised Charter of the City of Manila speaks of ordinance in general, i.e., irrespective of the nature and scope thereof, whereas, Section 43 of the

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Local Tax Code relates to ordinances levying or imposing taxes, fees or other charges in particular. In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is doubtless dominant, but, that dominant force loses its continuity when it approaches the realm of ordinances levying or imposing taxes, fees or other charges in particular. There, the Local Tax Code controls. Here, as always, a general provision must give way to a particular provision. Special provision governs. This is especially true where the law containing the particular provision was enacted later than the one containing the general provision. The City Charter of Manila was promulgated on 18 June 1949 as against the Local Tax Code which was decreed on 1 June 1973. The Federation of Manila Market Vendors Inc argued that the subject ordinance is not a tax ordinance because the imposition of rentals, permit fees, tolls and other fees is not strictly a taxing power but a revenue-raising function. The SC disagreed with their contention and pointed out that raising of revenues is the principal object of taxation. The Federation also contended that the market stall fees are diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila to the said corporation in a Management and Operating Contract. The SC however dismissed the contention. The court held that the fees collected in the ordinance do not go direct to the private coffers of the Asiatic Integrated Corporation because Ordinance No. 7522 was not made for the corporation but for the purpose of raising revenues for the city. The entrusting of the collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is public, it does not matter whether the agency through which the money is dispensed is public or private. The right to tax depends upon the ultimate use, purpose and object for which the fund is raised. It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used in applying it. The people may be taxed for a public purpose, although it be under the direction of an individual or private corporation SEPARATE OPINION: FERNANDO, J., concurring: But qualifies his assent as to an ordinance intra vires not being open to question "because of consequences that may arise from its enforcement." 18. ASIATIC INTEGRATED CORPORATION V HON. FEDERICO ALIKPALA Topic: Fundamental Principles Ponente: Barredo, J. Date: September 15, 1975 DOCTRINE: Tax Code cannot apply retroactively to the extent that it would then impair the obligation of contracts in violation of the Constitution. (Section II, Article IV, Bill of Rights) QUICK FACTS: The City of Manila entered into a contract with Asiatic which allows the latter to operate, supervise and control public markets in Manila. The employees and vendors in the public markets concerned assails the validity of the contract raising as one of its contentions that according to the Local Tax Code (PD 231), the city treasure has been vested with the powers of administration, supervision and control of the city markets and its personnel. FACTS: Tax: PD 231 or Local Tax Code on the powers of the city treasurer to administer, supervise, and control city markets and its personnel.

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Facts: On December 13, 1972, the Market Committee created by Republic Act 6039, approved a resolution recommending that the City Mayor of Manila urgently consider the immediate lease and/or assignment of the administration of the city public markets and talipapas to "a multi-million peso corporation under such terms and conditions as (would be) most advantageous to the City of Manila." Evidently in pursuance of such recommendation, on December 28, 1972, an agreement captioned "Management and Operating Contract" was executed by and between the City, represented by its Mayor, and Asiatic covering all the thirty-five public markets and talipapas in Manila. The said agreement vested upon Asiatic the power to "conduct, manage, operate, develop and maintain the city public markets and talipapas for a period of ten (10) years commencing from the date of execution of this Contract. Provided, however that the city government may at any time during the lifetime of this Contract revoke the same (if the services are unsatisfactory) or for violation of the terms and conditions." The employees and vendors in the public market questioned the legality of the said agreement. Petitioners Contention: The case merely re-stated the contract and no explicit contention of Asiatic was presented. It appears that it is the Court rebutting the contentions of the respondents. Respondents Contentions: 1) the Management and Operating Contract, involving as it does public markets, is ultra vires or beyond the authority of the City to enter into; (2) the Mayor of Manila had no power to execute the same and bind the City without the corresponding authority given in an ordinance duly approved by the Municipal Board; (3) it is violative of Republic Act No. 37 nationalizing public markets and of the existing civil service laws, rules and regulations; and (4) it is grossly disadvantageous to the City. TC: Declared the contract null and void. The trial court sustained respondent's contention that the City has no power to enter into a contract of management and operation of its public markets under the operational arrangement and conditions stipulated in the contract in dispute. We do not agree. We hold that the said contract is not ultra vires. CA: Not mentioned. ISSUE: WON the city treasurer is vested with the powers of administration, supervision and control of the city markets and its personnel. HELD: No. SC Reversed TC. RATIO: With respect to respondent's contention that under Presidential Decree No. 231 or the Local Tax Code, the city treasurer has been vested with the powers of administration, supervision and control of the city markets and its personnel, the Code took effect on June 28, 1973 and cannot apply retroactively as to affect a contract executed in December, 1972, since it would then impair the obligation of contracts in violation of the Constitution. (Section II, Article IV, Bill of Rights.) Moreover, it is not clear to the Court that the Local Tax Code completely derogates the inherent power of supervision and control of the Mayor of Manila over the affairs of the city government and its departments and the legislative power of the municipal board over its markets. (Secs. 9, 13 and 18 (cc) of the Charter of Manila, Republic Act 409, as amended by Republic Act 6039.) Note: There is a Separate Opinion. Also, I suggest that we read the entire case as other facts are too long to be included in this digest. (11) PROGRESSIVE DEVELOPMENT CORP. V QUEZON CITY, SUPRA

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Topic: Local Taxation Taxing Powers of LGUs Common Limitations Ponente: Feliciano, J. Date: April 24, 1989 DOCTRINE: If the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. ISSUE: WoN the imposition of a supervision fee of 5% of the gross receipts from stall rentals is actually a tax on income which Quezon City cannot impose. HELD: No. SC affirmed the CFI. Ruled for Quezon City. RATIO: The term tax is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes of regulation, while the latter is imposed under the taxing power primarily for purposes of raising revenues. Thus, if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. To be considered a license fee, the imposition questioned must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well. The Farmers' Market and Shopping Center being a public market in the' sense of a market open to and inviting the patronage of the general public, even though privately owned, petitioner's operation thereof required a license issued by Quezon City, the issuance of which, applying the standards set, was done principally in the exercise of the citys police power. (1) PHILIPPINE PILILLA, SUPRA PETROLEUM V MUNICIPALITY OF

Topic: Local Taxation Taxing Powers of LGUs Common Limitations Ponente: Paras, J. Date: June 3, 1991 DOCTRINES: A tax on business is distinct from a tax on the article itself. Thus, if the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared national policy, it should have been expressly stated in P.D. No. 436. QUICK FACTS: Phil Petroleum, based in Pililla, Rizal, a manufacturer of oil products, questions Municipal Ordinance No. 1 of Pililla which requires them to pay (a) tax on business and (b) storage fees, as well as mayor's permit and sanitary inspection fee, considering ( a) they are already subject to specific tax under the NIRC, and (b) Provincial Circular No. 677, issued by the Secretary of Finance which directed all city and municipal treasurers to refrain from collecting the socalled storage fee on flammable or combustible materials imposed under the local tax ordinance of their respective locality. ISSUE: WON PPC whose oil products are subject to specific tax under the NIRC, is still liable to pay tax on business? HELD: Yes, PPC is liable to pay unpaid business taxes.

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according to the trial court "was lifted in toto and/or is a literal reproduction of Section 19 (a) of the Local Tax Code as amended by P.D. No. 426." It conforms with the mandate of said law. 19. PEPSI-COLA BUTUAN BOTTLING COMPANY V CITY OF

RATIO: While Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as amended by P.D. 426, wherein the municipality is granted the right to levy taxes on business of manufacturers, importers, producers of any article of commerce of whatever kind or nature. A tax on business is distinct from a tax on the article itself. Thus, if the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared national policy, it should have been expressly stated in P.D. No. 436. P.D. No. 426 amending the Local Tax Code is deemed to have repealed Provincial Circular Nos. 26-73 and 26 A-73 issued by the Secretary of Finance when Sections 19 and 19 (a), were carried over into P.D. No. 426 and no exemptions were given to manufacturers, wholesalers, retailers, or dealers in petroleum products. The LGC states that: SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx (h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; xxx However, it should be noted that what is being levied in this case is the business itself and not the petroleum products. There is no question that Pililla's Municipal Tax Ordinance No. 1 imposing the assailed taxes, fees and charges is valid especially Section 9 (A) which

Topic: Local Taxation Fundamental Principles Ponente: Concepcion, C.J. Date: August 28, 1968 DOCTRINE: The general principle against delegation of legislative powers, in consequence of the theory of separation of powers is subject to one well-established exception, namely: legislative powers may be delegated to local governments. QUICK FACTS: Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation with offices and principal place of business in Quezon City. The defendants are the City of Butuan, its City Mayor, the members of its municipal board and its City Treasurer. Plaintiff seeks to recover the sums paid by it to the City of Butuan, pursuant to its Municipal Ordinance No. 110, as amended by Municipal Ordinance No. 122, both series of 1960, which plaintiff assails as null and void, and to prevent the enforcement thereof. FACTS: Pepsi Companys warehouse in the City of Butuan serves as a storage for its products the "Pepsi-Cola" soft drinks for sale to customers in the City of Butuan and all the municipalities in the Province of Agusan. These "Pepsi-Cola Cola" soft drinks are bottled in Cebu City and shipped to the Butuan City warehouse. Ordinance No. 110 as amended, imposes a tax on any person, association, etc., of P0.10 per case of 24 bottles of Pepsi-Cola and the plaintiff paid under protest.

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Pepsi Company filed the complaint for the recovery of the total amount of P14,177.03 paid under protest and those that if may later on pay on the ground that Ordinance No. 110 as amended is illegal, that the tax imposed is excessive and that it is unconstitutional. Section 2 provides for the payment by "any agent and/or consignee" of any dealer "engaged in selling liquors, imported or local, in the City," of taxes at specified rates. (Section 9 makes the ordinance applicable to soft drinks, liquors or carbonated drinks "received outside" but "sold within" the City.) Section 3-A, defines the meaning of the term "consignee or agent" for purposes of the ordinance. Pursuant to Section 5, the taxes "shall be based and computed from the cargo manifest or bill of lading or any other record showing the number of cases of soft drinks, liquors or all other soft drinks or carbonated drinks received within the month." Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the nature of an import tax; (2) it amounts to double taxation; (3) it is excessive, oppressive and confiscatory; (4) it is highly unjust and discriminatory; and (5) section 2 of Republic Act No. 2264 (local government law 1959), upon the authority of which it was enacted, is an unconstitutional delegation of legislative powers. ISSUE 1: WON the ordinance amounts to double taxation. HELD: NO. DECISION: Double taxation, in general, is not forbidden by our fundamental law. (SC did not provide further explanation) ISSUE 2: WON RA 2264 is an unconstitutional delegation of legislative powers. When we consider, also, that the tax "shall be based and computed from the cargo manifest or bill of lading ... showing the number of cases" not sold but " received" by the taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated drinks brought into the City from outside thereof becomes apparent. Viewed

HELD: NO. DECISION: The general principle against delegation of legislative powers, in consequence of the theory of separation of powers is subject to one well-established exception, namely: legislative powers may be delegated to local governments to which said theory does not apply in respect of matters of local concern. ISSUE 3: WON the tax is excessive, oppressive and confiscatory. HELD: NO. DECISION: The tax of "P0.10 per case of 24 bottles," of soft drinks or carbonated drinks in the production and sale of which plaintiff is engaged or less than P0.0042 per bottle, is manifestly too small to be excessive, oppressive, or confiscatory. ISSUE 4: WON the tax is an import tax, hence, beyond the local governments authority to impose by express provision of law. HELD: YES. DECISION: Merchants engaged in the sale of soft drink or carbonated drinks, are not subject to the tax, unless they are agents and/or consignees of another dealer, who, in the very nature of things, must be one engaged in business outside the City.

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from this angle, the tax partakes of the nature of an import duty, which is beyond defendant's authority to impose by express provision of law. ISSUE 5: WON the ordinance is unjust and discriminatory HELD: YES DECISION: The ordinance is invalid because it is discriminatory, hence, violative of the uniformity required by the Constitution, since only sales by "agents or consignees" of outside dealers would be subject to the tax. (Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax.) It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally all those who belong to the same class. These conditions are not fully met by the ordinance in question. (The SC annulled Ordinance No. 110, as amended by Ordinance No. 122, and sentenced the City of Butuan to refund to Pepsi-Cola Bottling Company the amounts collected from and paid under protest by the company)

20. PEOPLE V NAZARIO Topic: Local Taxation; Common Limitations Ponente: Sarmiento, J. Date: 31 August 1988 DOCTRINE: A Statute, such as a Municipal Tax Ordinance, to be said to be vague must lack comprehensible standards that men of common intelligence must necessarily guess at its meaning and differ as to its application. It must be utterly vague on its face, that is to say, it cannot be clarified by either a saving clause or by construction. QUICK FACTS: Eusebio Nazario, charged with the crime of violation of a Pagbilao Municipal Ordinance taxing the operation of fishponds, argues that the said tax measure was (1) vague for not defining who managers and owners are, and hence void; (2) is an ex post facto law; and (3) does not apply to him because he is not a resident of Pagbilao. FACTS: Tax: Municipal Ordinance No. 4, series of 1955, as amended by Municipal Ordinance No. 15, series of 1965, and finally amended by Municipal Ordinance No. 12, series of 1966, requiring any owner or manager of fishponds in places within the territorial limits of Pagbilao, Quezon, shall pay a municipal tax in the amount of P3.00 per hectare of fishpond on part thereof per annum. Facts: Eusebio Nazario was charged with the crime of nonpayment of municipal tax on operators of fishponds for the years 1964, 1965 and 1966, in violation of Municipal Ordinance No. 4, series of 1955, as amended by Municipal Ordinance No. 15, series of 1965, and finally amended by Municipal Ordinance No. 12, series of 1966.

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Petitioners Contention: He counters that he is not a resident of Pagbilao but of Manila, and hence not a subject of the municipality. He also argues that he is a mere lessee of the fishpond (leased from the government), and cannot be considered as an operator. For this reason, he contends that the ordinances being allegedly "ambiguous and uncertain." The petitioner contends that being a mere lessee of the fishpond, he is not covered since the said ordinances speak of "owner or manager." He likewise maintains that they are vague insofar as they reckon the date of payment: Whereas Ordinance No. 4 provides that parties shall commence payment "after the lapse of three (3) years starting from the date said fishpond is approved by the Bureau of Fisheries." Ordinance No. 12 states that liability for the tax accrues "beginning and taking effect from the year 1964 if the fishpond started operating before the year 1964." Respondents Contention: From their evidence prosecution would want to show to the court that accused, as lessee or operator of a fishpond in municipality of Pagbilao, refused, and still refuses, to pay municipal taxes for the years 1964, 1965 and 1966. TC Guilty beyond reasonable doubt the the the the their very provisions that the appellant falls within its coverage. As the actual operator of the fishponds, he comes within the term " manager." He does not deny the fact that he financed the construction of the fishponds, introduced fish fries into the fishponds, and had employed laborers to maintain them. While it appears that it is the National Government which owns them, the Government never shared in the profits they had generated. It is therefore only logical that he shoulders the burden of tax under the said ordinances. As it stands, liability for the tax accrues on January 1, 1964 for fishponds in operation prior thereto (Ordinance No. 12), and for new fishponds, three years after their approval by the Bureau of Fisheries (Ordinance No. 15). This is so since the amendatory act (Ordinance No. 12) merely granted amnesty unto old, delinquent fishpond operators. It did not repeal its mother ordinances (Nos. 4 and 15). With respect to new operators, Ordinance No. 15 should still prevail. To the Court, the ordinances in question set forth enough standards that clarify imagined ambiguities. While such standards are not apparent from the face thereof, they are visible from the intent of the said ordinances. NOTES: Further explanation of the topic. 21. FIRST PHILIPPINE INDUSTRIAL V CA Topic: Local Taxation Taxing Powers of LGUs Common Limitations Ponente: Martinez, J. Date: Dec. 29, 1998 DOCTRINE: A pipeline concessionaire is a "common carrier" and, therefore, exempt from the business tax as provided for in Section 133 (j) of the Local Government Code, to wit: "Section 133. Common Limitations on the Taxing Power of

CA not mentioned, except that the CA certified the appeal to the Supreme Court ISSUE: Are Municipal Ordinance No. 4, series of 1955, and its amendments, Municipal Ordinance No. 15, series of 1965 and Municipal Ordinance No. 12, series of 1966 vague and therefore void? HELD: No. SC Affirmed Trial Court. RATIO: In no way may the ordinances at bar be said to be tainted with the vice of vagueness. It is unmistakable from

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Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: . . . (j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water except as provided in this Code. QUICK FACTS: First Phil Industrial (FPIC) is a pipeline operator (with a government concession granted under the Petroleum Act, engaged in the business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals) questions the imposition of tax on gross receipts levied by the City Treasurer of Batangas City on them, claiming that as a common carrier, they are exempt from paying the said tax. FACTS: Tax: Tax on Gross Receipts FPIC is grantee of a pipeline concession under Republic Act No. 387 which was granted in 1967 and renewed by the Energy Regulatory Board in 1992. In January 1995, FPIC applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code. In order not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of 1993. FPIC wrote a protest letter to the City treasurer claiming it was a transportation contractor and thus not included in the enumeration of contractors under Section 131, Paragraph (h) of the Local Government Code and that the assessed amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to a regulatory imposition but TC dismissed the complaint. FPIC was deemed not a common carrier, but a special carrier extending its services and facilities to a single specific or "special customer" under a "special contract." CA affirms. ISSUE: WON FPIC is liable to pay tax on gross receipts? HELD: No, FPIC is not liable to pay tax on gross receipts because it is a common carrier. RATIO: A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally. is already a revenue raising measure. The Treasurer denied the request. On June 1994, FPIC filed with the RTC of Batangas City a complaint for tax refund with prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. FPICs Contention: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141(e) and 151 does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid.

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The test for determining whether a party is a common carrier of goods is: 1.He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; 2.He must undertake to carry goods of the kind to which his business is confined; 3.He must undertake to carry by the method by which his business is conducted and over his established roads; and 4.The transportation must be for hire. Thus, FPIC fulfils all the requirements of a common carrier. Also, Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public thus making no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. (Note: see doctrine above) Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue Code. To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code. 22. LAND BUTUAN TRANSPORTATION OFFICE V CITY OF
4

Topic: Ponente: Vitug, J. Date: 20 January 2000 DOCTRINE: (1) LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant franchises4 for the operation thereof. "To regulate" means to fix, establish, or control; to adjust by rule, method, or established mode; to direct by rule or restriction; or to subject to governing principles or laws. On the other hand, "to register," means to record formally and exactly, to enroll, or to enter precisely in a list or the like, and a "driver's license" is the certificate or license issued by the government which authorizes a person to operate a motor vehicle. Nevertheless, under Article 458 (a)[3-VI] of the Local Government Code, the power of LGUs to regulate the operation of tricycles and to grant franchises for the operation thereof is still subject to the guidelines prescribed by the DOTC. In compliance therewith, the Department of Transportation and Communications ("DOTC") issued "Guidelines to Implement the Devolution of LTFRBs Franchising Authority over Tricycles-For-Hire to Local Government units pursuant to the Local Government Code." (2) The devolution of the functions of the DOTC, performed by the LTFRB, to the LGUs, as so aptly observed by the Solicitor General, is aimed at curbing the alarming increase of accidents in national highways involving tricycles. It has been the perception that local governments are in good position to achieve the end desired by the law-making body because of their proximity to the situation that can enable them to address that serious concern better than the national government.

A franchise is defined to be a special privilege to do certain things conferred by government on an individual or corporation, and which does not belong to citizens generally of common right.

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QUICK FACTS: The Supreme Court is asked in this case to resolve the issue of whether under the present set up, the power of the Land Registration Office (now "LTO") to register, tricycles in particular, as well as to issue licenses for the driving thereof, has likewise devolved to local government units. FACTS: The Local Council of the City of Butuan passed an ordinance entitled "An Ordinance Regulating the Operation of Tricycles-for-Hire, providing mechanism for the issuance of Franchise, Registration and Permit, and imposing Penalties for Violations thereof and for other Purposes." The ordinance provided for, among other things, the payment of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the registration of the vehicle, and fees for the issuance of a permit for the driving thereof. RTC, Butuan City held that such authority has been vested in the Local Government Units ("LGUs"). Accordingly, it decreed the issuance of a permanent writ of injunction against LTO, prohibiting and enjoining LTO, as well as its employees and other persons acting in its behalf, from: registering tricycles and issuing licenses to drivers of tricycles. CA sustained the trial court. The adverse rulings of both the court a quo and the appellate court prompted the LTO to file the instant petition for review on certiorari to annul and set aside the decision. Respondent City of Butuan asserts that one of the salient provisions introduced by the Local Government Code (LGC) is in the area of local taxation, which allows LGUs to collect registration fees or charges along with, in its view, the corresponding issuance of all kinds of licenses or permits for the driving of tricycles.

ISSUE: WON the power of the Land Registration Office (now "LTO") to register tricycles and to issue licenses for the driving thereof has now devolved to LGUs. LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant franchises for the operation thereof, but they are subject to the guidelines to be prescribed by the DOTC. HELD: The registration and licensing functions are vested in the LTO, while franchising and regulatory responsibilities are vested in the LTFRB. Under the LGC, certain functions of the DOTC were transferred to the LGUs, particularly in Sec. 458, which provides: Sec. 458. Powers, Duties, Functions and Compensation. xxx xxx xxx (3) Subject to the provisions of Book II of this Code, enact ordinances granting franchises and authorizing the issuance of permits or licenses, upon such conditions and for such purposes intended to promote the general welfare of the inhabitants of the city and pursuant to this legislative authority shall: xxx xxx xxx (VI) Subject to the guidelines prescribed by the Department of Transportation and Communications, regulate the operation of tricycles and grant franchises for the operation thereof within the territorial jurisdiction of the city. To regulate means to fix, establish or control, to adjust by rule, method or established mode. From the explicit language of the statute, as well as the corresponding guidelines issued by DOTC, the newly delegated powers pertain to the franchising and regulatory powers theretofore exercised by the LTFRB and not to the functions of the LTO relative to the registration of motor vehicles and issuance of licenses for the driving thereof .

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Clearly unaffected by the Local Government Code are the powers of LTO under R.A. No. 4136 requiring the registration of all kinds of motor vehicles "used or operated on or upon any public highway" in the country. Thus Sec. 5. All motor vehicles and other vehicles must be registered. (a) No motor vehicle shall be used or operated on or upon any public highway of the Philippines unless the same is properly registered for the current year in accordance with the provisions of this Act (Article 1, Chapter II, R.A. No. 4136). The Commissioner of Land Transportation and his deputies are empowered at anytime to examine and inspect such motor vehicles to determine whether said vehicles are registered, or are unsightly, unsafe, improperly marked or equipped, or otherwise unfit to be operated on because of possible excessive damage to highways, bridges and other infrastructures. The LTO is additionally charged with being the central repository and custodian of all records of all motor vehicles. The reliance made by the City of Butuan on the broad taxing power of LGUs, specifically under Section 133 of the Local Government Code, is tangential. Police power and taxation, along with eminent domain, are inherent powers of sovereignty, which the State might share with local government units by delegation given under a constitutional or a statutory fiat. All these inherent powers are for a public purpose and legislative in nature but the similarities just about end there. Taxation focuses on the power of government to raise revenue in order to support its existence and carry out its legitimate objectives. Although correlative to each other in many respects, the grant of one does not necessarily carry with it the grant of the other. The two powers are, by tradition and jurisprudence, separate and distinct powers, varying in their respective concepts, character, scopes and limitations.

To construe the tax provisions of Section 133(1) indistinctively would result in the repeal to that extent of LTO's regulatory power which evidently has not been intended. If it were otherwise, the law could have just said so in Section 447 and 458 of the LGC, in the same manner that the specific devolution of LTFRB's power on franchising of tricycles has been provided. Repeal by implication is not favored. The power over tricycles granted under Section 458(8)(3)(VI) of the LGC to LGUs is the power to regulate their operation and to grant franchises for the operation thereof. The exclusionary clause contained in the tax provisions of Section 133(1) of the LGC must not be held to have had the effect of withdrawing the express power of LTO to cause the registration of all motor vehicles and the issuance of licenses for the driving thereof. These functions of the LTO are essentially regulatory in nature, exercised pursuant to the police power of the State, whose basic objectives are to achieve road safety by insuring the road- worthiness of these motor vehicles and the competence of drivers prescribed by R.A. 4136. Not insignificant is the rule that a statute must not be construed in isolation but must be taken in harmony with the extant body of laws. 23. (2) MACTAN CEBU INTL AIRPORT AUTHORITY V MARCOS, SUPRA 24. MIAA V CA AND CITY OF PARAAQUE Topic: Common Limitations Ponente: Carpio Date: 20 July 2006 DOCTRINE: When the law vests in a government instrumentality corporate powers, the instrumentality does

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not become a corporation. Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. A government instrumentality is exempted from the taxing powers of LGUs SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxxx (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalitiesand local government units.(Emphasis and underscoring supplied) Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax QUICK FACTS: City imposed real estate tax on MIAA. FACTS: Tax: Real estate tax imposed on MIAA; Section 21 LGC (on withdrawal of exemptions) in relation to Section 133 (o) (on Common Limitations to LGUs taxing powers) Indicate the law/provision/type of tax being contested. Be as specific as possible (ie, 10% of gross receipts, 10 cents per picul of sugar). MIAA operates NAIA under EO 903 (MIAA Charter) in 1983. EO 903 was later amended by EO 909 and 298. MIAA administers land, improvements and equipment within the NAIA Complex. OGCC issued Opinion 61 stating that the 1991 LGC withdrew the exemption from real estate tax which was previously granted to MIAA. MIAA received Final Notices of REal Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. City issued notices of levy and warrants of levy on the Airport Lands and Buildings. Paranaque Mayor threatened to sell at public auction the properties should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061. OGCC stated that the Section 21 of MIAA charter is the proof that MIA is exempt from said tax. MIAA filed with CA an original petition for prohibition and injunction with TRO. CA dismissed because it was filed beyond the 60-day period. A day before public auction, MIAA filed with SC an Urgent ExParte and Reiteratory Motion for the Issuance of a TRO. SC issued the TRO. Petitioners Contention: 3. Properties are owned by the State because they are devoted for public use and public service. They are inalienable and not subject real estate tax by LGUs 4. Section 21 of MIAA Charter specifically exempts MIAA from the payment of real estate tax. 5. Under Section 234 LGC, the Airport Lands and Buildings are owned by the Republic. The government cannot tax itself. The reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor. Respondents Contention: 4. Section 193 LGC expressly withdrew the tax exemption privileges of "GOCCs " upon the effectivity of the LGC.

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5. Express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 LGC. Thus, MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax. 6. Mactan International Airport v. Marcos held that the LGC has withdrawn the exemption from real estate tax granted to international airports. 7. Since MIAA has already paid some of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real estate tax. ISSUE: WoN the properties (Airport Lands and Bldgs of MIAA are exempt from real estate taxes. If exempt, WON the real estate tax assessments are void. HELD: Yes. Properties are exempt. RATIO: 10. MIAA is not a GOCC, it is a government instrumentality MIAA is not a GOCC A GOCC is any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock. (Section 2, Admin Code of 1987) MIAA is not a GOCC because it is not organized as a stock of non-stock corporation. It is not a stock corpo because it has no capital stock divided into shares. It has not stockholders or voting shares. It is not a nonstock corporation because it has no members. MIAA is a government instrumentality. It is vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality". SEC. 2. General Terms Defined. x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. A government instrumentality is exempted from the taxing powers of LGUs SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxxx (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalitiesand

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local government units.(Emphasis and underscoring supplied) Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax Principles of taxation ifo of MIAA: a. When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. This rule applies with greater force when local governments seek to tax national government instrumentalities. b. a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation. Maceda v. Macaraig, Jr.: The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. c. Doctrine of supremacy of the National Government over local governments. There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. 2. Properties are owned by the State/Republic a. Properties of Public Dominion Properties of public dominion mentioned in Article 420 of the Civil Code, like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports" includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State. They are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove their character as properties for public use. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. b. Outside the Commerce of Man properties of public dominion are outside the commerce of man. unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines. c. MIAA is a mere trustee of the Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic. MIAAs status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head

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cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance d. Transfer to MIAA reorganization was meant to implement a 25. DRILON V LIM Topic: Local Government Taxes Ponente: Cruz, J. Date: 4 August 1994 DOCTRINE: Sec. 187 of LGC not unconstitutional. QUICK FACTS: DOJ Sec declared Manila Revenue Code null and void for non-compliance with Sec 187, LGC. City of Manila filed petition of certiorari with RTC-Manila. RTC declared Sec. 187 unconstitutional. SC reversed RTC Judge and held Sec. 187 not unconstitutional. Nonetheless, SC affirmed RTC Judge with respect to the finding that there was compliance with procedural requirements. FACTS: Tax: Manila Revenue Code e. Real property owned by the Republic is not taxable Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic of the Philippines." Section 234(a) provides: SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; x x x. (Emphasis supplied) This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local Facts: DOJ Sec. Drilon had, on appeal to him of four oil companies and a taxpayer, declared Ordinance No. 7794 (Manila Revenue Code) null and void for non-compliance with the prescribed procedure in the enactment of tax ordinances (Sec 187, LGC5) and for containing certain provisions contrary
Sec 187, LGC. Procedure For Approval And Effectivity Of Tax Ordinances And Revenue Measures; Mandatory Public Hearings . The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof; Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the
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governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA's assets adverse to the Republic. The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines." This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings

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to law and public policy. City of Manila filed a petition for certiorari with the RTC of Manila, which revoked the Secretary's resolution and sustained the ordinance, holding inter alia that the procedural requirements had been observed. More importantly, Judge Pallatao of RTC-Manila declared Sec 187 as unconstitutional because of its vesture in the Secretary of Justice of the power of control over local governments in violation of the policy of local autonomy mandated in the Constitution and of the specific provision therein conferring on the President of the Philippines only the power of supervision over local governments. Hence, the present petition by DOJ Sec. Drilon. Petitioner DOJ Sec. Drilons Contention: There were no written notices of public hearings on the proposed Manila Revenue Code that were sent to interested parties as required by Art. 276(b) of the Implementing Rules of the Local Government Code nor were copies of the proposed ordinance published in three successive issues of a newspaper of general circulation pursuant to Art. 276(a). No minutes were submitted to show that the obligatory public hearings had been held. Neither were copies of the measure as approved posted in prominent places in the city in accordance with Sec. 511(a) of the Local Government Code. Finally, the Manila Revenue Code was not translated into Pilipino or Tagalog and disseminated among the people for their information and guidance, conformably to Sec. 59(b) of the Code. TC IFO City of Manila. Judge Rodolfo C. Palattao declared Section 187 of the Local Government Code unconstitutional insofar as it empowered the Secretary of
appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction.

Justice to review tax ordinances and, inferentially, to annul them. He cited the familiar distinction between control and supervision, the first being "the power of an officer to alter or modify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for the latter," while the second is "the power of a superior officer to see to it that lower officers perform their functions in accordance with law." His conclusion was that the challenged section gave to the Secretary the power of control and not of supervision only as vested by the Constitution in the President of the Philippines. This was, in his view, a violation not only of Article X, specifically Section 4 thereof, and of Section 5 on the taxing powers of local governments, and the policy of local autonomy in general. ISSUE: WoN Section 187, LGC is unconstitutional. HELD: No. SC reversed RTC-Manila. Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. It was act not of control but of mere supervision. RATIO: When the DOJ Secretary alters or modifies or sets aside a tax ordinance, he is not permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his own version of what the Code should be. He did not pronounce the ordinance unwise or unreasonable as a basis for its annulment. He did not say that in his judgment it was a bad law. What he found only was that it was illegal. All he did in reviewing the said measure was determine if the petitioners were performing their functions in accordance with law, that is, with the prescribed procedure for the enactment of tax ordinances and the grant of powers to the city government under the Local Government Code. As we see it, that was an act not of control but of mere supervision.

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Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act, which allowed the Secretary of Finance to suspend the effectivity of a tax ordinance if, in his opinion, the tax or fee levied was unjust, excessive, oppressive or confiscatory. Determination of these flaws would involve the exercise of judgment or discretion and not merely an examination of whether or not the requirements or limitations of the law had been observed; hence, it would smack of control rather than mere supervision. That power was never questioned before this Court but, at any rate, the Secretary of Justice is not given the same latitude under Section 187. All he is permitted to do is ascertain the constitutionality or legality of the tax measure, without the right to declare that, in his opinion, it is unjust, excessive, oppressive or confiscatory. He has no discretion on this matter. In fact, Secretary Drilon set aside the Manila Revenue Code only on two grounds, to with, the inclusion therein of certain ultra vires provisions and non-compliance with the prescribed procedure in its enactment. These grounds affected the legality, not the wisdom or reasonableness, of the tax measure. MINOR ISSUE: WoN Judge Pallatao was correct in declaring that the procedural requirements had been observed in the enactment of the Manila Revenue Code. (Note: The SC acceded to the motion of the respondents and called for the elevation of the exhibits in order to settle this issue.) Yes. the Court carefully examined every one of these exhibits and agree with the trial court that the procedural requirements have indeed been observed. Notices of the public hearings were sent to interested parties as evidenced by Exhibits G-1 to 17. The minutes of the hearings are found in Exhibits M, M-1, M-2, and M-3. Exhibits B and C show that the proposed ordinances were published in the Balita and the Manila Standard on April 21 and 25, 1993, respectively, and the approved ordinance was published in the July 3, 4, 5, 1993 issues of the Manila Standard and in the July 6, 1993 issue of Balita, as shown by Exhibits Q, Q-1, Q-2, and Q-3. The only exceptions are the posting of the ordinance as approved but this omission does not affect its validity, considering that its publication in three successive issues of a newspaper of general circulation will satisfy due process. It has also not been shown that the text of the ordinance has been translated and disseminated, but this requirement applies to the approval of local development plans and public investment programs of the local government unit and not to tax ordinances. 26. FIGUERRES V CA Topic: Levy of Tax; Tax Ordinance Publication and Furnishing of Copies Ponente: Mendoza, J. Date: March 25, 1999 DOCTRINE: An ordinance imposing real property taxes must be posted or published. An ordinance fixing the assessment levels applicable to the different classes of real property in a local government unit and imposing penal sanctions for violations thereof should be published in full for three (3) consecutive days in a newspaper of local circulation, where available, within ten (10) days of its approval, and posted in at least two (2) prominent places in the provincial capitol, city, municipal, or barangay hall for a minimum of three (3) consecutive weeks. QUICK FACTS: Figuerres land was assessed real property tax based on a series of Ordinances. She alleged that the ordinances were invalid for having been adopted without public hearings and prior publication or posting. The SC ruled in favor of the municipality because Figuerres failed to rebut the presumption of validity in favor of the subject ordinances as she failed to present evidence. FACTS:

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RATIO: Public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes. R.A. No. 7160, 186 provides that an ordinance levying taxes, fees, or charges "shall not be enacted without any prior public hearing conducted for the purpose." However, it is noteworthy that apart from her bare assertions, petitioner Figuerres has not presented any evidence to show that no public hearings were conducted prior to the enactment of the ordinances in question. On the other hand, the Municipality of Mandaluyong claims that public hearings were indeed conducted before the subject ordinances were adopted, although it likewise failed to submit any evidence to establish this allegation. However, in accordance with the presumption of validity in favor of an ordinance, their constitutionality or legality should be upheld in the absence of evidence showing that the procedure prescribed by law was not observed in their enactment. The lack of a public hearing is a negative allegation essential to Figuerres cause of action in the present case. Hence, as Figuerres is the party asserting it, she has the burden of proof. Since she failed to rebut the presumption of validity in favor of the subject ordinances and to discharge the burden of proving that no public hearings were conducted prior to the enactment thereof, SC was constrained to uphold the constitutionality or legality of the ordinances. Publication or posting of the proposed schedule of fair market values of the difference classes of real property in an LGU is required pursuant to R.A. No. 7160, 212. An ordinance imposing real property taxes must be posted or published as required by R.A. No. 7160, 188. In view of 188 and 511(a) of R.A. No. 7160, an ordinance fixing the assessment levels applicable to the different classes of real property in a local government unit and imposing penal sanctions for violations thereof should be

Tax: Assessment of real property Facts: Figuerres is the owner of a parcel of land located in Mandaluyong. In 1993, she received a notice of assessment, dated October 20, 1993, from the municipal assessor, stating that her lands assessed value is P265, 006.00. The assessment, effective in the year 1994, was based on Ordinance Nos. 119 and 125, series of 1993, and Ordinance No. 135, series of 1994. Figuerres brought a prohibition suit in the CA against the Assessor, the Treasurer, and the Sangguniang Bayan to stop them from enforcing the ordinances in question. Figuerres Contention: the ordinances were invalid for having been adopted allegedly without public hearings and prior publication or posting and without complying with the implementing rules yet to be issued by the Department of Finance (DOF). TC N/A. Direct to CA.

CA Figuerres lost. The approval and determination by the DOF is not needed under the LocGov Code of 1991, since it is now the city council of Mandaluyong that is empowered to determine and approve the aforecited ordinances. Regarding the claim that there is need for municipal ordinances to be published in the Official Gazette for their effectivity, such is bereft of merit because it is not a prerequisite. ISSUE: WON the ordinances are null and void HELD: NO. SC affirmed CA.

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published in full for three (3) consecutive days in a newspaper of local circulation, where available, within ten (10) days of its approval, and posted in at least two (2) prominent places in the provincial capitol, city, municipal, or barangay hall for a minimum of three (3) consecutive weeks. Apart from her allegations, Figuerres has not presented any evidence to show that the subject ordinances were not disseminated. On the other hand, the Municipality of Mandaluyong presented a certificate of the Sanggunian Secretary that "Ordinance No. 125, S-1993 . . . has been posted in accordance with 59(b) of R.A. No. 7160. (4) CITY OF SAN PABLO V REYES, SUPRA Sec. 137 Franchise Tax Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on business enjoying a franchise, at a rate not exceeding fifty percent 50% of one percent 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts, or realized, within its territorial jurisdiction. . . . Sec. 151 Scope of Taxing Powers Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose: Sec. 193 Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non- stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. Sections 137 and 193 of the LGC support the position that MERALCO`s tax exemption has been withdrawn. The explicit language of Section 137 which authorizes the province to impose franchise tax "notwithstanding any exemption granted by any law or other special law" is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws. It is true that the phrase "in lieu of all taxes" found in special franchises has been held in several cases to exempt the franchise holder from payment of tax on its corporate franchise imposed of the Internal Revenue Code, as the charter is in the nature of a private contract and the exemption is part of the inducement for the acceptance of the franchise, and that the imposition of another franchise tax by the local authority would constitute an impairment of contract between the government and the corporation. BUT these "magic words" contained in the phrase "shall be in lieu of all taxes'' have to give way to the peremptory language of the LGC specifically providing for the withdrawal of such exemption privileges 27. PROVINCE OF MISAMIS ORIENTAL V CAGAYAN ELECTRIC POWER Topic: Local Taxing authority and Scope of Taxing Power Ponente: Grino Aquino, J Date: 12 January 1990 DOCTRINES: 1. A corporation whose franchise expressly provides "franchise tax of three per centum of the gross earnings shall be in lieu of all taxes and assessments of whatever authority upon privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee is exempt from paying a provincial franchise tax. 2. Local Tax Regulation 3-75 issued by the Secretary of Finance in 1976 made it clear that the franchise tax provided in the Local Tax Code may only be imposed on companies

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with franchise that do not contain the exempting clause, i.e. in-lieu-of-all-taxes-proviso. FACTS: Tax: Provincial Revenue Ordinance No. 19 - Franchise Tax. Cagayan Electric Power and light Co, Inc. (CEPALCO) was granted a franchise in 1961 under RA3247 to install, operate and maintain an electric light, heat and power system in Cagayan de Oro and its suburbs. Franchise was later amended on June 21, 1963 by R.A. No. 3570 (added the municipalities of Tagoloan and Opol to CEPALCO's sphere of operation), and was further amended on August 4, 1969 by R.A. No. 6020 (extended its field of operation to the municipalities of Villanueva and Jasaan). R.A. Nos. 3247, 3570 and 6020 uniformly provided that: Sec. 3. In consideration of the franchise and rights hereby granted, the grantee shall pay a franchise tax equal to three per centum of the gross earnings for electric current sold under this franchise, of which two per centum goes into the National Treasury and one per centum goes into the treasury of the Municipalities of Tagoloan, Opol, Villanueva and Jasaan and Cagayan de Oro City, as the case may be: Provided, That the said franchise tax of three per centum of the gross earnings shall be in lieu of all taxes and assessments of whatever authority upon privileges earnings, income, franchise,and poles, wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted. The Provincial Treasurer demanded payment of the provincial franchise tax from CEPALCO. CEPALCO refused to pay but on 27 May 1974 paid (under protest) in view of the opinion rendered by the Provincial Fiscal.. CEPALCO appealed the fiscal's ruling to the Secretary of Justice. Sec of Justice issued Local Tax Regulation 3-75on 26June1976 ruling in favor of CEPALCO. Meanwhile, on February 16, 1976, the Province filed in the Court of First Instance of Misamis Oriental a complaint for declaratory relief praying, among others, that the Court exercise its power to construe P.D. No. 231 in relation to the franchise of CEPALCO (R.A. No. 6020), and to declare the franchise as having been amended by P.D. No. 231. Province filed In 1973, the Local Tax Code (PD 231) was promulgated, where Section 96 thereof provided for a franchise tax. Pursuant thereto, the province of Misamis Oriental enacted Provincial Revenue Ordinance 19,whose Section 12 also provides for a franchise tax.

Sec. 9. Franchise Tax.Any provision of special laws to the contrary notwithstanding, the province may impose a tax on businesses enjoying franchise, based on the gross receipts realized within its territorial jurisdiction, at the rate of not exceeding onehalf of one per cent of the gross annual receipts for the preceding calendar year...
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In the case of newly started business, the rate shall not exceed three thousand pesos per year. Sixty per cent of the proceeds of the tax shall accrue to the general fund of the province and forty per cent to the general fund of the municipalities serviced by the business on the basis of the gross annual receipts derived therefrom by the franchise holder. In the case of a newly started business, forty per cent of the proceeds of the tax shall be divided equally among the municipalities serviced by the business. (Emphasis supplied.)

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CFI - The Court dismissed the complaint and ordered the Province to return to CEPALCO the sum of P4,276.28 paid under protest. ISSUE: WON CEPALCO is exempt from the provincial franchise tax? HELD: Yes RATIO: The franchise of respondent CEPALCO expressly exempts it from payment of "all taxes of whatever authority" except the three per centum (3%) tax on its gross earnings. RA 3247, 3571 and 6020 (Section 3 thereof), uniformly provided that: in consideration of the franchise and rights hereby granted, the g r a n t e e s h a l l p a y a f r a n c h i s e t a x equal to 3% of the gross earnings for electric c u r r e n t s o l d u n d e r t h e franchise, of which 2% goes to the national Treasury and 1% goes into the treasury of the municipalities of Tagoloan, Opol, Villanueva, Jasaan, and Cagayan de Oro, as the case may be: Provided, that the said franchise tax of 3% of the gross earnings shall be in lieu of all taxes and assessments of whatever authority upon privileges, earnings, income, franchise and poles, wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted. The Local Tax Regulation 3-75 issued by the Secretary of Finance in 1976 made it clear that the franchise tax provided in the Local Tax Code may only be imposed on companies with franchise that do not contain the exempting clause, i.e. in-lieu-of-all-taxes-proviso. Moreover, there is no provision in P.D. No. 231 expressly or impliedly amending or repealing Section 3 of R.A. No. 6020. The perceived repugnancy between the two statutes should be very clear before the Court may hold that the prior one has been repealed by the later, since there is no express provision to that effect (Manila Railroad Co. vs. Rafferty, 40 Phil. 224). The rule is that a special and local statute applicable to a particular case is not repealed by a later statute which is general in its terms, provisions and application even if the terms of the general act are broad enough to include the cases in the special law unless there is manifest intent to repeal or alter the special law. (3) NPC V CITY OF CABANATUAN, SUPRA QUICK FACTS: NPC refused to pay franchise tax assessed by the City contending that being a government instrumentality, as well as a non-profit organization, it is exempted from all taxes and duties notwithstanding withdrawal of exemptions under LGC. NPCs Contention: 1. Sections 137 and 151 of the LGC in relation to section 131, limit the taxing power of the city government to private entities that are engaged in trade or occupation for profit. It is not engaged in an activity for profit, in as much as its charter specifically provides that it is a "non-profit organization." The accumulation of profit is merely incidental to its operation; all these profits are required by law to be channeled for expansion and improvement of its facilities and services. 2. It is an instrumentality of the National Government,25 and as such, may not be taxed by the respondent city government. 3. Section 193 of Rep. Act No. 7160, withdrawing the tax privileges of government-owned or controlled corporations, is in the nature of an implied repeal. A special law, its charter cannot be amended or modified impliedly by the local government code which is a general law. Consequently, NPC claims that its exemption from all taxes, fees or charges under its charter subsists despite the passage of the LGC. 4. The charter of the NPC, being a valid exercise of police power, should prevail over the LGC. It alleges that the power

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of the local government to impose franchise subordinate to NPC's exemption from taxation. tax is exercise its franchise. It is within this context that the phrase "tax on businesses enjoying a franchise" in section 137 of the LGC should be interpreted and understood. Verily, to determine whether the petitioner is covered by the franchise tax in question, the following requisites should concur: (1) that petitioner has a "franchise" in the sense of a secondary or special franchise; and (2) that it is exercising its rights or privileges under this franchise within the territory of the respondent city government. Petitioner fulfills the first requisite. Commonwealth Act No. 120, as amended by Rep. Act No. 7395, constitutes petitioner's primary and secondary franchises. It serves as the petitioner's charter, defining its composition, capitalization, the appointment and the specific duties of its corporate officers, and its corporate life span. As its secondary franchise, Commonwealth Act No. 120, as amended, vests the petitioner powers which are not available to ordinary corporations. With these powers, petitioner eventually had the monopoly in the generation and distribution of electricity. Petitioner also fulfills the second requisite. It is operating within the respondent city government's territorial jurisdiction pursuant to the powers granted to it by Commonwealth Act No. 120, as amended. From its operations in the City of Cabanatuan, petitioner realized a gross income of P107,814,187.96 in 1992. Fulfilling both requisites, petitioner is, and ought to be, subject of the franchise tax in question. Also, a franchise tax is imposed based not on the ownership but on the exercise by the corporation of a privilege to do business. The taxable entity is the corporation which exercises the franchise, and not the individual stockholders. By virtue of its charter, petitioner was created as a separate and distinct entity from the National Government. It can sue and be sued under its own name, and can exercise all the powers of a corporation under the Corporation Code.

ISSUE: WoN National Power Corporation (NPC) liable to pay franchise tax to the City of Cabanatuan. HELD: YES. RATIO: In its general signification, a franchise is a privilege conferred by government authority, which does not belong to citizens of the country generally as a matter of common right. In its specific sense, a franchise may refer to a general or primary franchise, or to a special or secondary franchise. The former relates to the right to exist as a corporation, by virtue of duly approved articles of incorporation, or a charter pursuant to a special law creating the corporation. The right under a primary or general franchise is vested in the individuals who compose the corporation and not in the corporation itself. On the other hand, the latter refers to the right or privileges conferred upon an existing corporation such as the right to use the streets of a municipality to lay pipes of tracks, erect poles or string wires. The rights under a secondary or special franchise are vested in the corporation and may ordinarily be conveyed or mortgaged under a general power granted to a corporation to dispose of its property, except such special or secondary franchises as are charged with a public use. In section 131 (m) of the LGC, Congress unmistakably defined a franchise in the sense of a secondary or special franchise. This is to avoid any confusion when the word franchise is used in the context of taxation. As commonly used, a franchise tax is "a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state." It is not levied on the corporation simply for existing as a corporation, upon its property or its income, but on its exercise of the rights or privileges granted to it by the government. Hence, a corporation need not pay franchise tax from the time it ceased to do business and

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The Province of Laguna, through then Gov. Jose Lina, denied the refund relying on the LGC instead of PD 551. 28. MANILA ELECTRIC COMPANY V PROVINCE OF LAGUNA Topic: Local Taxation; Local Taxing Authorities and Scope of Taxing Power; Provinces Ponente: Vitug Date: May 5, 1999 DOCTRINE: The legislative intent of the LGC, as seen in Sec. 193 of the Code, in withdrawing exemption given to certain entities must prevail from prior enacted laws. QUICK FACTS: A number of municipalities gave MERALCO franchise to distribute electricity. With the enactment of the LGC, the Province imposed franchise tax on MERALCO. MERALCO paid under protest and later filed for refund. FACTS: Tax: Franchise tax of 50% of 1% of annual gross receipts on businesses enjoying franchises (Laguna Provincial Ordinance No. 01-92) MERALCO was given franchise by various municipalities in Laguna to distribute electricity. Upon the enactment of the LGC of 1991 (LGC), the Province of Laguna enacted the abovementioned Provincial Ordinance. The Province sent a demand letter to MERALCO. The latter paid in the amount of P19,520.628.42 under protest. Later a formal demand of refund was filed to the Provincial Treasurer claiming that the franchise tax it had paid and continued to pay to the National Government under PD 551 (2% based on gross receipts) already included the franchise tax imposed by the Provincial Ordinance. MERALCO filed a complaint for refund with the RTC, the amount then already increased to P27,669,566.91 because of additional payments it made under protest. The RTC denied the complaint declaring the Provincial Ordinance valid. ISSUE: WON the Provincial Ordinance is valid HELD: Yes. RATIO: A. The legislative intent is clear with Sec. 193 of the LGC which withdrew tax exemptions or incentives then enjoyed by certain entities. B. MERALCO: Cited a number of SC cases wherein the phrase in lieu of all taxes granted to the franchisee exempted it from payment of other taxes aside from the franchise tax imposed on it. C. SC: In the recent case of City Government of San Pablo v. Reyes, it was held that the phrase in lieu of all taxes have to give way to the provisions of the LGC withdrawing such exemptions and privileges. D. Contractual tax exemptions v. tax exemptions in special franchises Contractual tax exemptions are those contained in government bonds or debentures, lawfully entered into by the person and the government, acting in its private capacity, where the latter sheds its cloak of authority and waives its government immunity. In this case the non-impairment clause in the Constitution may be properly invoked. Being a part of the inducement for carrying on the franchise, tax exemption in special franchises is

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different. A franchise is a grant which is beyond the purview of the non-impairment clause. 29. PLDT V CITY OF DAVAO Topic: Local Taxing Authorities Provinces: Franchise Tax Ponente: Mendoza, J. Date: August 22, 2001 DOCTRINE: LGC which took effect on 1Jan1992, grants provinces the power to impose a tax on businesses enjoying a franchise and withdrew tax exemption privileges enjoyed by all persons upon the effectivity of the Code. However, it does not extend to future exemptions that may be granted by Congress expressly in a statute in a clear language . Otherwise, the rule of strict construction of laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing powers shall be applied. QUICK FACTS: Davao City refused to issue a Mayors Permit to PLDT pending payment of P3.7 million local franchise tax for 1999 which the latter contends to be improper claiming that it is exempted from paying local franchise tax under its charter. FACTS: Tax: 75% of 1% (0.75%) local franchise tax of gross annual receipts within the territorial jurisdiction of Davao City. Facts: On Jan1999, Davao City refused to issue a Mayors Permit to PLDT pending payment of P3.7 million local franchise tax for 1999. PLDTs Contention: PLDT is exempt from payment of franchise tax in view of the following: 1. In lieu of all taxes proviso. BLGF opinion dated 2Jun1998 which provides that PLDT is exempt from payment of all other taxes as provided in Sec 12 of RA 7082 7 as the 3% franchise tax on all gross receipts was in lieu of all taxes. 2. Equality of treatment in Telecoms Industry. Under Sec 23 of RA 7925,8 PLDT, as a telecom franchise holder, becomes automatically covered by the tax exemption provisions of RA 7925 (effective 16Mar1995). Assuming LGC withdrew its tax exemption, RA 7925, in relation to exemptions given to Globe and Smart from local franchise taxes, again entitles PLDT from local franchise tax. Davao Citys Contention: PLDT is liable for local franchise tax in view of the legal opinion of the City Legal Oficer of Davao and Art 10, Sec 1 of Ordinance 230, as amended by Ordinance 519 which provides that : businesses enjoying a franchise are imposed a tax of 75% of 1% of gross receipts on income earned within the jurisdiction of Davao, notwithstanding any exemption granted by law. TC IFO Davao City holding that:

SECTION 12. The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings, and personal property, exclusive of this franchise, as other persons or corporations are now or hereafter may be required by law to pay. In addition thereto, the grantee, its successors or assigns shall pay a
7 businesses transacted under this franchise by the grantee, its successors or assigns, and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof . . .

franchise tax equivalent to three percent (3%) of all gross receipts of the telephone or other telecommunications

SECTION 23. Equality of Treatment in the Telecommunications Industry. Any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchise and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications franchises concerning territory covered by the franchise, the life span of the franchise, or the type of service authorized by the franchise.
8

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1. LGC withdrew all tax exemptions previously enjoyed by all persons and authorized LGUs to impose a tax on businesses enjoying a franchise notwithstanding the grant of tax exemption to them; 2. It is clear from the wording of LDC that Congress did not intend to exempt any franchise holder from the payment of local franchise and business taxes; 3. the opinion of the Executive Director of the BLGF is not binding on Davao City; and 4. PLDT failed to present any proof that Globe and Smart were enjoying local franchise and business tax exemptions (this is in relation to PLDTs argument on equality of treatment in telecoms industry). ISSUE: WoN PLDT is exempt from payment of local franchise tax? HELD: No. SC Affirmed TC and ruled IFO Davao City holding that the LGC which took effect on 1Jan1992, grants provinces the power to impose a tax on businesses enjoying a franchise9 and also withdrews tax exemption privileges enjoyed by all persons upon the effectivity of the Code. 10
9

There is no subsequent law clearly providing PLDT with exemption from local franchise tax. RATIO: Although RA 7925 was enacted, providing for equality in telecoms industry, subsequent to the LGC enactment, Sec 23 of RA 7925 is too general and there is nothing in its language nor in the proceedings of the HoR and the Senate which shows that it contemplates the grant of tax exemptions to all telecom entities, including those whose exemptions had been withdrawn by the LGC. Tax exemptions must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. NOTES: Power to impose franchise tax does not extend to future exemptions. Sec 137 of LGC 4 does not cover future exemptions. Although a provision in the later law withdrew the exemption enjoyed by a franchisee, a subsequent amendment of its franchise, exempting it from all other taxes except those imposed by its franchise, again entitles the franchisee to exemption from the date of enactment of such amendment. [PAL v EDU] Power of Congress to grant tax exemptions. The grant of taxing powers to LGUs under the Constitution and the LGC does not affect the power of Congress to grant exemptions to certain persons. It simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations. [Meralco v Laguna]

SECTION 137. Franchise Tax. Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within its territorial jurisdiction. In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided herein. SECTION 193. Withdrawal of Tax Exemption Privileges . Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or -controlled corporations, except local water districts, cooperatives duly registered under R.A.
10

6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.

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Nature of BLGF opinion. BLGF opinion involving a legal question has no force of law as it was created merely to provide consultative services and technical assistance to local governments and the general public on local taxation, real property assessment, and other related matters, among others unlike CTAs which were created for the review of tax cases. 30. PALMA DEVT V MUNICIPALITY OF MALANGAS xxxxxxxxx Topic: Local Taxation Local Taxing Authorities and Scope of Taxing Power Provinces Franchise Tax Ponente: Panganiban Date: October 16, 2003 DOCTRINE: In accordance with the Local Government Code, a municipal ordinance imposing fees on goods that pass through the issuing municipalitys territory is null and void. QUICK FACTS: The Municipality of Malangas passed an ordinance imposing services fees on goods that pass its roads and streets. FACTS: Tax: Municipal Revenue Code No. 09 imposing service fees for the use of roads or streets and police surveillance. The Municipality of Malangas passed Municipal Revenue Code No. 09 which imposed the collection of service fees (Sec. 5G.01) (1) for the use of municipal roads or streets leading to the wharf and to any point along the shorelines within the jurisdiction of the municipality and (2) police surveillance on all goods and all equipment sheltered in the premises of the wharf. Rate: a) Vehicles and Equipment: rate of fee 41. Rice and corn grits/sack 0.50 Palma Devt Corp, engaged in milling and selling rice and corn, uses the municipal port of Malangas as transhipment point for its goods. It paid service fees under protest. Palma filed a case against the Municipalitty of Malangas assailing the validity of Section 5G.01 of the municipal ordinance. Palma Devt Corps Contention: 1. Under the Local Govt Code, municipal governments did not have the authority to tax goods and vehicles that passed through their jurisdictions. 2. While the municipality has the power to tax or impose fees on vehicles using its roads, it cannot tax the goods that are transported by the vehicles. 3. The Provision is contrary to Sec. 133(e) 11 of the LGC. Municipalitys Contention:
"Section 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxxxxxxxx e) Taxes, fees and charges and other impositions upon goods carried into and out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or merchandise;"
11

1. Automatic per unit P10.00 2. Ford Fiera P10.00 3. Trucks P10.00 xxxxxxxxx b) Other Goods, Construction Material products: 1. Bamboo craft P20.00 2. Bangus/Kilo 0.30

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1. The subject fees are intended for services rendered, the use of municipal roads and police surveillance. The fees are supposedly not covered by the prohibited impositions under Section 133(e) of LGC. 2. It was empowered by the express mandate of Sections 153 and 15512 of LGC to enact Section 5G.01 of the ordinance. 3. There is no proof that the P0.50 fee for every sack of rice or corn is a fraudulent legislation enacted to subvert the limitation imposed by Section 133(e) of RA No. 7160. Allowing Palma to use its roads without paying the P0.50 fee for every sack of rice or corn would contravene the principle of unjust enrichment. TC IFO Palma. The entire Municipal Revenue Code No. 09 is ultra vires, and hence, null and void. CA Remanded case back to TC. Palma still had to adduce evidence to substantiate its allegations that the assailed ordinance had imposed fees on the movement of goods within the Municipality of Malangas in the guise of a toll fee for the use of municipal roads and a service fee for police surveillance. ISSUE: WoN Sec. 5G.01 of the Municipal Revenue Code No. 09 is valid. HELD: NO. The imposition of a service fee for police surveillance on all goods harbored or sheltered in the premises of the municipal port of Malangas under Sec. 5G.01 of the Malangas Municipal Revenue Code No. 09, series of 1993, is declared NULL AND VOID for being violative of Republic Act No. 7160. RATIO: By express language of Sections 153 and 155 of LGC, local government units, through their Sanggunian, may prescribe the terms and conditions for the imposition of toll fees or charges for the use of any public road, pier or wharf funded and constructed by them. A service fee imposed on vehicles using municipal roads leading to the wharf is thus valid. However, Section 133(e) of RA No. 7160 prohibits the imposition, in the guise of wharfage, of fees -- as well as all other taxes or charges in any form whatsoever -- on goods or merchandise. It is therefore irrelevant if the fees imposed are actually for police surveillance on the goods, because any other form of imposition on goods passing through the territorial jurisdiction of the municipality is clearly prohibited by Section 133(e). Under Section 131(y) of RA No. 7160, wharfage is defined as "a fee assessed against the cargo of a vessel engaged in foreign or domestic trade based on quantity, weight, or measure received and/or discharged by vessel." It is apparent that a wharfage does not lose its basic character by being labeled as a service fee "for police surveillance on all goods." MINOR ISSUE: WoN Palma was unjustly enriched at the Municipalitys expense. NO. For unjust enrichment to be deemed present, two conditions must generally concur: (a) a person is unjustly

"Section 153. Service Fees and Charges. -- Local government units may impose and collect such reasonable fees and charges for services rendered. xxxxxxxxx "Section 155. Toll Fees or Charges. -- The sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the local government unit concerned: Provided, That no such toll fees or charges shall be collected from officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission, post office personnel delivering mail, physically-handicapped, and disabled citizens who are sixty-five (65) years or older. "When public safety and welfare so requires, the sanggunian concerned may discontinue the collection of the tolls, and thereafter the said facility shall be free and open for public use."
12

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benefited, and (b) such benefit is derived at anothers expense or damage. In the instant case, the benefits from the use of the municipal roads and the wharf were not unjustly derived by Palma. Those benefits resulted from the infrastructure that the municipality was mandated by law to provide. There is no unjust enrichment where the one receiving the benefit has a legal right or entitlement thereto, or when there is no causal relation between ones enrichment and the others impoverishment. 31. PLDT V PROVINCE OF LAGUNA Topic: Local Taxation Local Taxing Authorities and Scope of Taxing Powers Provinces Franchise Tax Ponente: Garcia, J. Date: August 16, 2005 DOCTRINE: Tax exemptions must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. QUICK FACTS: PLDT claimed from the provincial treasurer of Laguna a refund of the amount it paid as local franchise tax for 1998, claiming that it is exempt from the payment of local franchise tax by virtue of RA 7925 or the Public Telecommunications Policy Act of the Philippines. FACTS: Tax: Local franchise tax at a rate of not exceeding 50% of 1% of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within the territorial jurisdiction of the LGU as provided in Section 137 of the Local Government Code.

PLDT was a holder of a legislative franchise. Its franchise provided for the payment of 3% franchise tax in lieu of all taxes. The Local Government Code (LGC), however, was subsequently passed, which withdrew tax exemption privileges of all entities enjoying such privileges prior to the enactment of the said code (Section 193). The LGC also granted to provinces the power to impose franchise tax on businesses enjoying a franchise (Section 137) Invoking its authority under Section 137 of the Local Government Code, Laguna, through its local legislative assembly, enacted Provincial Ordinance No. 01-92, imposing a franchise tax upon all businesses enjoying a franchise, PLDT included. On January 28, 1998, PLDT, in compliance with the said ordinance, paid Laguna its local franchise tax liability for the year 1998 in the amount of P1,081,212.10. Prior to this, however, Congress passed RA 7925 or the Public Telecommunications Policy Act of the Philippines in 1995. Section 23 of the cited law provided that privileges enjoyed under existing franchises shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises. A 1998 ruling from the Bureau of Local Government Finance (BLGF) confirmed that PLDT was exempt from paying local franchise tax, deeming that the in lieu of all taxes clause of its franchise was restored to its franchise by virtue of RA 7925. On the basis of the BLGF ruling, PLDT refused to pay Laguna its local franchise tax liability for 1999. On December 22, 1999, it filed with the Office of the Provincial Treasurer a written claim for refund of the amount it paid as local franchise tax for 1998. With no refund having been made, PLDT instituted with the Regional Trial Court at Laguna a petition against the Province and its Provincial Treasurer

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Petitioners Contention: Exempt from paying local franchise tax by virtue of Section 23 of RA 7925. Respondents Contention: RA 7925 did not expressly exempt PLDT from paying local franchise tax nor did it expressly preclude Laguna from imposing it against PLDT. TC Laguna won. Ruled the PLDT was not exempt from paying franchise tax to the province. CA n/a : petition for review filed directly before the SC. ISSUE: WoN PLDT is exempt from paying local franchise tax. HELD: No. Affirmed TC. RATIO: It did not appear that, in approving Section 23 of RA 7925, Congress intended it to operate as a blanket tax exemption to all telecommunications entities. Applying the rule of strict construction of laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing powers, Section 23 of R.A. No. 7925 cannot be considered as having amended petitioner's franchise so as to entitle it to exemption from the imposition of local franchise taxes. Exemptions from taxation are highly disfavored, so much so that they may almost be said to be odious to the law. He who claims an exemption must be able to point to some positive provision of law creating the right. The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. RA 7925 is a legislative enactment designed to set the national policy on telecommunications and provide the 32. SMART COMMUNICATIONS V CITY OF MAKATI NOTE: Not a digest. This is a news item which discussed the merits of the case. The case assigned is a CA case. I've tried hard but I couldn't find it online. The citation on the syllabus doesn't help at all. The Court of Appeals (CA) recently exempted Smart Communications, Inc. (Smart) from paying Makati City P312 million in local franchise taxes. On similar grounds, the Supreme Court (SC) upheld a CA decision to exempt Smart subsidiary Pilipino Telephone Corp. (Piltel) from paying its Makati local franchise taxes. The CA dismissed the case of the City of Makati against Smart and upheld a lower court decision in its Notice of Resolution dated June 9, 2005, which Smart only received last month. Under the notice, the 11th Division of the CA deemed the case abandoned and dismissed after the City of Makati filed no petition for review within the allowed period of extension. Early this year, the Court of Appeals gave the City of Makati a 15-day Extension, until March 9, 2005 to file a petition for review. However, the City failed to file any petition as of May 30, 2005. structures to implement it to keep up with the technological advances in the industry and the needs of the public. The thrust of the law is to promote gradually the deregulation of the entry, pricing, and operations of all public telecommunications entities and thus promote a level playing field in the telecommunications industry. There is nothing in the language of Section 23 nor in the proceedings of both the House of Representatives and the Senate in enacting RA 7925 which shows that it contemplates the grant of tax exemptions to all telecommunications entities, including those whose exemptions had been withdrawn by the LGC.

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enjoyed at the time of the enactment of the Local Government Code of 1991 and not with regard to those which were granted after the enactment of the said law, the court added. On January 19, 2005, Branch 28 of the Iloilo City RTC likewise ruled that Smart is exempt from paying local franchise and business tax worth P764,545.29 for calendar years 1997 to 2001, inclusive of surcharges and penalties. 33. NPC v. PROVINCE OF ISABELA Topic: Franchise tax; Local taxing authorities and scope of taxing power Ponente: Callejo, Sr., J. Date: June 16, 2006 DOCTRINE: Franchise tax: a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state. Requisites for coverage: 1) franchise in the sense of a secondary or special franchise, and 2) corp is exercising its rights or privileges under this franchise within the territory of the city govt Fulfillment of these requisites makes the corp liable to pay franchise tax, regardless of whether it is an instrumentality of the government, or has a charter passed before the enactment of the LGC that exempts it from payment of taxes. QUICK FACTS: NPC claims that it is exempt from paying franchise tax to the Province of Isabela because of several reasons, but mainly because it claims to be exempt as an instrumentality of the national government and that its

Likewise, the SC decided to exempt Piltel on its April 6, 2005 entry of judgment on its October 13, 2004 decision. On August 3, 2004, Branch 61 of the Makati Regional Trial Court (RTC) declared Smart exempt from paying the local franchise taxes charged by the Makati City Miscellaneous Taxes, Fees and Charges Division worth P196.227 million for calendar years 2000 and 2001, and P115.828 million for 1995, 1998 and 1999. These included surcharges and interests. The City of Makati elevated the case to the Court of Appeals, but no petition for review was filed within the prescribed period. RTC cited Section 9 of Republic Act 7294 or the Smart franchise, which stipulates that Smart should pay a franchise tax equivalent to 3 percent of all gross receipt of the business transacted under this franchise... and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof. Provided, that the grantee, its successors or assigns shall continue to be liable for income taxes payable... The court added Smart is not covered by Section 137 of the Local Government Code or RA 7160, which states that notwithstanding any exemption by any law or other special law, the province may impose a tax on businesses enjoying a franchise, and by Section 193, which withdraws tax exemption privileges. The franchise of Smart or RA 7294 was enacted only on March 27, 1992 whereas the Local Government Code or RA 7160 was enacted on Sept. 12, 1991 and took effect on January 1, 1992, the court said. The revocations and withdrawals of tax exemptions under Section 193 of the Local Government Code clearly refer to those which were previously granted and/ or those presently

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Charter trumps the LGC in that it is exempt from payment of taxes. FACTS: Tax: franchise tax Facts: Magat River Hydro-Electric Plant paid franchise taxes for 1992 and 1993, but refused to pay in 1994 because there was confusion as to territorial jurisdiction. There was a territorial dispute between Isabela and Ifugao and Magat was confused as to whom it should pay taxes. Province of Ifugao also filed a complaint-in-intervention, claiming that the plant is located within its territory. Petitioners Contention: 1) Due to the boundary dispute between Isabela and Ifugao, it is in a quandary as to whom it should pay franchise tax. 2) No jurisdiction over subject matter pursuant to PD 242 prescribing procedure for the administrative settlement or adjudication of disputes, claims and controversies between and among government offices, agencies and instrumentalities, including GOCCs. 3) Isabela did not exhaust administrative remedies by first settling its boundary dispute with Ifugao. 4) NPC is a non-profit corporation pursuant to its charter (RA 6395) and is therefore not covered by LGC and not obliged to pay franchise tax. There was no provision in LGC expressly repealing the Charter, and neither was there implied repeal. Legislature had no intention to repeal. 5) Even if LGC Sec. 137 is not applicable because NPC is neither a private corp nor a business created for profit, which are the only ones liable for franchise tax under the said law. 6) Isabela has no authority to tax NPC because NPC is an instrumentality of the national govt. 7) To require NPC to pay franchise tax could have deleterious effects on its operations. It would compel NPC to borrow from domestic and foreign institutions. Ultimately, the national govt will pay the tax, and the burden shouldered by the Filipino people. Respondents Contention: 1) The plant is within its territory and is therefore liable to pay taxes to Isabela. Its an expansion of the Magat River Irrigation System located in Ramon, Isabela and the Siffu River Irrigation System located along boundaries of San Mateo and Ramon, Isabela. 2) All communications received and sent during the construction of the power plant were addressed to Isabela and not to Ifugao 3) Magat and Ifugao are guilty of laches and estoppel because they have known since 1976 that the location of the plant is within Isabelas territory. 4) The fact of its territory is well publicized throughout the country. 5) The presumption is that NPC is taxable; failure to overcome the presumption means NPC is indeed taxable. 6) NPC is not exempt; it is a corp created to undertake ministrant or proprietary function, has long been treated in this jurisdiction as akin to a private commercial corp. Its dealings are considered to be purely private and commercial undertakings although imbued with public interest. Complaint-in-intervention of Province of Ifugao, contentions: 1) Plant is located within its territory. All principal structures of the plant are within its jurisdiction. 2) Ifugao maintains the watershed that ensures the continuous flow of water to plants reservoir. 3) Ifugao is not precluded form asserting its lawful claim despite undue payment to Isabela. TC Isabela NPC liable for payment of franchise tax to

CA Affirmed RTC. Magat not exempt from paying franchise tax because LGC withdrew t he tax exemption provided under its charter. However, RTC had no basis in

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ordering it to pay franchise tax because the territorial dispute is not yet resolved. RTC has no jurisdiction because there is failure to exhaust administrative remedies before filing the complaint. CA ordered NPC to deposit the amount in escrow pending final determination in the proper forum. CA, therefore, upheld dismissal of t he complaint-in-intervention. ISSUE: WoN NPC is liable to pay franchise tax under LGC HELD: YES. RATIO: 1) Taxation is the rule and exemption is the exception. Burden of proof rests upon the party claiming exemption to prove that it is, in fact, covered by the exemption so claimed. 2) LGC has expressly withdrawn exemption through LGC Sec. 193. 3) NPC has already been decided by the SC in NPC v. Cabanatuan case to be a business enjoying a franchise. Franchise tax: a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state. Requisites for coverage: 1) franchise in the sense of a secondary or special franchise, and 2) corp is exercising its rights or privileges under this franchise within the territory of the city govt In this case, NPC fulfills both requisites. 4) As a general rule, LGUs cannot impose taxes, fees or charges of any kind on the national govt, its agencies and instrumentalities, EXCEPT: under LGC Sec. 137 franchise tax. 34. PHILIPPINE BASKETBALL ASSOCIATION V CA

Topic: Amusement tax Ponente: Purisima, J. DOCTRINE: The NIRC provides that proprietor, lessee or operator of professional basketball games is required to pay an amusement tax equivalent to 15% of the gross receipts to the BIR, which payment is a national tax. The payment of amusement tax is in lieu of all other percentage taxes of whatever nature and description. QUICK FACTS: PBA received an assessment from CIR for the payment of deficiency amusement tax in the amount of P5.8 million. PBA contested the assessment but CIR denied. FACTS: TAX: Amusement tax on PBA game tickets. In 1989, PBA received an assessment from CIR for the payment of deficiency amusement tax in the amount of P5.8 million. PBA contested the assessment but CIR denied. PBA The Local Tax Code of 1973 transferred the power and authority to levy and collect amusement taxes from the sale of admission tickets to places of amusement from the national government to the local governments. CTA Dismissed PBAs petition for lack of merit. MR was also denied. CA Affirmed decision of CTA. MR was also denied. CA held that the jurisdiction to collect amusement taxes of PBA games is vested in the national government to the exclusion of local government. ISSUE: WON the amusement tax on admission tickets to PBA games a national tax.

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DOCTRINES: (1) The proper remedy of BA-Lepanto from the RTC judgment is an ordinary appeal under Rule 41 to the Court of Appeals. However, the Supreme Court (Court)makes this pronouncement subject to two important qualifications. First, in this particular case there are nonetheless significant reasons for the Court to overlook the procedural error and ultimately uphold the adjudication of the jurisdiction exercised by the Court of Appeals in this case. Second, the doctrinal weight of the pronouncement is confined to cases and controversies that emerged prior to the enactment of Republic Act No. 9282, the law that expanded the jurisdiction of the Court of Tax Appeals (CTA). (2) In levying taxes, reference to the local tax ordinance is vital, for the power of local government units to impose local taxes is exercised through the appropriate ordinance enacted by the sanggunian, and not by the Local Government Code alone. What determines tax liability is the tax ordinance, the Local Government Code being the enabling law for the local legislative body.

HELD: YES. The decisions of CA and CTA were affirmed. RATIO: Sec. 13 of the Local Tax Code indicates that the province can only impose a tax on admission from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement. The authority to tax professional basketball games is not therein included. On the other hand, the NIRC provides that proprietor, lessee or operator of professional basketball games is required to pay an amusement tax equivalent to 15% of the gross receipts to the BIR, which payment is a national tax. The payment of amusement tax is in lieu of all other percentage taxes of whatever nature and description. Professional basketball games are not within the scope of other places of amusement, as provided in the Local Tax Code. Professional basketball games do not fall under the same category as theaters, cinematographs, concert halls and circuses as the later basically belong to artistic forms of entertainment while the former caters to sports and gaming. History: Tax laws (PDs 871, 1456, 1959) recognize that amusement tax on professional basketball games is a national, not a local, tax. NIRC Sec. 125[10] retained this. LGC Sec. 140[11] granted authority to a province to levy amusement tax but without including professional basketball games. 35. LUZ YAMANE CORPORATION V BA LEPANTO CONDOMINIUM

Topic: Local Business Taxes; Taxpayers Remedies Ponente: Tinga, J. Date: 25 October 2005

(3) Local tax on businesses is authorized under Section 143 of the Local Government Code. The word business itself is defined under Section 131(d) of the Code as trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit. This definition of business takes on importance, since Section 143 allows local government units to impose local taxes on businesses other than those specified under the provision. Moreover, even those business activities specifically named in Section 143 are themselves susceptible to broad interpretation. For example, Section 143(b) authorizes the imposition of business taxes on wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature.

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QUICK FACTS: BA-Lepanto was assessed by the petitioner City Treasurer a certain amount, as payment for city business taxes, fees and charges. The Notice of Assessment was silent as to the statutory basis of the business taxes assessed. BA-Lepanto protested the assessment. FACTS: (2) manage the condominium for the unit owners, and (3) hold title to the parcels Condominium was located. of land on which the

Moreover, it was not authorized, under its articles of incorporation or by-laws to engage in profit-making activities.

The respondent BA-Lepanto Condominium Corporation (BALepanto) is a duly organized condominium corporation constituted in accordance with the Condominium Act, which owns and holds title to the common and limited common areas of the BA-Lepanto Condominium, situated in Makati City.

The City Treasurer denied the protest. The respondent filed an appeal to the RTC of Makati.

In this case, BA-Lepanto was assessed by the petitioner City Treasurer for PhP 1,601,013.77 as payment for city business taxes, fees and charges. The Notice of Assessment was silent as to the statutory basis of the business taxes assessed. BA-Lepanto protested the assessment.

RTC dismissed the appeal and held that the activities of BA-Lepanto fell under the definition of 'business' under Sec 13(b) of the LGC. From the decision of the RTC, the respondent filed a Petition for Review under Rule 42 of the Rules of Civil Procedure with the Court of Appeals.

BA-Lepanto Argues That The Assessment has no basis and that BA-Lepanto is not liable for business taxes and surcharges and interest thereon, under the Makati Revenue Code or even under the Local Government Code (LGC). Section 3A.02(m) of the Makati Revenue Code, which provides for imposition of business tax on owners or operators of any business not specified in the said code is not applicable since the corporation, as a condominium corporation, was organized not for profit, but to: (1) hold title over the common areas of the condominium

CA initially dismissed the petition outright but it subsequently reinstated the petition; held that the respondent is not liable to pay business taxes to the City of Makati because it is not a juridical entity intended to make profit, as its sole purpose was to hold title to the common areas in the condominium and to maintain the condominium.

Luz Yamane, City Treasurer of Makati Argues That (1) BA Lepanto filed the wrong mode of appeal before the Court of Appeals when the latter filed its Petition for Review under Rule 42.

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(2) BA-Lepanto is engaged in business, for the dues collected from the different unit owners is utilized towards the beautification and maintenance of the Condominium, resulting in 'full appreciative living values' for the condominium units which would command better market prices should they be sold in the future. Also, the rationale for business taxes is not on the income received or profit earned by the business, but the privilege to engage in business. The Local Government Code or any other statute does not expressly confer appellate jurisdiction on the part of regional trial courts from the denial of a tax protest by a local treasurer. On the other hand, Section 22 of BP 129 expressly delineates the appellate jurisdiction of the Regional Trial Courts, confining as it does said appellate jurisdiction to cases decided by Metropolitan, Municipal, and Municipal Circuit Trial Courts. Unlike in the case of the Court of Appeals, BP 129 does not confer appellate jurisdiction on Regional Trial Courts over rulings made by non-judicial entities.

ISSUES 1:WON the respondent filed the wrong mode of appeal in the CA. In the case at bar, there are significant reasons for the Court to overlook the procedural error and ultimately uphold the adjudication of the jurisdiction exercised by the CA. Procedural rules should not be enforced blindly, especially if mechanical application would defeat the higher ends that animate our civil procedure: the just, speedy and inexpensive disposition of every action and proceeding.

HELD: YES, but the review taken by the RTC over the denial of the protest by the local treasurer would fall within that court's original jurisdiction so the proper remedy of the respondent corporation from the RTC judgment is an ordinary appeal under Rule 41 to the Court of Appeals.

RATIO: In Garcia v. De Jesus, the Court distinguished original jurisdiction and appellate jurisdiction thus: Original jurisdiction is the power of the Court to take judicial cognizance of a case instituted for judicial action for the first time under conditions provided by law. Appellate jurisdiction is the authority of a Court higher in rank to re-examine the final order or judgment of a lower Court, which tried the case now elevated for judicial review.

ISSUE 2: WON the respondent is liable for local tax

HELD: NO.

In this case, the review of the RTC is the initial judicial cognizance of the matter. Moreover, labeling the said review as an exercise of appellate jurisdiction is inappropriate, since the denial of the protest is not the judgment or order of a lower court, but of a local government official.

RATIO: Luz Yamane, the City Treasurer has not informed BA-Lepanto, the RTC, the CA, or even the SC, as to what exactly is the precise statutory basis under the Makati Revenue Code for the levying of the business tax. The notice of assessment, which stands as the first instance the taxpayer is officially made aware of the pending tax liability, should be sufficiently informative to apprise the taxpayer the legal basis of the tax.

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corporate activities other than the holding of the common areas, the administration of the condominium project, and other acts necessary, incidental or convenient to the accomplishment of such purposes. Also, under the By-laws of the respondent, none of the corporate purposes are geared towards maintaining a livelihood or the obtaining profit.

Sec. 195 of the LGC does not expressly require that the notice of assessment specifically cite the provision of the ordinance involved but it does require that it state the nature of the tax, fee or charge, the amount of deficiency, surcharges, interests and penalties. In this case, the notice of assessment sent to the respondent did state that the assessment was for business taxes, as well as the amount of the assessment. There may have been prima facie compliance with the requirement under Sec 195. However, the Revenue Code provides multiple provisions on business taxes, and at varying rates. Reference to the local tax ordinance is vital, for the power of local government units to impose local taxes is exercised through the appropriate ordinance enacted by the Sanggunian, and not by the LGC. However, the Court may not rule that there has been a due process violation since it was not raised by the BA-Lepanto. It has focused its argument on the position that the LGC does not sanction the imposition of business taxes against it.

The Court rejected the City Treasurers argument that the collection of assessments and dues by the respondent is with the end view of getting full appreciative living values' for the condominium units, and as a result, profit is obtained once these units are sold at higher prices. First, if any profit is obtained by the sale of the units, it accrues not to the corporation but to the unit owner. Second, if the unit owner does obtain profit from the sale of the corporation, the owner is already required to pay capital gains tax on the appreciated value of the condominium unit.

Sec. 143 allows local government units to impose local taxes on businesses other than those specified under the provision. The word 'business' itself is defined under Sec 131(d) of the Code as trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit BA-Lepanto does not fall within the definition of business in the LGC and is thus exempt from local business taxation.

A condominium corporation is specially formed for the purpose of holding title to the common area, in which the holders of separate interests shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units. The Court The possible exception to the rule is when the unit owners elicited from the Condominium Act that a condominium of a condominium would band together to engage in corporation is precluded by statute from engaging in E2014: Arnel, Teph, Zoe, Azy, VJ, Marshall, Jayson, Shiree, Bern, Floyd, Rubb, Diega, Jessie, Macel, Rod, Bianca, Dotty, Raj, Bobby, Jasper, Leslie| 65

With regard to the City Treasurers contention that the fact that the Corporation is engaged in business is evinced by the Articles of Incorporation, which specifically empowers the Corporation to acquire, own, hold, enjoy, lease, operate and maintain, and to convey, sell, transfer mortgage or otherwise dispose of real or personal property, the Court said that, [w]hatever capacity BA-Lepanto may have pursuant to its power to exercise acts of ownership over personal and real property is limited by its stated corporate purposes, which are by themselves further limited by the Condominium Act. A condominium corporation, while enjoying such powers of ownership, is prohibited by law from transacting its properties for the purpose of gainful profit.

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activities for profit under the shelter of the condominium corporation. and declaring the same as export sales in accordance with Art. 143(c) of RA 7160, Steneil paid in taxes in the amount of Php 190,002.40 corresponding to the tax rate provided in Art 143(c). In 2005, City Treasury of Davao issued a deficiency tax assessment for Php 772, 359 inclusive of surcharge, on the premise that Steneils sales were local and not export sales, and using the tax rate provided under Sec 143 (a) as tax base. Steneil protested the assessment through a letter but was denied with finality. City of Davao- Products cannot be considered as essential commodities mentioned in Art 5, Chapter III of Davao City Local Tax Code and hence not export sales. Steneil paid under protest. It filed a Petiton and/or Appeal before RTC Davao City. RTC - dismissed petition/appeal. Ratio- Steneils products are inputs for export products and not the export products itself. Hence, not exporter and sales not export sales. ISSUE: Won Steneil is considered and exporter under Art 143 (c) which would make the tax rate provided in Art 143 (c) applicable (1/2 of 37.5% of 1 % in contrast a manufacturer is imposed a tax rate of 37.5% of 1%). HELD: No RATIO: In relation to Subsection (c) of aforequoted Section 143, an exporter for purposes of imposing local business tax, shall refer to those principally engaged in the business of exporting goods and merchandise, as well as manufacturers and producers whose goods or products are both sold domestically and abroad as provided under Article 232, of the Implementing Rules and Regulations of RA 7160,

36. STENEIL MINDANAO TREASURER OF DAVAO

PACKAGING

CITY

Topic: Municipalities: Local Business Taxes: LGC secs. 143146 Ponente: UY Date: November 27, 2008 DOCTRINE: The power of a municipality to impose business taxes derives from Sec 143 of the LGC that specifically enumerates several types of business on which it may impose taxes. Corollary thereto, the City of Davaos taxing power is provided under Art III, Sec 151 of same code. QUICK FACTS: Steneil claims to be an exporter and hence its sales should be subjected to tax rate provided for by sec 143 (c). City treasurer of Davao applied tax rate provided for in Sec 143(A) and not 143 (c). (exporter tax rate in Sec 143(c)= 1/2 of 37.5% of 1 % in contrast a to manufacturer in Sec 143 (a)= 37.5% of 1%). City of Davao affirmed by RTC and CTA. FACTS: Tax: see quick facts Steneil is a domestic corporation with business address in Bunawan, Davao City. It is engaged in the business of manufacturing and selling packaging materials, such as corrugated fiber board containers, cartons, and boxes. During taxable year 2004, Steneils total sales of its packaging materials to both export oriented and non-export oriented clientele amounted to Php 199, 419,195. Treating

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or the Local Government Code. Thus, to be considered an exporter under the said Code, it is necessary that the business entity is engaged, either in the exportation of its goods and merchandise; or in the manufacture or production of goods or products that are both sold domestically and abroad. Indubitably, Steneil is a manufacturer and a seller of packaging materials such as corrugated fiber board containers, cartons and boxes, which are sold to different clients both for local consumption and export. In other words, Steneil does not export its packaging materials but sells them instead to export-oriented enterprises, which in turn utilize the same to package their products for export. Notably, the IRR of EO No. 226 (Omnibus Investments Code) considers packaging materials constituting supplies as forming part of the export product. Based on Article 39(k), packaging materials form part of the export products. In spite of this provision however, it does not necessarily make petitioner an exporter as contemplated under the LGC. The provision merely confirms that the packaging materials used by export oriented enterprises form part of the export product for purposes of granting incentives to BOIregistered enterprises. Furthermore, the tax credit mentioned therein pertains to National Internal Revenue taxes and Customs duties. There is no mention of local taxes thereby making said provision not applicable in the case. The business tax is imposed upon Steneil for its privilege of engaging in business in the City of Davao, specifically, its business of manufacturing corrugated fiber containers, cartons and boxes. This imposition of business tax is provided for under Section 143 of the Local Government Code of 1991. The said Code does not make the manufacturer who sells its manufactured product to an exporter who utilizes the same to produce its export product, an exporter, petitioner cannot be considered as an exporter, but rather, by its own admission, as a manufacturer of any article of commerce of whatever kind and nature. A company that does not export it products, but sells it to local companies, which in turn utilize said products, as inputs in the manufacture of other products that are exported abroad, is locally taxable as manufacturer under Section 143(a), and not under Section 143(c) of RA No. 7160. Additionally, petitioners sales of manufactured corrugated containers, cartons, and boxes cannot fall under the term export sales because Section 143(c) of RA No. 7160 only applies to sales of essential commodities, limited to those enumerated in said Subsection. As the manufactured corrugated boxes of petitioner are neither considered exports nor one of the essential commodities enumerated in Section 143(c) of RA No. 7160, petitioners sales during taxable year 2004 are all considered local sales subject to the tax rate provided under Section 143(a) of the same Code. Hence, petitioner is taxable as a manufacturer under Section 143(a), and not under Section 143(c), of RA No. 7160. Petitioner was denied its claim for refund or issuance of tax credit certificate. Petition for review is dismissed. *** Section 143. Tax on Business. - The municipality may impose taxes on the following businesses: (a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or

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manufacturers of any article of commerce of whatever kind or nature, in accordance with the following schedule: xxx xxx (c) On exporters, and on manufacturers , millers, producers, wholesalers, distributors, dealers or retailers of essential commodities enumerated hereunder at a rate not exceeding one-half () of the rates prescribed under subsection (a), (b) and (d) of this Section: xxx 37. KEPCO ILIJAN CORP V CITY OF MAKATI Topic: LOCAL TAXATION; MUNICPIMALITIES, LOCAL BUSINESS TAX Ponente: Uy Date: September 2008 DOCTRINE: The fact that petitioner merely operates, maintains, and manages the power plant for the conversion of fuel supplied by NAPOCOR for the eventual transmission of electricity only toNAPOCOR show that the same all come in the nature of the rendition of service for a fee. All theselead to the conclusion that petitioner is a "contractor" as defined under the LGC of 1991. QUICK FACTS: Kepco Ilijan claims that it is a manufacturer while Makati, classifies Kepco as contractor for purposes of local business tax FACTS: Petitioner, Kepco Ilijan Corporation, is a domestic corporation, with principal place of business in Salcedo Village, Makati City. Respondent City of Makati, is being sued in its capacity as the local government unit which classified petitioner as a "contractor" for purposes of local business tax. Petitioner entered into an Energy Conversion Agreement (ECA) with the NAPOCOR, whereby the latter shall build, operate and maintain the1200 MW Ilijan Natural Gas Power Plant. Petitioner was issued a Mayor's Permit by respondent classifying it as "SEO" or special contractor for local business tax purposes. Petitioner then requested that its classification be changed from contractor to that of a manufacturer since its classification as a contractor is allegedly not in accordance with the definition of said word under existing laws and relevant Department of Finance circulars. Due to the fact however that it was still under Income Tax Holiday (ITH) then, and as a consequence of which, no tax collection or assessment could then be imposed by the respondent up to February 28, 2004, petitioner still sought to have its classification reconsidered through a series of written communications and appropriate meetings with officers of the respondent. Upon the expiration of its ITH, petitioner requested for a computation of its local business taxes from the respondent. Respondent issued the requested computation classifying petitioner as a contractor and not a manufacturer and assessed petitioner for the amount of P3,358,711.75, representing its local business tax. Despite its objections, petitioner paid the said assessment but subsequently filed its protest City of Makati: denied petitioners protest.

TC - (1) dismissed petitioners appeal for lack of merit; (2) held that petitioner was properly classified as a contractor and not as a manufacturer, pursuant to Section 131 (h) of the LGC of 1991; (3) denied petitioners Motion for Reconsideration ISSUE: WoN petitioner, in selling electricity, is considered a contractor or a manufacturer, as defined under the Local Government Code and Makati City Tax Code

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HELD: Petitioner is a CONTRACTOR. RATIO: The Court looked into the nature of the conversion of fuel into electricity; whether such act of converting the natural gas or the diesel fuel, through the use of its turbine generator equipment and applying specific engineering methods, into electricity is sufficient to classify petitioner as a "manufacturer". NAPOCOR is obligated to supply and shoulder the cost of the fuel requirements of the power plant used by petitioner in converting the natural gas or diesel fuel into electricity. NAPOCOR then pays the "fees" for the conversion of such fuel. As defined under Black's Law Dictionary, a "fee" is a recompense for an official or professional service or a charge or emolument or compensation for a particular act or service. It is a fixed charge or perquisite charged as recompense for labor; reward, compensation, or wage given to a person for performance of services or something done or to be done. There is thus no argument that these activities of petitioner come in the form of services. In the process of performing these services, the question that arises is whether petitioner, in the course of performing said services, does it as a "contractor" or as a "manufacturer"? Sections 131 (h) and (o) of the LGC of 1991, 16 to wit:"SEC. 131.Definition of Terms. When used in this Title, the term:xxx xxx xxx(h)'Contractor' includes persons, natural or juridical, not subject to professional tax under Section139 of this Code, whose activity consists essentially of the sale of all kinds of services for a fee, regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractor or his employees. the term 'contractor' shall include general engineering, general building, and specialty contractors as defined under applicable laws; filling, demolition and salvage works contractors; proprietors or operators of mine drilling apparatus; proprietors or operators of dockyards; persons engaged in the installation of water system, and gas or electric light, heat or power; proprietors or operators of smelting plants; engraving, plating and plastic lamination establishments ;proprietors or operators of establishments for repairing, repainting, upholstering, washing or greasing of vehicles, heavy equipment, vulcanizing, recapping and battery charging; proprietors or operators of furniture shops and establishments for planing or surfacing and recutting of lumber, and sawmills under contract to saw, or cut logs belonging to others; proprietors or operators of dry-cleaning or dyeing establishments, steam laundries and laundries using washing machines; proprietors or owners of shops for the repair of any kind of mechanical and electrical devices, instruments, apparatus, or furniture and shoe repairing by machine or any mechanical contrivance; proprietors or operators of establishments or lots for parking purposes; proprietors or operators of tailor shops, dress shops, milliners and hatters, beauty parlors, barbershops, massage clinics, sauna, Turkish and Swedish baths, slenderizing and building saloons and similar establishments; photographic studios; funeral parlors; proprietors or operators of hotels, motels and lodging houses; proprietors or operators of arrastre and stevedoring, warehousing, or forwarding establishments; master plumbers; smiths, and house or sign painters; printers, bookbinders, lithographers; publishers except those engaged in the publication or printing of any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of advertisements; business agents, private detective or watchman agencies, commercial and immigration brokers, and cinematographic film owners, lessors and distributors." "(o)'Manufacturer' includes every person who, by physical or chemical process, alters the exterior texture or form or inner substance of any raw material or manufactured or partially manufactured product in such manner as to prepare it for special use or uses to which it could not have been put in its original condition, or who by any such process alters the

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quality of any raw material or manufactured or partially manufactured products so as to reduce it to marketable shape or prepare it for any of the use of the industry, or who by any such process, combines any such raw materials or manufactured or partially manufactured products with other materials or products of the same or of different kinds and in such manner that the finished products of such process or manufacture can be put to a special use or uses to which such raw material or manufactured or partially manufactured products in their original condition could not have been put, and who in addition, alters such raw material or manufactured or partially manufactured products, or combines the same to produce such finished products for the purpose of their sale or distribution to others and not for his own use or consumption." The fact that petitioner merely operates, maintains, and manages the power plant for the conversion of fuel supplied by NAPOCOR for the eventual transmission of electricity only to NAPOCOR show that the same all come in the nature of the rendition of service for a fee. All these lead to the conclusion that petitioner is a "contractor" as defined under the LGC of 1991. 38. HONEST SERVICE PROVIDERS V CITY OF MAKATI Topic: Municipalities; Local Business Taxes Ponente: Acost, P.J. Date: May 29, 2008 DOCTRINE: The municipality may impose taxes on contractors and independent contractors on the basis of gross receipts. QUICK FACTS: Honest Service received a copy of the Notice of Assessment demanding payment of P2,415,509.42 representing deficiency city business taxes, fees and charges for taxable period 2003-2005.

FACTS: Tax: Business tax on contractors and other independent contractors; definition of gross sales or receipts. Facts: Honest Service Providers, Inc. is a domestic corporation engaged in providing janitorial and messengerial services to clients within Metro Manila and nationwide. Petitioner has been faithfully securing its yea rly business permit and paying its local taxes due to respondent City of Makati. In January of 2005, when petitioner applied for a renewal of their business permit, the amount due was P817,248.48 which was far different from the previous years' business tax of around P50,000.00. Hence, petitioner was not able to renew its business permit. Due to the above assessment, petitioner's Accountant and Vice President visited the office of respondent City Treasurer, and they were informed that an examiner will be sent to petitioner's office for the verification of the records. Thereafter, a Letter of Authority No. LA-2006-00 I was issued, authorizing Revenue Examiner Felito A. Manrique to verify the records of petitioner. But instead of conducting an actual examination or verification of records, the Revenue Examiner requested copies of petitioner's Audited Financial Statements for years 2002 up to 2005. On February 27, 2006, petitioner received a copy of the Notice of Assessment dated February 22, 2006 demanding payment of P2,415,509.42 representing deficiency city business taxes, fees and charges for taxable period 20032005. On April 11 , 2006, petitioner responded with a written protest requesting for a reconsideration of the assessment. City of Makati and City Treasurer dismissed Honest's appeal for lack of merit. Petitioners Contention: NA

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SECTION 151. Scope of Taxing powers. - Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this code. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes. SEC. 3A.02 Imposition of Tax. - There is hereby levied an annual tax on the following businesses at rates prescribed therefore: XXX XXX XXX (f) On Contractors and other independent contractors defined in SEC. JA-01 (q) of Chapter ITl of this Code: and on owners or operators of business establishments rendering or offering services such as; xxx janitorial services. Rates prescribed: With gross sales or receipts for the preceding calendar year ISSUE 2: WON direct expenses are part of gross sales or receipts. HELD: No. CTA affirmed RTC. RATIO: The Local Government Code of 1991 provides that gross sales or receipts include the total amount of money received, or its equivalent representing the contract price, compensation or service fee undiminished by costs or expenses and excluding discounts, sales returns, excise tax and VAT. The payment for the janitorial and messengerial services rendered by H Corp. and the janitorial cleaning materials used, included in the contract price/service fee paid

Respondents Contention: The assessment is oppressive/confiscatory and, therefore, violative of the right to due process of the taxpayer; b. The assessment is null and void because the basis of the assessment was not stated in the assessment; c. The assessment of the City of Makati failed to consider the taxes paid by the taxpayer: and d. The assessment failed to consider the direct costs representing reimbursements of salaries and contributions to the Government Agencies and taxes paid. TC - Dismissed Honest's Appeal for lack of merit. Gross sales or receipts', the same includes compensation or service fee, plus the amount charged or materials supplied with the services. ISSUE 1: WON Honesty should be taxed based on gross receipts. HELD: Yes. CTA Affirmed RTC. RATIO: The applicable provisions herein are Section 143(e) of the Local. Government Code (LGC) of 1991 in relation to its Section 151, and Sec. 3A.02(f) of the'Makati Revenue Code, covering contractor's tax. The pertinent portions of the provisions are quoted hereunder: SECTION 143. Tax on Business. - The municipality may impose taxes on the following businesses: XXX XXX XXX (e) On contractors and other independent contractors, in accordance with the gross receipts for the preceding calendar year XXX XXX ARTICLE III CITIES XXX

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by its clients, form part of the gross sales or receipts to be reported by the taxpayer. 39. PETRON V MAJOR TIANGCO Topic: Local Taxation Local Business Taxes Ponente: Tinga, J. Date: April 16, 2008 DOCTRINE: A local government unit is NOT empowered under the Local Government Code (the LGC) to impose business taxes on persons or entities engaged in the sale of petroleum products. QUICK FACTS: Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas. Through that depot, it has engaged in the selling of diesel fuels to vessels used in commercial fishing in and around Manila Bay. On 1 March 2002, Petron received a letter from the office of Navotas Mayor, respondent Toby Tiangco, wherein the corporation was assessed taxes "relative to the figures covering sale of diesel declared by your Navotas Terminal from 1997 to 2001." Petron refuses to pay the assessed tax. It argued that it was exempt from local business taxes in view of Art. 232(h) of the Implementing Rules (IRR) of the LGC, as well as a ruling of the Bureau of Local Government Finance of the Department of Finance dated 31 July 1995, the latter stating that sales of petroleum fuels are not subject to local taxation. FACTS: The letter-protest of Petron was denied by the Navotas Municipal Treasurer, in a letter dated 8 May 2002. This was followed by a letter of denial from Mayor Tobias M. Tiangco. Petron filed with the Malabon RTC a Complaint for Cancellation of Assessment for Deficiency Taxes with Prayer for the Issuance of a TRO and/or Preliminary Injunction. The TRO was not issued by the Malabon RTC upon manifestation of Mayor Tiangco, et al, that they would not proceed with the closure of Petrons Navotas bulk plant until after the RTC shall have decided the case on the merits. However, while the case was pending decision, the City of Navotas refused to issue a business permit to Petron, thus prompting Petron to file a Supplemental Complaint with Prayer for Preliminary Mandatory Injunction against the City of Navotas. RTC - dismissed Petrons complaint and ordered the payment of the assessed tax amount. Petron filed a motion for reconsideration but this was denied. Petron assailed the RTC Decision directly before the SC since the matter at hand involves pure questions of law. Particularly, the controversy hinges on the correct interpretation of Section 133(h) of the LGC, and the applicability of Article 232 (h) of the IRR. ISSUE: WON the City of Navotas, an LGU, has the power to impose a business tax on Petron, an entity engaged in the sale of petroleum products. HELD: NO. RTC decision reversed. RATIO: Section 133 of the LGC prescribes the limitations on the capacity of LGUs to exercise their taxing powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the Section mentions two kinds of taxes which cannot be imposed by local government units, namely: "excise taxes on articles enumerated under the NIRC, as amended;" and "taxes, fees or charges on petroleum products." Section 133(h) of the LGC reads as follows: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and Barangays shall not extend to the levy of

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the following: xxx (h) Excise taxes on articles enumerated under the NIRC, as amended, and taxes, fees or charges on petroleum products; Evidently, Section 133 prescribes the limitations on the capacity of LGUs to exercise their taxing powers otherwise granted to them under the LGC. Meanwhile, the power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Under the provision, a municipality is authorized to impose business taxes on a whole host of business activities. Nonetheless, Article 232 of the IRR defines with more particularity the capacity of a municipality to impose taxes on businesses. The enumeration that follows is generally a positive list of businesses which may be subjected to business taxes, and paragraph (h) of Article 232 does allow the imposition of local business taxes "on any business not otherwise specified in the preceding paragraphs which the sanggunian concerned may deem proper to tax," but subject to this important qualification, thus: "xxx provided further, that in line with existing national policy, any business engaged in the production, manufacture, refining, distribution or sale of oil, gasoline and other petroleum products shall not be subject to any local tax imposed on this article. The City of Navotas cites the SCs declaration in City Government of San Pablo v. Reyes that following the 1987 Constitution the rule thenceforth "in interpreting statutory provisions on municipal fiscal powers, doubts will have to be resolved in favor of municipal corporations." Such policy is also echoed in Section 5(a) of the LGC, which states that "any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit." But somewhat conversely, Section 5(b) then proceeds to assert that "in case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it, and liberally in favor of the taxpayer." And this latter qualification has to be respected as a constitutionally authorized limitation which Congress has seen fit to provide. Evidently, local fiscal autonomy should not necessarily translate into abject deference to the power of local government units to impose taxes. Congress has the constitutional authority to impose limitations on the power to tax of local government units, and Section 133 of the LGC is one such limitation. Indeed, the provision is the explicit statutory impediment to the enjoyment of absolute taxing power by LGUs, not to mention the reality that such power is a delegated power. Although a tax on a business is distinct from a tax on the article itself, however, such distinction is immaterial insofar as the latter part of Section 133(h) is concerned, for the phrase "taxes, fees or charges on petroleum products" does not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the provision. It would have been a different matter had Congress, in crafting Section 133(h), barred "excise taxes" or "direct taxes," or any category of taxes only, for then it would be understood that only such specified taxes on petroleum products could not be imposed under the prohibition. The absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum products, including business taxes, are prohibited by Section 133(h). Where the law does not distinguish, we should not distinguish. Why the special concern over petroleum products? In this age where unfortunately dependence on petroleum as fuel has yet no equally feasible alternative, the cost of petroleum products, though fully controlled by private enterprise, remains an area of public concern. There is an inevitable link between the fluctuation of oil prices and the prices of every

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other commodity. The reality, indeed, is oil is a political commodity. x x x "[T]he upswing and downswing of our economy materially depend on the oscillation of oil." "Fluctuations in the supply and price of oil products have a dramatic effect on economic development and public welfare." It can be reasonably presumed that if municipalities, cities and provinces were authorized to impose business taxes on manufacturers and retailers of petroleum products, the resulting losses to these enterprises would be passed on to the consumers, triggering the chain of increases that normally accompany the increase in oil prices. No similarly massive trigger effect would ensue upon the imposition of business taxes on other commodities, including those already subject to excise taxation under the NIRC. 40. BATANGAS CITY V PILIPINAS SHELL Topic: Local Taxing Authorities and Scope of Taxing Powers Ponente: Casanova, J. Date: 22 January 2009 DOCTRINE: (1) The exemption from the imposition of Taxes on Business on Petroleum Products under Section 133(h) of the LGC apply not only to the articles or products themselves, but also to businesses or transactions involving such products. (2) The requirement to obtain a mayors permit is regulatory in nature. Thus, fees therefor must be reasonable and commensurate with the cost of regulation, licensing of a business and the expenses incurred in the conduct of the necessary inspection or surveillance. QUICK FACTS: Pilipinas Shell was assessed in 2002 more than P4 Million in Mayors Permit Fees and more than P400 E2014: Arnel, Teph, Zoe, Azy, VJ, Marshall, Jayson, Shiree, Bern, Floyd, Rubb, Diega, Jessie, Macel, Rod, Bianca, Dotty, Raj, Bobby, Jasper, Leslie| 74 Petitioners Contention: PSPC argues that it is clearly exempted from local business taxes pursuant to Section 133(h) of the LGC. PSPC also argues that the Mayors Permit Fees charged by the City are exorbitant, confiscatory, arbitrary, unreasonable and not commensurate with the cost of issuing a license. Respondents Contention: Batangas City contends that the above provision is not an express limitation on the ppower of local government units to impose taxes on the business of manufacture and distribution of petroleum products. It cites Philippine Petroleum Corporation v. Municipality of Pillila, Rizal (198 SCRA 89), which provides that the tax on business is distinct from the tax from the article or product itself. The City further argued that it can legally impose the Mayors Permit fees. Million in Local Business Taxes. Pilipinas Shell argues that, being engagedin the business of petroleum products, it is exempt under the LGC from local business taxes. FACTS: Tax: Section 23 of the Batangas City Tax Code Tax on Business (based on gross sales); Mayors Permit Fee Facts: Pilipinas Shell Petroleum Corporation (PSPC) operates an oil refinery and depot in Tabingao, Batangas City. Prior to 2002, PSPC was paying only P98,964.71 for fees and other charges, which includes 1,180.34 as Mayors Permit Fee. But on 20 February of that year, the City sent a notice of assessment to PSPC demanding the payment of P92,373,720.50 and P312,656,253.04 as business taxes for its manufacturing and distribution operations, and P 4,299,851.00 as Mayors Permit Fees.

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PSPC filed its protest, which the City denied. Hence, PSPC filed a Petition for Review under Section 195 of the LGC before the RTC TC The RTC found the business taxes in the amount of P400 Million Pesos to be valid but declared that the Mayors Permit Fees in the amount of P4 Million were grossly excessiveand unreasonable considering the aforementioned business taxes. CTA, 2nd DIvision PSPC is not liable to local business taxes; The Mayors Permit Fees are excessive. ISSUE 1: WoN PSPC, being engaged in the manufacture and distribution of petroleum products, is exempt from Local Business Taxes under the LGC HELD: Yes RATIO: While local government units are empowered to impose taxes, such power is not all-encompassing. It is subject to limitations as explicitly stated in Section 5, Article X of the 1987 Constitution, viz: Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. Such common limitations on the taxing powers of local government units provided by congress is clearly found in Section 133 of the LGC, to wit: Section 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: (h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; There is no qualification as to what taxes, fees, or charges to be imposed on petroleum products. Ubi lex non distinguit nec nos distinguere debemos. So as long as the subject matter is petroleum products per se or even the activity or privilege related to petroleum products such as manufacturing or distribution, it is covered by the said limitation. Thus, it the limitation applies not only to the petroleum products per se but to any business or transaction dealing with petroleum products. The ruling of the Supreme Court in Pillila (supra) is not applicable because it was issued when what was in effect was the old Local Tax Code, which did not expressly provide for a common limitation on taxation of petroleum products. ISSUE 2: WoN the Mayors Permit Fees in the amount of P4 Million is excessive HELD: Yes RATIO: The Mayors Permit Fee is imposed in the exercise of police power primarily for purposes of regulation. Hence, it must be reasonable and commensurate with the cost of regulation, inspection and licensing a business or occupation, pursuant to Section 147 of the LGC, viz: SEC. 147. Fees and Charges. - The municipality may impose and collect such reasonable fees and charges on business and occupation and,

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except as reserved to the province in Section 139 of this Code, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing before any person may engage in such business or occupation, or practice such profession or calling. 41. LINDBERG PHILS v CITY OF MAKATI Topic: Local Taxation Local Taxing Authorities and Scope of Taxing Power Municipalities Local Business Taxes Ponente: Uy, J. (CTA En Banc) Date: Nov. 11, 2008 DOCTRINE: Under the BOT arrangement, Linberg advances the necessary capital by employing and paying for the services of a contractor which will build the power plant. These transactions, prior to the completion of the power plants and branch offices of petitioner, are considered as activities of doing business, which are necessarily taxable in its principal office, considering that all the documents and deals were arranged in its principal office in Makati City(by as much as thirty (30%)percent of petitioner's gross sales/receipts). QUICK FACTS: Linberg Philippines (Linberg) which finances the construction and operation of power plants under the Build-Operate-Transfer (BOT) agreement, questions the assessment of business tax on sale of services levied by the City Treasurer of Makati City on them for the years 2000, 2001, and 2002, which arose from Makati's reclassification of petitioner's business from a "holding or investment" company to a "contractor". FACTS: Tax: Local Tax on Sale of Services E2014: Arnel, Teph, Zoe, Azy, VJ, Marshall, Jayson, Shiree, Bern, Floyd, Rubb, Diega, Jessie, Macel, Rod, Bianca, Dotty, Raj, Bobby, Jasper, Leslie| 76

On March 7, 2003, Linberg received a Notice of Assessment for deficiency business taxes plus surcharges and interests covering the taxable years 2000, 2001 and 2002 in the aggregate amount of Php8,714,744.53. The alleged deficiency business taxes arose from respondent's reclassification of petitioner's business from a "holding or investment" company to a "contractor". Linberg filed a Letter Protest but this was denied by respondent City Treasurer. On July 3, 2003, Linberg assailed the denial of the protest before the RTC of Makati City. RTC dismissed the petition of Linberg for lack of merit. MR also denied. CTA On June 2007, CTA First Division partially granted the petition and reduced the deficiency taxes of Linberg to Php993,901.29. MR was filed but was denied by this division. Thus, this appeal. Linbergs Contention: (1) If petitioner is classified as a contractor, all if not substantially all, of the controlling or operative acts that constitute petitioner's sale of services, must be done in Makati City, whereas most of its power plants are located outside Makati; (2) it is not a contractor but a financing company because it does not perform services to its customers for a fee, as it merely finances the construction of the power plants for its customers through BOT arrangements. ISSUE: WON Linberg is a contractor thus liable to pay tax on sale of services? HELD: Yes, Linberg is a contractor and is liable to pay tax on sale of services. Decision of the CTA First Division affirmed.

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RATIO: Section 150 of the Local Government Code for purposes of determining the situs of tax in the instant case, states that: "Section 150. Situs of the Tax.-(a) xxx. In cases where there is no such branch or sales outlet in the city or municipality where the sale or transaction is made, the sale shall be duly recorded in the principal office and the taxes due shall accrue and shall be paid to such city or municipality." Although the power plants, which are subject of petitioner's contract of BOT, are situated at different localities, still the act of financing the construction and operation thereof, are considered as "doing business" which appears to have been performed at petitioner's principal office in Makati City. It is therefore clear that respondent City of Makati has jurisdiction to tax petitioner. (Besides, Linberg did not offer any proof that the plants acted as their branches.) The term "contractor" includes any person whether natural or juridical as long as the activity of such person consists essentially of the sale of services for a fee. In the case at bench, Linberg is definitely engaged in such sale of services as can be seen in its Amended Articles and under the BOT arrangement (which petitioner is engaged in), that there is not only the financing of the project that is involved, but also the construction, maintenance and operation thereof. Thus, petitioner is not only engaged in financing or investment activities, but also in the sale of services which readily classifies it as a contractor. Finally, upon discovery by the local government that Linberg misrepresented itself and caused a different tax rate to be applied to it, there is legal basis to impose surcharge and penalties. 42. CITY OF LAS PIAS V SEALED AIR (5) ILOILO BOTTLERS INC V CITY OF ILOILO, SUPRA Topic: Local business taxes Ponente: Cortes, J. Date: 19 August 1998 DOCTRINE: A bottling company located in one LGU may be taxed by another LGU for its other activities which it conducts (selling and distributing) in the other LGU. QUICK FACTS: Iloilo Bottlers, Inc. is engaged in the business of bottling softdrinks with a bottling plant situated at Barrio Ungca Municipality of Pavia, Iloilo, which is outside the jurisdiction of defendant City of Iloilo. On July 12,1972, Iloilo Bottlers, Inc. filed a complaint with CFI Iloilo for the recovery of the sum of P3,329.20, which amount allegedly constituted payments of municipal license taxes under Ordinance No. 5 series of 1960, as amended, that the company paid under protest. SC held that plaintiff is liable for the municipal taxes on the basis of its selling activities in Iloilo City (but not for its bottling operations which was conducted elsewhere). 43. MANILA TRADING & SUPPLY CO. V CITY OF MANILA Topic: Local Taxing Authorities; Municipalities; Local Business Tax Ponente: Date: November 9, 1923 DOCTRINE: The plaintiff, having accepted that, as part of the consideration of the lease of land belonging to the Philippine Islands, it shall be the owner of said land for purposes of taxation, and that it will pay all taxes on the land as they mature, then the Government could terminate the lease and oust the plaintiff from its possession upon failure to

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pay the taxes. The fact that the title of the land belongs to the State does not exempt it from tax when the Governor General particularly declared that it is no longer needed for public purposes and thereafter leased it out for commercial and business purposes. QUICK FACTS: Manila Trading leased a portion of land whose title belongs to the Philippine Islands. It now invokes that since the land is owned by the State, then it should be exempt from local taxation. FACTS: Manila Trading entered into a lease agreement over land whose title is in the government of the Philippine Islands. Such land has been declared by the Governor-General to be no longer needed for public purposes and shall hence be leased out for commercial and business purposes, with such lease to run for a period of ninety-nine years at a rental of 3 per cent per annum of the appraised value. It is conceded that the title to the land is in the government of the Philippine Islands, and that the plaintiff applied for, took and accepted, the lease in question under Act No. 1654 of the Philippine Commission. Section 4 of the Act provides: All lands leased under the provisions of the foregoing sections of this Act, and all improvements thereon, shall be subject to local taxation against the lessees, their heirs, executors, administrators, successors, or assigns, to the same extent as if such lessees, their heirs, executors, administrators, successors, or assigns, were the owners of both land and improvements. Manila Tradings Contention: It relies upon section 344 of the Administrative Code in invoking exemption, as follows: Property exempt from tax: (a) Property owned by the United States of America, the Government of the Philippine Islands, or by any province or municipality in the Philippine Islands. ISSUE: WON Manila Trading can be taxed for said land belonging to State. HELD: YES. RATIO: Section 4 of the Act above quoted expressly provides that all lands leased under leased under the provisions of the Act, and all improvements thereon, shall be subject to local taxation to the same extent as if such lessees, their heirs, executors, administrators, successors, or assigns, were the owners of both land and improvements. In other words, by the terms of the Act, and the lease itself, the plaintiff has stipulated that, for the purpose of taxation, it is the owner of both the land and improvements. Having signed and entered under the lease, the plaintiff is estopped to claim or assert that it is not liable for the taxes in question. This is further evidenced by the fact that the lease also recites that for any failure or neglect to pay the taxes as they mature, the lease shall forthwith cease and determine. In legal effect, the Government said to the plaintiff that it would lease it the land at a stipulated rental, but in addition thereto, and as part thereof, and as one of the considerations for such leasing, the plaintiff should further covenant and agree that, for the purpose of taxation, it is the owner of the land, and that it will pay all taxes on the land as they mature, and that for any failure or neglect to pay them, the Government could terminate the lease and oust the plaintiff from its possession. This plaintiff, having accepted the proposition, is bound by the terms and provisions of the lease and the covenants which it made in the lease. The judgment of the lower court is affirmed, without costs to either party.

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delivered partly in the City of Manila, partly in Pasay City, and partly in Nasugbu, Batangas. The City of Manila assessed and collected from Central under Municipal Ordinance 3420 imposing municipal tax on wholesale dealers and partly under Mun. Ord. 1925. Central is a dealer in sugar in the City of Manila. It has never been engaged in the wholesale business or in the retail. CFI Central is a manufacturer of sugar from sugar cane in its sugar central and that the sale of the sugar from its mills does not make it a dealer in sugar. It ordered City to refund the tax paid City appealed from this decision. Centrals contention It has never engaged in the wholesale business or in the retail. Citys contention Central is a dealer in sugar in the City. When it made sales to SMB for the manufacture of softdrinks, said sales were in retail; that as the sales were made in the City of Manila because the contracts of the sale were apparently made in Manila, the letter offering the sugar for sale having been written from plaintiff's office in Soriano Building, Manila, plaintiff-appellee is taxable not as a manufacturer of sugar, but as a dealer of sugar in the City. ISSUE: WON Central is liable for the municipal tax on wholesale dealers as a dealer in the City. HELD: NO. Central is not a dealer. RATIO: 1. Dealer, definition. a. "a person who makes a business of buying and selling goods, especially as distinguished from a manufacturer, without altering their condition" (Webster's International Dictionary) b. It has also been held that a dealer as used in a law taxing wholesale liquor dealers "cannot be construed to

44. CENTRAL AZUCARERA DE DON PEDRO V CITY OF MANILA Topic: Local Business Taxes Ponente: Labrador Date: September 29 1955 DOCTRINE: The mere fact that it sells the sugar it manufactures does not thereby make it a dealer in sugar. The right to manufacture necessarily implies the right to sell the manufactured product at the manufactory. One who thus sells the liquors mentioned in the statute, manufactured by him, is not a "wholesaler' of liquors. The manufacturer becomes a dealer IF he carries on the business of selling goods or his products manufactured by him at a store or warehouse apart from his own shop or manufactory. QUICK FACTS: Central is engaged in milling and manufacturing sugar from sugar cane. It agreed to sell sugar to Kim Kee, Chua Yu & Co., and San Miguel and thereafter made deliveries partly in the Manila, partly in Pasay , and partly Batangas. The City of Manila assessed and collected from Central municipal tax on wholesale dealers. FACTS: Central is engaged in milling and manufacturing sugar from sugar cane, for which purpose it operates and maintains a sugar mill where sugar cane is processed, warehouses where manufactured sugar is stored, a main office in Manila and a branch office in Nasugbu, Batangas. It agreed to sell sugar to Kim Kee, Chua Yu & Co., Inc., and thereafter made deliveries. It also agreed to sell sugar to the San Miguel Brewery and also made deliveries. The sugar sold and delivered was taken from warehouses Central and was

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mean a manufacturer who sells articles manufactured by him; . . .. A manufacturer or whisky or other spirituous liquors, who sells from his place of manufacture in unbroken packages, or as a manufacturer, is not a wholesale dealer in whisky. A dealer is a middleman between the producer and the consumer. A dealer, in the popular acceptation or sense of the word, is one who buys to sell again. c. In the case at bar, Central receives sugarcane which it mills and converts into sugar. In making the sale of the sugar it has manufactured, it may be liable for the manufacturer's tax, or the producer's tax. 2. The mere fact that it sells the sugar it manufactures does not thereby make it a dealer in sugar. a. The right to manufacture necessarily implies the right to sell the manufactured product at the manufactory. One who thus sells the liquors mentioned in the statute, manufactured by him, is not a "wholesaler' of liquors. b. The provision that "no person paying a manufacturer's tax on brewed or malt liquors under this Act shall be liable to pay a wholesale dealer's tax on the same" neither enlarges nor restricts the right of the manufacturer to sell his product. The statute, without this language, would give him the same right of sale that he has with it, vix., the right to sell his product at his brewery. The manufacturer is entitled to keep his goods in store at the place of manufacture for the purpose of sale when receiving orders, and in so doing is not a "wholesaler," 3. The manufacturer becomes a dealer IF he carries on the business of selling goods or his products manufactured by him at a store or warehouse apart from his own shop or manufactory. a. In the case at bar, Central did not carry on the business of selling sugar at stores or at its warehouses. It entered into the contracts of sale at its central office in Manila and made deliveries of the sugar sold from its warehouses. It does not appear that the plaintiff keeps stores at its warehouses and engages in selling sugar in said stores. Neither does it appear that any one who desires to purchase sugar from it may go to the warehouses and there purchase sugar. All that it does was to sell the sugar it manufactured; it does not open stores for the sale of such sugar. SC upheld the judgement appealed from. 45. CALTEX PHIL V CITY OF MANILA Topic: Local Government Taxes Ponente: Makalintal, J. Date: 28 July 1969 DOCTRINE: The term dealer refers to a person who makes a business of buying and selling goods, especially as distinguished from a manufacturer a middleman between the producer and the consumer one who buys to sell again (who) stands between the producer and consumer, and depends for his profit not on the labor he bestows on his commodities, but on the skill and foresight with which he watches the markets. (US Jurisprudence cited in Central Azucarera case) QUICK FACTS: Caltex was assessed and paid quarterly tax on wholesale dealers. Caltex filed civil case demanding return of these amounts paid arguing that it is not a dealer as defined under Ordinance No. 3420 as amended. Both CFIManila and SC ruled IFO Caltex. FACTS: Tax: Quarterly tax on wholesale dealers in general merchandise based on their quarterly gross sales or receipts during the preceding quarter, which was imposed by Ordinance No. 3420 as amended

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Facts: Plaintiff Caltex maintains a petroleum refinery in Bauan, Batangas, several warehouses in Pandacan, Manila, where manufactured petroleum products are stored, and a main office at 540 Padre Faura, Ermita, Manila. In the past plaintiff used to sell its finished products directly from the Pandacan depot, where deliveries were made simultaneously with the sales. But beginning January 15, 1958 plaintiff adopted a completely revised merchandising system. Since then it has entirely disallowed sales of its products from its warehouses and adopted a new selling procedure whereby a customer may place his order only at plaintiffs main office at Padre Faura, Manila. The sale is then invoiced in the said office, after which the order is teletyped to the Pandacan depot, where actual delivery is made. In other words, the Pandacan depot has ceased to be a selling center; it has simply become a storage site and conveniently utilized as the delivery point of the petroleum products earlier sold. Plaintiff Caltexs Contention: With this newly-adopted operational set-up, plaintiff contends that it may not be considered a dealer anymore within the meaning of Ordinance No. 3420 as amended. Plaintiffs insistence on its non-liability for the payment of the wholesale dealers tax is anchored on the premise that it is principally a manufacturer, not a dealer. In support of its argument plaintiff falls back on previous rulings of this Court in similar cases 13. Defendany City of Manilas Contention: Plaintiff revised its merchandising procedure in order to come within the scope of the Central Azucarera de San Pedro doctrine, thereby availing of the advantageous consequences thereof, defendants have not effectively shown why the operational set-up followed by plaintiff should be treated differently from that involved in the former case. TC CFI-Manila ruled IFO Caltex. Ordered return of taxes assessed and collected by defendant City of Manila. ISSUE: WoN defendant City of Manila should reimburse Caltex for quarterly tax on wholesale dealers in general merchandise it paid (To answer this question, it is just as important to determine WoN Caltex should not be considered a dealer anymore within the meaning of Ordinance No. 3420 as amended) HELD: Yes. SC affirmed CFI-Manila. Caltex declared not a dealer anymore within the meaning of the Ordinance. City of Manila ordered to return taxes assessed and collected. RATIO: The business set-up of the Central Azucarera de San Pedro (case cited by plaintiff) and that of herein plaintiff in respect of the point at issue are almost identical. In both cases sales transactions are entered into and perfected at the respective main offices, where orders are received and approved before delivery orders are sent to the warehouses, where in turn actual deliveries are made. It is common policy for both not to permit warehouse sales; nor do they maintain any other separate stores where they may sell their products independently from their main offices. Undoubtedly herein plaintiff is not a dealer under the foregoing definition (see doctrine), nor does it become one simply because it sells the products it manufactures, since the right to manufacture implies the right to sell the manufactured products. The exception recognized by this Court in the Central Azucarera case is if the manufacturer carries on the business of selling goods or his products manufactured by him at store or warehouse apart from his own shop or manufactory.

In Central Azucarera Don Pedro vs. City of Manila, 97 Phil. 627, plaintiff sought recovery of a certain sum collected from it by defendants under the authority also of Ordinance No. 3420 as amended, the same ordinance involved in the present case. Although plaintiff there admittedly sold the sugar that it manufactured, this Court did not consider it a dealer.
13

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The change adopted by plaintiff in its merchandising procedure is not as insignificant as defendants wish to make it appear. We perceive no relevance in the place where the warehouse utilized as storage by the manufacturer is situated whether at its manufactory or at some other site in the case of appellee, whether at its plant in Bauan, Batangas, or in Manila. In either alternative, delivery to customers must necessarily be made at the warehouse, and that fact is immaterial to the question of whether or not the manufacturer should be considered as a dealer. But there is an appreciable difference between a situation in which the warehouse, situated apart from the manufactory, is utilized at the same time as a business store where sales are actually made to whoever may come to buy, and a situation where the sales transactions are entered into in the main office and the warehouse is used only as a convenient site where to make the corresponding deliveries. 46. CITY OF MANILA V MANILA REMNANT CO. Topic: Local Business Taxes Ponente: Montemayor, J. Date: January 30, 1957 DOCTRINE: License taxes, through a municipal ordinance, may be imposed on retail sales QUICK FACTS: Manila Remnant Co. failed to pay license taxes for retail sales. It argued that the sale was wholesale hence, non-taxable. It argued that the quantity of the goods sold determines whether the sale is wholesale or retail. SC ruled ifo City of Manila, holding that it is the use to which the goods sold is put by the buyer which is the basis for the determination of the kind of sale. FACTS: Tax: License taxes provided for retail sales as provided for in a municipal ordinance Facts: On July 15, 1953, the City of Manila, filed a complaint in CFI Manila to collect from the Manila Remnant Co., Inc., a corporation engaged in the importance of textiles and remnants for resale to the public both on wholesale and retail, the sum of P8,709, with interest, which amount is the total accumulated license taxes provided for in a municipal ordinance which defendant failed to pay for retail sales made from 1946 to 1950, including surcharge. There is no dispute about the amount of the sale involved during the period aforementioned, or as to the amount of taxes due if the sales involved were retail, instead of wholesale. CFI City of Manila won. It is the use to which the buyer puts the goods bought that determines the kind of sale. CA N/A. Direct appeal to SC. ISSUE: WON the sales of textiles made by Manila Remnant were retail, hence, taxable HELD: YES. SC affirmed CFI. RATIO: It should not be too difficult to determine the nature of a sale if we consider the business of the buyer, regardless of the bulk or volume of the sale. A sale or fix or a dozen bolts (piezas) of cloth to a retail merchant engaged in the sale of cloth by the yard or meter should be consider as wholesale; and a sale even of dozens of the bolts or hundreds of kilos of cloth or textiles to tailor, shirt factories or dressmaking establishments, should be regarded as retail for the reason that said textiles are consumed by said buyers in their business of converting the cloth into finished suits, dresses, shirts, etc., using in the conversion and manufacture not only the original cloth, but also thread, buttoms, metal hooks, zippers, trimmings, decoration, etc., resulting in a

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product for sale, one entirely different from the original article purchased. (15) ERICSSON TELECOM V CITY OF PASIG, SUPRA 47. PHIL. MATCH CO. V CEBU CITY Topic: Tax Situs Ponente: Aquino, J Date: 18 January 1978 DOCTRINE: 1. 1. Situs of Taxation place of sale 2. 2. The taxing power of cities, municipalities and municipal districts may be used (1) "upon any person engaged in any occupation or business, or exercising any privilege" therein; (2) for services rendered by those political subdivisions or rendered in connection with any business, profession or occupation being conducted therein, and (3) to levy, for public purposes, just and uniform taxes, licenses or fees QUICK FACTS: Philippine Match Co. Ltd., with principal office in Manila, questioned the legality of the tax collected by the City of Cebu on sales of matches stored by the company in Cebu City but delivered to customers outside the city. FACTS: Tax: Ordinance No. 279 of Cebu City - Quarterly tax on gross sales or receipts of merchants, dealers, importers and manufacturers of any commodity doing business" in Cebu City. It imposes a sales tax of one percent (1%) on the gross sales, receipts or value of commodities sold, bartered, 12 August 1963 Phil Match filed the complaint praying that the ordinance be declared void insofar as it taxed the deliveries of matches outside of Cebu City, that the city be ordered to refund to the company the said sum of P12,844.61 as excess sales tax paid, and that the city treasurer be ordered to pay damages. exchanged or manufactured in the city in excess of P2,000 a quarter. Philippine Match Co. Ltd., with principal office in Manila, engaged in the manufacture of matches. Its factory is located at Punta, Sta. Ana, Manila. It ships cases or cartons of matches from Manila to its branch office in Cebu City for storage, sale and distribution within the territories and districts under its Cebu branch or the whole VisayasMindanao region. Cebu City itself is just one of the eleven districts under the company's Cebu City branch office. On 10 May 1960, the city passed Ordinance No.279. Section 9 of which provided that, for the purpose of the tax, all deliveries of goods or commodities stored in Cebu City, or if not stored are sold in that city shall be considered as sales in the city and shall be taxable Phil Match paid under protest to the city t the sum of P12,844.61 as one percent sales tax on those three classes of out-of-town deliveries of matches for the second quarter of 1961 to the second quarter of 1963. 15 April 961- Phil Match wrote to the city treasurer sought the refund of the sales tax paid for out-of-town deliveries of matches. It invoked Shell Company of the Philippines, Ltd. vs. Municipality of Sipocot, Camarines Sur, 105 Phil. 1263. In that case sales of oil and petroleum products effected outside the territorial limits of Sipocot, were held not to be subject to the tax imposed by an ordinance of that municipality. City Treasurer denied.

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Phil Match did not question the tax on the matches of matches consummated in Cebu City, meaning matches sold and delivered within the city. It assailed the legality of the tax which the city treasurer collected on out-of- town deliveries of matches, to wit: (1) sales of matches booked and paid for in Cebu City but shipped directly to customers outside of the city; (2) transfers of matches to newsmen assigned to different agencies outside of the city and (3) shipments of matches to provincial customers pursuant to salesmen's instructions. TC 1. Sustained the tax on the sales of matches booked and paid for in Cebu City although the matches were shipped directly to customers outside of the city. The lower court held that the said sales were consummated in Cebu City because delivery to the carrier in the city is deemed to be a delivery to the customers outside of the city. 2. Invalidated the tax on transfers of matches to salesmen assigned to different agencies outside of the city and on shipments of matches to provincial customers pursuant to the instructions of the newsmen It ordered the defendants to refund to the plaintiff the sum of P8,923.55 as taxes paid out the said out-of-town deliveries with legal rate of interest from the respective dates of payment. Phil Match appealed TC's decision #1. ISSUE: WON the City of Cebu can tax sales of matches which were perfected and paid for in Cebu City but were delivered to customers outside the city? HELD: Yes RATIO: The city can validly tax the sales of matches to customers outside of the city as long as the orders were booked and paid for in the companys branch office in the city. Those matches can be regarded as sold in the city, as contemplated in the ordinance, because the matches were delivered to the carrier in Cebu City. Generally, delivery to the carrier is delivery to the buyer (Article 1523, Civil Code). The sales in this case were in the city and the matches sold were stored in the city. The fact that the matches were delivered to customers, whose places of business were outside of the city, would not place those sales beyond the city's taxing power. Those sales formed part of the merchandising business being assigned on by the company in the city. In essence, they are the same as sales of matches fully consummated in the city. A different interpretation w o u l d d e f e a t t h e t a x ordinance in question or encourage tax evasion t h r o u g h t h e s i m p l e e x p e d i e n t o f arranging for the delivery of the matches at the outskirts of the city though the purchases were effected andpaid for in the companys branch office in the city. The municipal board of the city is empowered to provide for the levy and collection of taxes for general and special purposes in accordance with law. 48. ESTANISLAO V COSTALES Topic: Local Taxation; Local Taxing Authorities and Scope of Taxing Power; Cities Ponente: Gancayco Date: May 8, 1991 DOCTRINE: Under the Local Tax Code, a city may only impose a percentage tax on both essential and non-essential goods, and not impose a graduated tax on the same. QUICK FACTS: Zamboanga City enacted an Ordinance imposing P0.01 tax per liter of softdrinks produced, manufactured, and/or bottled within the territorial jurisdiction of the City of Zamboanga. The Secretary of Finance

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suspended its effectivity. The RTC, on the other hand, upheld its validity. FACTS: Tax: Ordinance No. 44 of Zamboanga City, dated January 13, 1982 imposing a P0.01 tax per liter of softdrinks produced, manufactured, and/or bottled within the territorial jurisdiction of the City of Zamboanga Upon enactment of said Ordinance, the Sanggunian Panlungsod sent a copy of the same to the then Minister of Finance for review pursuant to the Local Tax Code (PD 231). The Minister suspended the effectivity of the Ordinance for being violative of PD 231. The City appealed the decision with the RTC. The RTC found that the tax levied is not one among those that may be levied by the Sanggunian under the Local Tax Code but nonetheless upheld it because of the Ministers failure to take appropriate action within 120 days from receipt of the Ordinance. The Minister, now the Secretary, appealed. ISSUE: WON the Ordinance is valid HELD: No. RATIO: A. Sec. 23 of the Local Tax Code provides that in lieu of the graduated tax rates provided under Sec. 19 of the same Code (applying to municipalities), cities may impose a percentage tax on the sales of non-essential commodities at the rate of max 2% and on the sales of essential commodities at the rate of max 1%. A city may not impose both the graduated fixed tax and the percentage tax on the same subject. B. The Ordinance in issue imposes P0.01 per liter of softdrinks produced, manufactured, and/or bottled within the territorial jurisdiction of the City of Zamboanga. The authority of the City is limited to the imposition of a percentage tax on the gross sales or receipts of said product which, being nonessential, shall be at the rate of not exceeding 2% of the gross sales or receipts of the softdrinks for the preceding calendar year. The tax being imposed under said Ordinance is based on the output or production and not on the gross sales or receipts as authorized under the Local Tax Code. C. Zamboanga City: Pepsi-Cola Bottling Company v. Municipality of Tanauan, Leyte ruled in favor of a Municipal Ordinance No. 27 enacted by the Municipality of Tanauan, Leyte imposing a tax of P0.01 for every gallon of softdrinks produced in the municipality. D. SC: The case was decided under the Local Autonomy Act (which gave cities and municipalities the right to tax everything except those mentioned), which was superseded by the Local Tax Code. E. On the issue of the Secretary of Finances inaction, hence making the Ordinance valid: Even if the Secretary of Finance failed to review or act on the Ordinance within the prescribed period of 120 days it does not follow as a legal consequence thereof that an otherwise invalid ordinance is thereby validated. The Secretary may still suspend the effectivity or revoke the same. 49. QUEZON CITY V ABS-CBN Topic: Tax Exemption Privileges Ponente: Reyes, RT., J. Date: October 6, 2008 DOCTRINE: Claims for tax exemption must be based on language in law too plain to be mistaken. It cannot be made out of inference or implication. For the "in lieu of all taxes"

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provision to apply, the exemption should clearly indicate what kind of taxes are exempted and whether it includes both local, whether municipal, city or provincial, and national tax. QUICK FACTS: ABS-CBN is asking for refund of local franchise tax paid under protest in view of the in lieu of all other taxes proviso in its franchise. FACTS: Tax: Sec31, Art 13 of QC Revenue Code of 1993 imposing a franchise tax on businesses operating within its jurisdiction at the rate of: (1) 10% of 1% for 1993-1994; (2) 20% of 1% for 1995; and (3) 30% of 1% for 1996 onwards of gross receipts and sales. Facts: ABS-CBN was granted a franchise to install and operate radio and television broadcasting stations under RA 7966 which provides that it shall pay a franchise tax equivalent to 3% of all gross receiptsin lieu of all taxes on this franchise or earnings14 In view of this, ABS-CBN paid under protest the local franchise tax imposed by the QC government from 1995-1997 amounting to P19.9 million.
Section 8. Tax Provisions. - The grantee, its successors or assigns, shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise, as other persons or corporations are now hereafter may be required by law to pay. In addition thereto, the grantee, its successors or assigns, shall pay a franchise tax equivalent to three percent (3%) of all gross receipts of the radio/television business transacted under this franchise by the grantee, its successors or assigns, and the said percentage tax shall be in lieu of all taxes on this franchise or earnings thereof; Provided that the grantee, its successors or assigns shall continue to be liable for income taxes under Title II of the National Internal Revenue Code pursuant to Section 2 of Executive No. 72 unless the latter enactment is amended or repealed, in which case the amendment or repeal shall be applicable thereto.
14

In 1997, ABS-CBN filed several written claim for refund for local franchise tax paid to QC for the periods 1996-1997 amounting to P14.2 million (not stated why they are initially just claiming for P14.2 million refund). When the QC government filed to respond to its claim, ABS-CBN filed a complaint before the QC RTC on Jun1997 seeking for the declaration of nullity of the imposition of local franchise tax for being unconstitutional and asked for refund of P19.9 million. QCs Contentions: 1. The "in lieu of all taxes" provision in RA No. 9766 could not have been intended to prevail over a constitutional mandate which ensures the viability and self-sufficiency of LGUs. 2. Taxes imposed by LGUs are distinct from taxes imposed by the national government since under the Constitution, it accrues exclusively to the LGU. 3. Exemption under RA 7966 was withdrawn by Congress when LGC was passed in view of Sec 193 of the Code. 15 ABS-CBNs Contention: RA 7966 clearly provides that ABSCBN shall pay a franchise tax x x x in lieu of all taxes including local franchise tax. TC IFO ABS-CBN holding that RA 7966 absolutely excused the company from payment of local franchise tax imposed under the QC Ordinance. 1. Special over general law. Further, law granting a franchise is a special while a local tax code is a general law and whenever there is a conflict between two laws, one special
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or -controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non-stock and nonprofit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.
15

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and particular and the other general, the special law must be taken as intended to constitute an exception to the general act. [Prov. Of Misamis Oriental v Cagayan Electric Power and Light Co (CEPALCO)]. 2. In case of conflict, later law repeals earlier law . Since the legislative fanchise of ABS-CBN was granted years after the effectivity of the LGC, Sec 8 of RA 7966 is an exception since the legislature ought to be presumed to have enacted it with knowledge of the existence of LGC. 3. Non-impairment of contracts . Imposition of local franchise tax would impair ABS-CBNs contract with the government as its charter is in the nature of a private contract between the company and the government. CA Dismissed QC governments appeal holding that the issues raised were purely legal questions cognizable only by the SC. ISSUE: WoN the phrase "in lieu of all taxes" indicated in ABSCBNs franchise exempts it from the payment of the local franchise tax imposed by the QC government? HELD: No. SC Reversed TC and ruled IFO QC government as the in lieu of all taxes clause in its franchise failed to specifiy the taxes it sought to be exempted from nor particularize the jurisdiction from which the taxing power is withheld. Also, the clause has become functus officio as ABS-CBN is now subject to VAT and not franchise tax. RATIO: The right to exemption from local franchise tax must be clearly established and cannot be made out of inference or implications but must be laid beyond reasonable doubt. For the "in lieu of all taxes" provision to apply, the exemption should clearly indicate what kind of taxes are exempted and whether it includes both local, whether municipal, city or provincial, and national tax. Statutes granting tax exemptions are construed stricissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of tax exemption must be clearly shown and based on language in law too plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the exception. NOTES: The inherent power to tax of Congress against the delegated power to tax of LGUs The taxing power by the local government 16 is limited in the sense that Congress can enact legislation granting exemptions. [City Govt of QC v Bayan Telecom] The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely be virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Congress may provide which, however, must be consistent with the basic policy of local autonomy. [ Mactan Cebu International Airport Authority] The grant of taxing powers to local government units under the Constitution and the LGC does not affect the
16

Section 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at the rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized within its territorial jurisdiction. x x x xxxx Section 151. Scope of Taxing Powers. - Except as otherwise provided in this Code, the city may levy the taxes, fees and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and component cities shall accrue to them and distributed in accordance with the provisions of this Code. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes.

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power of Congress to grant exemptions to certain persons, pursuant to a declared national policy. The legal effect of the constitutional grant to local governments simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations. [PLDT v City of Davao] (29) PLDT V CITY OF DAVAO, SUPRA DOCTRINE: Tax exemptions granted by Congress must be made expressly in a statute in a clear language . Otherwise, the rule of strict construction of laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing powers shall be applied. ISSUE: WoN RA7925, a later law, vaildly grants PLDT exemption from local franchise tax? HELD: No. SC Affirmed TC and ruled IFO Davao City holding RA 7925 does not clearly provide PLDT with exemption from local franchise tax. RATIO: Tax exemptions must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. (3) NPC V CITY OF CABANATUAN, SUPRA Topic: Tax Exemption QUICK FACTS: NPC refused to pay franchise tax assessed by the City contending that being a government instrumentality, as well as a non-profit organization, it is exempted from all taxes and duties withdrawal of exemptions under LGC. ISSUE: WON NPC is exempt. HELD: No. RATIO: As a rule, tax exemptions are construed strongly against the claimant. Exemptions must be shown to exist clearly and categorically, and supported by clear legal provisions. In the case at bar, the petitioner's sole refuge is section 13 of Rep. Act No. 6395 exempting from, among others, "all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities." However, section 193 of the LGC withdrew, subject to limited exceptions, the sweeping tax privileges previously enjoyed by private and public corporations. Contrary to the contention of petitioner, section 193 of the LGC is an express, albeit general, repeal of all statutes granting tax exemptions from local taxes. It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius. Not being a local water district, a cooperative registered under R.A. No. 6938, or a non-stock and non-profit hospital or educational institution, petitioner clearly does not belong to the exception. It is therefore incumbent upon the petitioner to point to some provisions of the LGC that expressly grant it exemption from local taxes. But this would be an exercise in futility. Section 137 of the LGC clearly states that the LGUs can impose franchise tax "notwithstanding any exemption granted by any law or other special law." This particular provision of the LGC does not admit any exception. notwithstanding

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(31) PLDT V PROVINCE OF LAGUNA, SUPRA Topic: Local Taxation Tax Exemption Privileges Grant Ponente: Garcia, J. Date: August 16, 2005 DOCTRINE: Laws granting tax exemption are strictly construed. Doubts in interpreting municipal taxing powers are resolved in favor of the municipal corporation. ISSUE: WoN Section 23 of RA 7925 exempted PLDT from paying the local franchise tax imposed by Laguna. HELD: No. Affirmed TC. RATIO: Exemptions from taxation are highly disfavored, so much so that they may almost be said to be odious to the law. The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted strictly against the taxpayer and liberally in favor of the taxing authority. There is nothing in the language of Section 23 nor in the proceedings of both the House of Representatives and the Senate in enacting RA 7925 which shows that it contemplates the grant of tax exemptions to all telecommunications entities, including those whose exemptions had been withdrawn by the LGC. (2) MACTAN CEBU MARCOS, SUPRA Topic: Tax Exemptions QUICK FACTS: MCIAA contends that it enjoyed the privilege of exemption from payment of realty taxes in accordance with its Charter. It further asserts as reason the fact that it is INTL AIRPORT AUTHORITY V an instrumentality of the government performing governmental functions, citing Section 133 of LGC which puts limitations on the taxing powers of local government units. ISSUE: WON MCIAA is exempt. DECISION: No. RATIO: A general rule under Sec. 133, the taxing powers of local government units cannot extend to the levy of, inter alia, taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person, as provided in item (a) of the first paragraph of Section 234. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the

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exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Sections 232 and 234. Also, reliance on Basco vs. Philippine Amusement and Gaming Corporation is unavailing since it was decided before the effectivity of the LGC. Besides, nothing can prevent Congress from decreeing that even instrumentalities or agencies of the Government performing governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom. MINOR ISSUE: WON MCIAA is a taxable person. YES. The petitioner cannot claim that it was never a taxable person under its Charter. It was only exempted from the payment of real property taxes. The grant of the privilege only in respect of this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except real property tax. (4) CITY OF SAN PABLO V REYES, SUPRA Topic: Tax Exemption and Privileges - Withdrawal Implied Repeal. there was an implied repeal by Republic Act No. 7160 of the MERALCO franchise insofar as the latter imposes a 2% tax "in lieu of all taxes and assessments of whatever nature" Exemption is withdrawn. Section 137 is explicit in its authorization of the province to impose franchise tax "notwithstanding any exemption granted by any law or other special law" is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws. Sec. 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise provided in this Code, tax exemptions or incentives granted to or presently enjoyed by all persons whether natural or juridical, including government-owned or controlled corporations except 1) local water districts, 2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities. Sect 137 and 193 together allows local government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts realized within its territorial jurisdiction It is true that the phrase "in lieu of all taxes" found in special franchises has been held in several cases to exempt the franchise holder from payment of tax on its corporate franchise imposed of the Internal Revenue Code, as the charter is in the nature of a private contract and the exemption is part of the inducement for the acceptance of the franchise, and that the imposition of another franchise tax by the local authority would constitute an impairment of

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contract between the government and the corporation. BUT these "magic words" contained in the phrase "shall be in lieu of all taxes'' have to give way to the peremptory language of the LGC specifically providing for the withdrawal of such exemption privileges (28) MANILA ELECTRIC COMPANY V PROVINCE OF LAGUNA, SUPRA 50. MOBIL PHIL. V CITY TREASURER OF MAKATI Topic: Local Taxation Collection of Local Taxes Accrual Ponente: Quisumbing Date: July 14, 2005 DOCTRINE: Business Tax vis-a-vis Income Tax Business taxes imposed in the exercise of police power for regulatory purposes are paid for the privilege of carrying on a business in the year the tax was paid. It is paid at the beginning of the year as a fee to allow the business to operate for the rest of the year. It is deemed a prerequisite to the conduct of business. Income tax, on the other hand, is a tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a persons income, emoluments, profits and the like. It is tax on income, whether net or gross realized in one taxable year. It is due on or before the 15th day of the 4th month following the close of the taxpayers taxable year and is generally regarded as an excise tax, levied upon the right of a person or entity to receive income or profits. QUICK FACTS: Makati City assessed Mobil for business taxes when Mobil decided to transfer its principal place of business from Makati to Pasig. FACTS:

Tax: Business Tax Mobil Philippines filed an application with the City Treasurer of Makati for the retirement of its business in Makati as it moved its principal place of business to Pasig City. Mobil declared its gross sales/receipts for the yr 1997 (453M) and Jan-Aug 1998 (267M). The OIC of the License Division assessed almost 1.9M as business taxes. Mobil paid the amount under protest. Mobil filed a claim for refund but was denied on the ground that Mobil was merely transferring and not retiring its business, and that the gross sales realized while Mobil still maintained office in Makati from January 1 to August 31, 1998 should be taxed in the City of Makati. Mobil filed a petition with RTC of Pasig seeking the refund of business taxes erroneously collected by the City of Makati. Mobils Contention: The 1997 gross sales/revenue is merely the basis for the amount of business taxes due for the privilege of carrying on a business in the year when the tax was paid. Makati Citys Contention: Since local taxes, which include business taxes, are paid either within the first twenty days of January of each year or of each subsequent quarter, as the case may be, what the taxpayer actually pays during the recorded calendar year is actually its business tax for the preceding year. RTC IFO Makati City. In summary, the pertinent law provides that a person or entity doing business in the Municipality shall be subject to business tax. The tax shall be fixed by the quarter. The initial tax for the quarter in which a business starts to operate shall be two and one-half percent (2%) of one percent (1%) of its capital investment. Thereafter, the tax shall be computed based on the gross sales or receipts of the preceding quarter. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross sales or receipts

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for the preceding calendar year. That tax shall accrue on the first day of January of each year and payment shall be made within the first 20 days of January or of each subsequent quarter as the case may be. Considering therefore that the business tax accrues only on the first day of January as provided in Sec. 3A.07 and becomes payable within the first 20 days thereof or of each subsequent quarter, the payments made by Mobil in the year 1998 are therefore payments for the business tax for 1997 which accrued in January of 1998 and became payable within the first 20 days of January or of each subsequent quarter. Thus, upon retirement in August 1998, the taxes for said year which should accrue in January 1999 [become] immediately payable before the application for retirement can be approved (Ibid, (g), Sec. 3A.08). The assessment of the Chief of the License Division of Makati is therefore with legal basis and does not constitute double taxation. ISSUE: WoN the payments made by Mobil in 1998 are payments for business tax incurred in 1997 which only accrued in Jan 1998. HELD: NO. Also, Mobil is not liable for business taxes based on its gross income/revenue for January to August 1998. RATIO: Under the Makati Revenue Code 17, it appears that the business tax, like income tax, is computed based on the
Section 3A.04 of the Makati City Revenue Code states: Sec.3A.04. Computation of tax for newly-started business. In the case of newly-started business under Sec. 3A.02, (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), and (m) above, the tax shall be fixed by the quarter. The initial tax of the quarter in which the business starts to operate shall be two and one half percent (2 %) of one percent (1%) of the capital investment. In the succeeding quarter or quarters, in cases where the business opens before the last quarter of the year, the tax shall be based on the gross sales or receipt for the preceding quarter at one-half ( ) of the rates fixed therefor by the pertinent schedule in Section 3A.02, (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), and (m).
17

previous years figures. This is the reason for the confusion. A newly-started business is already liable for business taxes (i.e. license fees) at the start of the quarter when it commences operations. In computing the amount of tax due for the first quarter of operations, the business capital investment is used as the basis. For the subsequent quarters of the first year, the tax is based on the gross sales/receipts for the previous quarter. In the following year(s), the business is then taxed based on the gross sales or receipts of the previous year. The business taxes paid in the year 1998 is for the privilege of engaging in business for the same year, and not for having engaged in business for 1997. Based on Sec. 3A.11 par.(g) 18, on the year an establishment retires or terminates its business within the municipality, it would be required to pay the difference in the amount if the tax collected, based on the previous years gross sales or receipts, is less than the actual tax due based on the current years gross sales or receipts. For the year 1998, Mobil paid a total of P2,262,122.48 to the City Treasurer of Makati as business taxes for the year 1998. The amount of tax as computed based on Mobils gross sales for 1998 is only P1,331,638.84. Since the amount paid is
In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross sales or receipts for the preceding calendar year, or any fraction thereof as provided in the same pertinent schedules. 18 Sec. 3A.11 par. (g) which states: . . . (g) Retirement of business. . . . For purposes thereof, termination shall mean that business operation are stopped completely. . . . (2) If it is found that the retirement or termination of the business is legitimate, [a]nd the tax due therefrom be less than the tax due for the current year based on the gross sales or receipts, the difference in the amount of the tax shall be paid before the business is considered officially retired or terminated.

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more than the amount computed based on Mobils actual gross sales for 1998, Mobil upon its retirement is not liable for additional taxes to the City of Makati. Thus, we find that the Makati City erroneously treated the assessment and collection of business tax as if it were income tax, by rendering an additional assessment of P1,331,638.84 for the revenue generated for the year 1998. 51. HSBC V RAFFERTY Topic: Local Taxation Collection Government Remedies - Lien Ponente: Malcolm, J. Date: November 15, 1918 of Local Taxes 6,087.54 cubic meters of timber. The forest charges amounted to P8,328.93. From the timber removed by Pujalte, railroad ties were manufactured in its saw mills in Manila for the Manila Railroad Co. 6,305 railroad ties manufactured were rejected by the Manila Railroad Co. In February, 1915, Pujalte was indebted to HSBC. Being unable to pay its debt in money, Pujalte assigned to the bank, among other things, a large quantity of the railroad ties manufactured at its mills. HSBC sold these ties at various times until in May, 1916, there remained with it some 2,000 railroads ties of the lot acquired. The charges on the forest products remained unpaid. On May 2, 1916, the CIR instituted delinquency proceedings against Pujalte and caused the issuance of a distress warrant. On May 15, 1916, the CIR caused an additional distress levy to be made upon the 6,305 ties, which had been assigned by Pujalte to HSBC. The CIR seized the 2,000 ties in the possession of HSBC. Prior to May 15, 1916, HSBC had no notice of the tax liability of Pujalte. Petitioners Contention: No demand for payment of tax had been made when HSBC acquired the railroad ties. Respondents Contention: The lien follows the property subject to the tax even though transferred to HSBC who had no notice of the existence of the lien so as to make this property respond for all the unpaid internal revenue taxes due from Pujalte. TC Ruled for HSBC. Tax: Charges for forest products as provided in Section 21( f ) of Act 2339 (subsequently, Section 1438( f ) of the Administrative Code of 1917) From 1912 to 1915, Pujalte was engaged in the lumber business in Mindanao. The company removed from the forest and milled at its saw mills during this period, a total of CA n/a ISSUE: WoN the lien follows the property subject to the tax even though transferred to a third party who had no notice of the existence of the lien.

DOCTRINE: In order that the lien (by virtue of a tax delinquency) may follow the personal property into the hands of a third party purchaser for value, it is essential that the latter should have notice, either actual or constructive. QUICK FACTS: Pujalte & Co. (Pujalte) was liable to the government for forest charges for timber removed from Mindanao forests. They used the timber to manufacture railroad ties. They used these ties to pay a debt to HSBC. Subsequently, Pujalte was declared by the CIR to be delinquent on the payment of forest charges. The CIR attempted to levy the railroad ties already assigned by Pujalte to HSBC. FACTS:

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HELD: No. RATIO: The tax lien does not establish itself upon property which has been transferred to an innocent purchaser prior to demand. Where a statute makes taxes on personal property a lien thereon, a purchaser of such property takes the same free from any lien for taxes if the title passes before such a lien attaches by levy, distraint, or otherwise. (Shelby vs. Tiddy). In order that the lien may follow the property into the hands of a third party, it is essential that the latter should have notice, either actual or constructive. The reason is that the Constitution which prohibits the taking of property without due process of law. Liens, it has well been said, are of too sacred character to be impaired by vague and uncertain implications. The lien which the law favors is the specific or particular lien and not the general lien. However, the policy of the law is against upholding secret liens and charges against the property of innocent purchasers or encumbrances for value. NOTE: The lien follows the property even when already in the hands of a third party (even without notice of the lien) in the case of real estate taxation. 52. SPS. FEDERICO SERFINO V CA HELD: NO. Topic: Local Taxing Authorities and Scope of Taxing Power Collection of Local Taxes Government Remedies Administrative Actions; Distraint and Levy Ponente: Paras, J. Date: September 15, 1987 DOCTRINE: The prescribed procedure in auction sales of property for tax delinquency being in derogation of property rights should be followed punctiliously. Strict adherence to RATIO: There is no evidence that Nemesia Baltazar, the registered owner at the time, was notified of the auction sale in 1956. Neither was she furnished as the owner of the delinquent real property with the certificate of sale as prescribed by Sec. 37 of Commonwealth Act No. 470. These infirmities are fatal. Worth mentioning also is the fact that Lopez Sugar Central was not entirely negligent in its payment of land taxes. The record shows that taxes were paid for the the statutes governing tax sales is imperative not only for the protection of the tax payers, but also to allay any possible suspicion of collusion between the buyer and the public officials called upon to enforce such laws. Notice of sale to the delinquent land owners and to the public in general is an essential and indispensable requirement of law, the nonfulfillment of which invalidates the sale. QUICK FACTS: Case concerns the auction sale of property for tax delinquency. The registered owner of the land (Nemesia Baltazar, predecessor-in-interest of herein private respondent Lopez Sugar Central Mill Co.) was not informed of the auction sale. FACTS: A piece of land was sold by Nemesia Baltazar to private respondent Lopez Sugar Central Mill Co. in 1951. However, the latter did not present the documents for registration in the Office of the Registry of Deeds until after 13 years (1964). In the meantime, the subject property was put into public auction sale for tax delinquency for the period starting 1950. Notice of this public auction sale was sent to Pacifico Casamayor (Nemesias predecessor-in-interest) but none to Nemesia Baltazar and Lopez Sugar. Petitioner spouses Serfino in 1956, bought the subject property and was issue a title. ISSUE: Whether there was a valid tax delinquency sale of the property.

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years 1950 to 1953 and a receipt therefor was obtained in its name. The sale therefore by the Province of Negros Occidental of the land in dispute to the spouses Serfinos was void since the Province of Negros Occidental was not the real owner of the property thus sold. In turn, the spouses Serfinos title which has been derived from that of the Province of Negros Occidental is likewise void. A purchaser of real estate at the tax sale obtains only such title as that held by the taxpayer, the principle of caveat emptor applies. Where land is sold for delinquency taxes under the provisions of the Provincial Assessment Law, rights of registered but undeclared owners of the land are not affected by the proceedings and the sale conveys only such interest as the person who has declared the property for taxation has therein. 53. ESTATE OF THE LATE MERCEDES JACOB V CA Topic: Administrative actions, distraint and levy; Government remedies; Collection of local taxes Ponente: Bellosillo, J. Date: December 22, 1997 DOCTRINE: [Medyo mahirap yung case so I made my own doctrine. But if u have doubts, read the original na lang.] One must not be fooled by the name or title of the action, but by the ultimate goal it seeks to achieve. An action for annulment of judgment of the RTC which delivered the property to another, or an action for annulment of auction sale which gave possession and ownership to another are in fact and in reality actions for reconveyance of the property. In an action for reconveyance, RTC has jurisdiction pursuant to BP 129.19. QUICK FACTS: This case is comprised of 2 petitions with totally different facts, but both are questioning the jurisdiction of the RTC over their cases. Facts: This case is comprised of 2 petitions. [However, I think we should focus only on the 2nd petition because thats where the topic in the syllabus is related.] CASE # 1: G.R. no. 120435 Mercedes Jacob, owner of the land, left for the US and assigned her son-in-law Lucianto Quinto to pay the real estate taxes on her property. However, Luciano was not allowed w/o written authorization from Mercedes. City Treasurer refused their payments. City Treasurer, in 1984, sent a notice to Mercedes through her daugher Lilian Jacob Quinto of her tax payment delinquency. She was also informed that the land was already sold at public auction to Virginia Tugbang. Mercedes only knew of the sale when she received a notice of sale of real property addressed to her husband. She tried to redeem the property but Virginia evaded them until the Final Bill of Sale was issued to her. Virginia then filed a petition to cancel the TCT and issue a new TCT in her name. Case # 1: Respondent Virginia Tugbang procured a TCT upon her fraudulent representation in her petition for cancellation of title. The true owner Mercedes Jacob filed a complaint for annulment or cancellation of auction sale (through which Tugbang acquired the property). Case # 2: City Treasurer sold property at an auction sale because of delinquency of landowner in payment of real estate taxes, but they sent notice to the previous owner, not the current one. The current one, Teresa Valencia, meanwhile, sold the property to another, and therefore the vendee in that sale and the highest bidders of the auction sale are claiming rights of ownership over the property. FACTS: Tax: real estate tax

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Mercedes et al. filed a complaint for annulment or cancellation of auction sale, the final bill of sale, TCT and for redemption of property + damages. TC: dismissed for lack of jurisdiction. It decided that in reality the petition was for annulment of judgment of RTC-QC. CA: dismissed for lack of merit ISSUE: WoN RTC has jurisdiction HELD: YES. In reality, it is an action for reconveyance. RATIO: 1) In the instant case the complaint alleges that respondent Virginia Tugbang procured a transfer certificate of title upon her fraudulent representation in her petition for cancellation of title. This way of acquiring title creates what is called "constructive trust" in favor of the defrauded party and grants to the latter a right to the reconveyance of the property. Thus it has been held that if a person obtains legal title to property by fraud or concealment courts will impress upon the title a so-called "constructive trust" in favor of the defrauded party. The use of the word "trust" in this sense is not technically accurate but as courts are agreed in administering the same remedy in a certain class of frauds as are administered in fraudulent breaches of trusts, and as courts and the profession have concurred in calling such frauds constructive trusts, there can be no misapprehension in continuing the same phraseology, while a change might lead to confusion and misunderstanding. 2) Therefore, RTC has jurisdiction because it a) involves a civil action involving title to, or possession of, real property, or any interest therein and b) may be considered only as a continuation of the original proceeding for cancellation of title which in view of its non-litigious character CASE # 2: G.R. no. 120974 Alberto Sta. Maria sold a parcel of land to Teresa Valencia. She however failed to have the tax declaration transferred in her name. She thus paid real estate taxes from 1964 to 1978 in the name of Alberto. Valencia then sold the land to Bernardita Tolentino. But fro 1979-1983, Valencia failed to pay real estate taxes due on the land. Therefore, City Treasurer sent notices of tax delinquency and intent to sell property to Sta. Maria. In the auction sale, sps. Chua bought the land. City Treasurer was unaware that that Valencias TCT had already been cancelled ifo Tolentino. When the Chuas demanded delivery from Tolentino and Valencia, Tolentino sued for annulment of auction sale. TC: granted. CA: affirmed. ISSUE 1: WoN the TC has jurisdiction over the case HELD: YES. RATIO: "in the law of pleading, courts are called upon to pierce the form and go into the substance, not to be misled by a false or wrong name given to a pleading because the title thereof is not controlling and the court should be guided by its averments x x x x" Apparently the ruling is contrary to petitioner's very own position. While the complaint of Bernardita C. Tolentino is captioned as one for annulment of auction sale with damages, it is not an action for annulment of judgment which should be filed with the Court of Appeals. In fact, from the allegations in the complaint it can be gathered that a reconveyance was intended by Tolentino, in which case, jurisdiction is vested in the trial court. Under Sec. 55 of the Land Regitration Act, as amended

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by Sec. 53 of PD No. 1529, [14] an original owner of registered land may seek the annulment of the transfer thereof on the ground of fraud and the proper remedy is reconveyance. However, such remedy is without prejudice to the rights of an innocent purchaser for value holding a certificate of title. ISSUE 2: WoN Sta. Maria was the real delinquent taxpayer HELD: NO. RATIO: The controversy lies in the failure of petitioner City Treasurer to notify effectively the delinquent taxpayer who at the time of the auction sale was Teresa L. Valencia. Apparently, petitioner proceeded on the wrong premise that the property was still owned by the former registered owner, Alberto Sta. Maria, who sold the property to Valencia in 1964. In fact, at the time of the auction sale, the property was already covered by a conditional sale on installment in favor of respondent Bernardita C. Tolentino. Plainly, at the time of the auction sale, Alberto Sta. Maria who appeared to have been notified of the auction sale was no longer the registered owner, much less the delinquent taxpayer. In ascertaining the identity of the delinquent taxpayer, for purposes of notifying him of his tax delinquency and the prospect of a distraint and auction of his delinquent property, petitioner City Treasurer should not have simply relied on the tax declaration. The property being covered by the Torrens system, it would have been more prudent for him, which was not difficult to do, to verify from the Office of the Register of Deeds of Quezon City where the property is situated and as to who the registered owner was at the time the auction sale was to take place, to determine who the real delinquent taxpayer was within the purview of the third paragraph of Sec. 73. For one who is no longer the lawful owner of the land cannot be considered the "present registered owner" because, apparently, he has already lost interest in the property, hence is not expected to defend the property from the sale at auction. The purpose of PD No. 464 is to collect taxes from the delinquent taxpayer and, logically, one who is no longer the owner of the property cannot be considered the delinquent taxpayer. While we understand the earnestness and initiative of local governments to collect taxes, the same must be collected from the rightful debtors and not from those who may only appear to be the registered owners in the official files. Certainly, properties change hands as fast as their owners can, and to deprive the present owners of their properties by notifying only the previous owners who no longer have any interest in them will amount not only to inequity and injustice but even to a violation of their constitutional rights to property and due process. 54. MANILA ELECTRIC COMPANY V BARLIS Topic: Protest Ponente: Callejo, Sr., J. DOCTRINE: If the taxpayer is not satisfied with the action of the local assessor in the assessment of his property, he has the right to appeal, under Sec. 30 of Real Property Tax Code, to the Local Board of Assessment Appeals (LBAA) by filing a verified petition within 60 days from service of said notice of assessment. If the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due becomes absolute upon expiration of such period, with respect to the taxpayers property. The action to collect the taxes due is akin to an action to enforce judgment. QUICK FACTS: Meralco bough machineries and equipment for its plants. However, when it sold the plants to NAPOCOR, the Municipal Assessor discovered that Meralco misdeclared a number of real properties. Municipal Treasurer wanted to collect deficiency but to no avail so warrants of garnishment of Meralcos bank deposits were issued. Meralco went to the

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RTC for injunction or TRO. Question: Did Meralco exhausted admin remedies before going to court? FACTS: TAX: Real Property Tax From 1968 to 1972, Meralco erected 4 power generating plants in Sucat and purchased machineries and equipment to equip said plants. Then Meralco filed its tax declaration covering the said plants and its machineries and equipment, which were assessed by the Provincial Assessor (P33M in 1976; P36.9M in 1978). In December 1978, Meralco sold the plants to NAPOCOR. The Assessor of Muntinlupa discovered that Meralco misdeclared or failed to declare a number of real properties consisting of machineries and equipment. So the Municipal Treasurer sent notices to Meralco requesting payment of the full amount. He even enlisted the help of BLGF. It was alleged that Meralco did not pay a total of P36.4M as of 1986 assessment. Several demand letters were sent by the Municipal Treasurer but to no avail. So after issuing the certificate of non-payment and complying with the requirement of public posting of notices, the Treasurer issued warrants of garnishment ordering the attachment of Meralcos bank deposits. Meralco filed Preliminary Injunction and/or TRO, arguing among others, that it has paid its real property taxes in full and the collection letters were issued arbitrarily or without authority. On the other hand, Treasurer filed to dismiss, arguing that courts are prohibited from entertaining any suit assailing the validity of a tax assessed until the taxpayer shall have paid, under protest, the tax assessed against him (Sec. 64, Real Property Tax Code). TC Issued TRO. Then denied the motion to dismiss holding that Meralco was not the taxpayer contemplated under Sec. 64, Real Property Tax Code since it was not the present owner of the properties. Treasurer filed certiorari. CA Granted certiorari. Held that the TC order is void having been issued without jurisdiction. (Meralco did not exhaust admin remedies.) Also ruled that Meralco is the taxpayer liable. SC (May 2001 decision) Affirmed CA. SC emphasized that Meralco could not file a petition for certiorari and prohibition without first resorting to the proper admin remedies, and by paying under protest the tax assessed, to allow the court to assume jurisdiction over the petition. SC also held that letters of Treasurer to Meralco were not mere collection letters but are notices of assessment. MR was filed but SC also denied (February 2002 decision). However, SC reversed its ruling that the letters sent by the Treasurer were notice of assessment. It ruled that those letters were mere collection letters. Meralco filed 2nd MR. NOTE: Meralco argument under MR: Meralco did not receive any notice of assessment and collection. This is important because without the notice of assessment prior to collection of back taxes, Sec. 64 of the Real Property Tax Code and the exhaustion of admin remedies do not apply. If exhaustion does not apply, Meralco can go straight to court. ISSUE: WON Meralco exhausted admin remedies before going to court. HELD: NO. But E2014: Arnel, Teph, Zoe, Azy, VJ, Marshall, Jayson, Shiree, Bern, Floyd, Rubb, Diega, Jessie, Macel, Rod, Bianca, Dotty, Raj, Bobby, Jasper, Leslie| 98

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RATIO: Preliminaries: Meralco has the right to file 2nd MR because of the inconsistency of the rulings of SC regarding the letters. Also, Meralco is the taxpayer under Sec. 64, Real Property Tax Code. Unpaid tax attaches to the property and is chargeable against the person who had actual or beneficial use and possession of it regardless of whether or not he is the owner. ASSESSMENT: An assessment fixes and determines the tax liability of a taxpayer. It is a notice to the effect that the amount therein stated is due as tax and a demand for payment thereof. The assessor is mandated by law to give written notice within 30 days of such assessment to the person in whose name the property is declared. The notice should indicate the kind of property being assessed, its actual use and market value, the assessment level and the assessed value. The notice may be delivered either personally to such person or to the occupant in possession, if any, or by mail to the last known address of the person to be served, or through the assistance of the barrio captain. The issuance of a notice of assessment by the local assessor shall be his last action on a particular assessment. For purpose of giving effect to such assessment, it is deemed made when the notice is released, mailed, or sent to the taxpayer. As soon as the notice is duly served, an obligation arises on the part of the taxpayer to pay the amount assessed and demanded. PROTEST: If the taxpayer is not satisfied with the action of the local assessor in the assessment of his property, he has the right to appeal, under Sec. 30 of Real Property Tax Code, to the Local Board of Assessment Appeals (LBAA) by filing a verified petition within 60 days from service of said notice of assessment. If the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due becomes absolute upon expiration of such period, with respect to the taxpayers property. The action to collect the taxes due is akin to an action to enforce judgment. COLLECTION: The local treasurer is tasked with collecting taxes due from the taxpayer. The duty of the local treasurer to collect the taxes commences from the time the taxpayer fails or refuses to pay the taxes due, following the latters failure to question the assessment in the LBAA and/or to the Central Board of Assessment Appeals (CBAA). This in turn renders the assessment of the local assessor final, executor and demandable, thus, precluding the taxpayer from disputing the correctness of the assessment or from invoking any defense that would reopen the question of its liability on the merits. The letters sent by the Municipal Treasurer were not notices of assessment but notices of collection. Even the BLGF deemed them to be collection letters. HOWEVER, TC was without authority to address the irregularity in the issuance of the notices of assessment without prior tax payment, under protest, by Meralco. Sec. 64 of the Real Property Tax Code prohibits courts from declaring any tax invalid by reason of irregularities or informalities in the proceedings of the offices charged with the assessment or collection of taxes except upon the condition that the taxpayer pays the amount of the tax, as determined by the court in the pending proceeding. Upon receipt of the first letter from the Municipal Treasurer, Meralco should have availed the proper admin remedies in protesting an erroneous tax assessment; that is, to question the correctness of the assessments before the LBAA, and later, invoke the appellate jurisdiction of the CBAA. Under the doctrine of primacy of admin remedies, an error in the assessment must be administratively pursued to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction. The failure to appeal within the

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statutory period shall render the assessment final and unappealable. BUT, statutorily, the Municipal Treasurer is not the officer obliged to issue any notice of assessment (he collects). The duty belongs to the Municipal Deputy Assessor for municipalities outside Metro Manila, and to the Municipal Assessor fro municipalities within Metro Manila (on real property tax only). HENCE, Secs. 30 and 64 of the Real Property Tax Code has no application in this case. Case remanded to determine whether or not Municipal Assessor issued notice of assessment. 55. (35) LUZ YAMANE V BA LEPANTO CONDOMINIUM CORPORATION, SUPRA 56. LOPEZ V CITY OF MANILA Topic: Taxpayers Remedies (related to admin law) Ponente: QUISUMBING Date: February 19, 1999 DOCTRINE: With regard to questions on the legality of a tax ordinance, the remedies available to the taxpayer are provided under Sections 187, 226, and 252 of R.A. 7160. Taxpayer may bring an appeal before the Secretary of Justice questioning legality of the city ordinance (Sec 187); owner of real property who is not satisfied with the assessment of his property may, within sixty (60) days from notice of assessment, appeal to the Board of Assessment Appeals (Sec 226); should the taxpayer question the excessiveness of the amount of tax, he must first pay the amount due, then he must request the annotation of the phrase paid under protest and accordingly appeal to the Board of Assessment Appeals (Sec 252). QUICK FACTS: Lopez sought the declaration of nullity of City of Manila Ordinance No. 7894. RTC dismissed the case. FACTS: Tax: Manila Ordinance No. 7894 (An Ordinance Prescribed as the Revised Schedule of Fair Market Values of Real Properties of the City of Manila)was enacted. With its implementation, the tax on the land owned by the petitioner was increased by 580%. With respect to the improvement on his property, the tax increased by 250%. The facts as found by the trial court are as follows: Section 219 of Republic Act 7160 (R.A. 7160) or the Local Government Code of 1991 requires the conduct of the general revision of real property as follows: General Revision of Assessments[2] and Property Classification -- The provincial, city or municipal assessor shall undertake a general revision of real property assessments within two (2) years after the effectivity of this Code and every three (3) years thereafter. Although R.A. 7160 took effect on January 1, 1992, the revision of real property assessments prescribed therein was not yet enforced in the City of Manila. However, the process of real property valuation had already been started and done by the former city assessor. In 1992, the schedule of real property values in the city was prepared and submitted to the City Council of Manila, but for unknown reason, was not acted upon. Nevertheless, despite the inaction of the City Council, there was a continuous update of the fair market values of the real properties within the city. Until the year 1995, the basis for collection of real estate taxes in the City of Manila was the old, year-1979, real estate market values.

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Lourdes Laderas, the newly appointed City Assessor of Manila, received Memorandum Circular in March 1995, from the Bureau of Local Government Finance, Department of Finance. This memorandum relates to the failure of most of the cities and municipalities of Metropolitan Manila, including the City of Manila, to conduct the general revision of real property. For this purpose, Laderas embarked in a working dialogue with the Office of the City Mayor and the City Council for the completion of the task. Laderas began the process of general revision based on the updated fair market values of the real properties. This was submitted to the City Council. The Council then conducted public hearings as required by law. The proposed ordinance was subjected to the regular process in the enactment of ordinances pursuant to the City Charter of Manila. The ordinance with the schedule of fair market values of real properties was published in the Manila Standard. It was approved by the City Mayor on December 27, 1995, and made effective on Jan. 01, 1996. Thereafter, notices of the revised assessments were distributed to the real property owners of Manila pursuant to Sec. 223 of R.A. 7160. With the implementation of Manila Ordinance No. 7894, the tax on the land owned by the petitioner was increased by five hundred eighty percent (580%). With respect to the improvement on petitioners property, the tax increased by two hundred fifty percent (250%). As a consequence,Lopez filed a specialproceeding for the declaration of nullity of the ordinance with preliminary injunction and prayer for temporary restraining order (TRO). At around the same time, Manila Ordinance No.7905 took effect, reducing by 50% the assessment levels (depending on the use of property, e.g., residential, commercial) for the computation of tax due. It also provides that the amendment shall take effect retroactively to Jan 1, 1996. As a result, it reduced the tax increase of petitioners residential land to 155%, while the tax increase for residential improvement was 82%. Despite this, the controversy proceeded. City of Manila- case should be dismissed for failure of Lopez to exhaust administrative remedies.RTC directed the issuance of a writ of injunction. City of Manila filed MFR on the denial of its motion to dismiss. It also underscored the happening of supervening event, i.e., the enactment and approval of the City Mayor of Manila Ordinance No.7905. RTC then granted MD. Ratio- failure to exhaust administrative remedies and ordinance 7894 repealed by 7905. Lopez filed MFR, but was denied. Contentions of Lopez: When the trial court ruled that it has jurisdiction over the case, the question of whether he needs to resort to the exhaustion of administrative remedies becomes moot and academic.- The question of the constitutionality of the city ordinance may be raised on appeal, either to the Secretary of Justice or the RTC, both having concurrent jurisdiction over the case (BP 129). At the time he instituted this complaint, it was premature to resort to the remedies provided by R.A. 7160 because he has not received the formal notice of assessment yet. ISSUE: WON petitioner failed to exhaust all administrative remedies

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HELD: YES RATIO: As a general rule, where the law provides for the remedies against the action of an administrative board, body, or officer,relief tocourts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. This should be done not only to give the administrative agency the opportunity to decide the matter by itself correctly, but also to prevent unnecessary and premature resort to courts. There are however a number of instances when the doctrine may be dispensed with and judicial action validly resorted to immediately. Among these exceptional cases are:(1) when the question raised is purely legal,(2) when the administrative body is in estoppel; (3) when the act complained of is patently illegal; (4) when there is urgent need for judicial intervention; (5) when the claim involved is small;(6) when irreparable damage will be suffered;(7) when there is no other plain, speedy and adequate remedy;(8) when strong public interest is involved;(9) when the subject of controversy is private land; and(10) in quo-warranto proceeding.* These exceptions are not present in the present case. What could have been done? With regard to questions on the legality of a tax ordinance, the remedies available to the taxpayer are provided under Sections 187, 226, and 252 of R.A. 7160. Taxpayer may bring an appeal before the Secretary of Justice questioning legality of the city ordinance (Sec 187); owner of real property who is not satisfied with the assessment of his property may, within sixty (60) days from notice of assessment, appeal to the Board of Assessment Appeals (Sec 226); should the taxpayer question the excessiveness of the amount of tax, he must first pay the amount due, then he must request the annotation of the phrase paid under protest and accordingly appeal to the Board of Assessment Appeals (Sec 252). ** The crux of petitioners cause of action is the determination of whether or not the tax is excessive, oppressive or confiscatory. This issue is essentially a question of fact and thereby, precludes this Court from reviewing the same. The ordinance is likewise, a social legislation intended to soften the impact of the tremendous increase in the value of the real properties subject to tax.** The supervening circumstance of enactment of Manila Ordinance No. 7905 has rendered the petition, moot and academic, for failure of the petitioner to amend his cause of action 57. TOLEDO V METRO MANILA SHOPPING MECCA Topic: LOCAL TAXATION; TAX PAYERS REMEDIES Ponente: Date: October 31, 2008 DOCTRINE: CTA LAYS DOWN THE DIFFERENCE BETWEEN PROTESTING A LOCAL TAX ASSESSMENT AND FILING A CLAIM FOR REFUND OF LOCAL TAXES. In local taxation, Section 195 of the Local Government Code (LGC) provides the remedies available to taxpayers in case of assessment while Section 196 of the LGC deals with the requirements for refund. As regards protesting an assessment, the taxpayer has 30 days from receipt of denial of the protest or the lapse of the 60day period for the local treasurer to decide on the protest within which to appeal the assessment to a court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.

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On the other hand, there are 2 requirements for a claim for refund: (i) a written claim for refund filed with the local treasurer before filing an action for refund with the appropriate court and (ii) the refund or tax credit claim must be filed before the court within 2 years from payment of the tax, fee or charge. A written protest does not take the place of a written refund claim. As the taxpayer failed to file a written claim for refund, the Regional Trial Court failed to acquire jurisdiction over the taxpayers refund claim. QUICK FACTS: FACTS: The SM Group of Companies (SM Group, for brevity) are the respondents in this case. The City treasurer made assessments of local business taxes for the 4th quarter of year 2001 under section 21 (Tax on Business Subject to Excise Tax, VAT or Percentage Taxes under NIRC) of the City Ordinance which SM Group paid accordingly amounting to 5M plus as follows: 1.Metro Manila Shopping Mecca Corp.P1,203,361.44 2.Shoemart, Inc.2,902,041.70 3.SM Prime Holdings, Inc.310,398.44 4.Star Appliances Center397,282.22 5.Supervalue, Inc.153,428.69 6.Ace Hardware Philippines, Inc.53,800.85 7.Health and Beauty, Inc.23,256.39 8.Jollimart Phils. Corp.25,574.05 9.Surplus Marketing Corp.P35,137.48 TOTALP5,104,281.26 2 Respondents paid accordingly. However, independently of amounts collected under section 21, the City treasurer assessed the SM groups of local taxes imposed upon retailers, wholesalers, exporters and importers pursuant to section 17 (Tax on Retailers) of the City Ordinance. Hence SM Group filed a judicial action for a TRO and for a refund of the taxes they paid under protest against Toledo, the City Treasurer of Manila and City of Manila (petitioners, for brevity) with the RTC Manila. RTC Manila declared the assessments made on taxes paid under section 21 are null and void ordering refund or alternatively, to issue tax credits for the amount. Hence, this petition for review by the City treasurer. ISSUE 1: WON the assessments of local business taxes for the 4th quarter of year 2001 under Section 21 are final and collectible and therefore valid HELD: Yes. Petitioners are correct in contending that that the RTC did not acquire jurisdiction due to respondents' failure to file the Amended Complaint within the prescribed period, including the failure to file a written claim for refund or credit, in violation of R.A. No. 7160. RATIO: At the outset, it must be pointed out that the nature, applicable statutory provisions and requirements of an assessment and a claim for refund differ. In local taxation, Section 195 of R.A. No. 7160 provides for the remedies available to taxpayers in case of assessment; while Section 196 of the same Code refers to the requirements for refund. In the CAB, SM Group of companies submitted a letter of protest dated October 19, 2001 addressed to the City treasurer. The City treasurer responded, denying the letter of protest which was received by SM Group on November 22, 2001. Records indicate that although respondents filed a protest on the assessments on October 19, 2001, the Petition filed before the RTC was filed beyond the reglementary period.

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Section 195 of R.A. No. 7160 categorically states that "the taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60)-day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable". The denial of the protest was received by respondents on November 22, 2001; however, they failed to contest the same before a court of competent jurisdiction within the allowable period, viz., thirty (30) days from receipt of the denial of the protest. In fact, respondents only filed their Petition and the Amended Complaint on October 20, 2003 and November 14, 2003, respectively. It took them almost two (2) years from the date of receipt of the denial of the protest on November 22, 2001 to seek judicial recourse; way more than the legally prescribed thirty (30) day period. Accordingly, the subject assessments became conclusive and unappealable when respondents failed to question the same before a competent court within thirty (30) days from receipt of the denial of their protest under the rules. ISSUE 2: WON SM Group can CLAIM FOR REFUND HELD: No RATIO: Based on Section 196 of R.A. No. 7160, there are two requisites for a refund claim or tax credit of local taxes, namely: (1) a written claim for refund or credit must be filed with the local treasurer before filing an action for refund with the appropriate court; (2) the refund claim or tax credit must be filed before the court within two (2) years from the date of payment of the tax, fee or charge. Although SM Group satisfied the second requisite (filing claim of refund before the court) as prescribed in Section 196 of R.A. No. 7160, they had failed to file a written claim for refund or credit with the petitioner local treasurer, under the first requisite, in violation of the same provision. Compliance with the two requisites is mandatory.

Letter of protest dated October 19, 2001 is not treated as a written claim for refund as settled in China Banking Corporation vs. City Treasurer of Manila. this Court declared that a written protest cannot be considered as a written claim for refund, and ruled that: The above letter (of protest) speaks for itself. The wordings of the letter are explicit and unequivocal that petitioner merely notified the respondent that it is paying under protest the amount representing the alleged local government tax and that they are presently instituting the appropriate legal actions to effect refund of any erroneous/excessive payment made. It is not the written claim for refund as contemplated under Section 196 of the Local Government Code. Having failed to comply with the requirements prescribed by Section 196, the complaint for refund was prematurely filed for failure to exhaust administrative remedies. Where the enabling statute indicates a procedure for administrative review, and provides a system of administrative appeal, or reconsideration, the courts, for reason of law, comity, and convenience, will not entertain a case unless the available remedies have been resorted to and the appropriate authorities have been given an opportunity to act and correct the errors committed in the administrative forum. The afore-quoted case squarely applies in the instant case. Respondents' letter dated October 19, 2001 disputing petitioners' assessments of local business taxes for the fourth (4th) quarter of year 2001, is merely a protest-letter, and should not be treated as a written claim for refund. In said letter, respondents did not categorically request for the refund of the amount they paid as local business taxes. Hence, respondents failed to comply with the requirements of Section 196 of R.A. No. 7160. There being no written claim for refund or credit filed with the petitioner local treasurer, the RTC did not acquire jurisdiction over respondents' refund claim. Thus, the RTC's decision granting respondents' claim

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for refund is void. A void judgment for want of jurisdiction is no judgment at all. 58. ALABANG SUPERMARKET CORP V CITY OF MANILA Topic: Taxpayer's remedy; Tax refund and tax credit Ponente: Uy, J. Date: February 12, 2009 DOCTRINE: No case or proceeding may be entertained by any courts absent showing that petitioner has a written claim for refund of erroneous or excessive payment of any tax, free or charge filed with the local treasurer prior to its filing before any court. QUICK FACTS: Alabang Supermarket claimed refund before the RTC without filing a written claim before the local treasurer. FACTS: Tax: Timely filing of claim of tax refund. Facts: Petitioner, Alabang Supermarket Corporation, is a domestic corporation duly organized and existing under Phil ippine Laws. It operates the Alabang branch of the Makati Supermarket, a distributor and dealer of, among others, liquor, beer, wine, distilled spirits, cigarettes and tobacco products. On the other hand, respondents City Treasurer of Muntinlupa, herein represented by Ms. Nelia A Barlis; The City Government of Muntinlupa, herein represented by Mayor Jaime R. Fresnedi; and the Sangguniang Panglungsod of Muntinlupa, are the government offices which enacted and are tasked to implement the assailed Ordinance No. 98-015. Pursuant to Section 5 (b), Article I, Chapter I of Title II of Ordinance No. 93-35, otherwise known as the Revenue Code of the City of Muntinlupa, petitioner pays the graduated business tax on its gross sales of liquor, beer, wine, distilled On December 1, 1998, the City Government of Muntinlupa, through the approval of its City Mayor, enacted City Ordinance No. 98-015 which imposes a three percent (3%) business tax on the sale and distribution of alcoholic beverages and tobacco products. In this regard, for the periods covering January 2, 1999 to September 15, 2002, petitioner allegedly paid the total amount of Three Million Six Hundred Ninety Six Thousand Five Hundred Fifty Seven and 06/100 Pesos (P3,696,557.06) in compliance with the aforementioned ordinance. Aggrieved by the alleged erroneous collections made by respondents, petitioner, through its external auditor, wrote a letter to the Bureau of Local Government Finance (BLGF) of the Department of Finance seeking clarification on whether or not the City of Muntinlupa can legally impose the 3% business tax on gross receipts of wholesalers and retailers from their sale of liquor, beer, wine, distilled spirits, cigarette and tobacco products under City Ordinance No. 98-015 to which the BLGF issued its ruling in favor of petitioner. In light of the ruling of the BLGF, petitioner wrote a letter dated March 20, 2001 addressed to the City Treasurer of Muntinlupa seeking the refund I tax credit of the amount of P1 ,630,047.57 representing the 3% business taxes paid on its gross sales of liquor, beer, wine distilled spirits, cigarettes and tobacco products for the period covering January 1999 to December 2000. Subsequently, on March 21 , 2001 , petitioner filed its Complaint with the Regional Trial Court of Muntinlupa seeking the refund or issuance of a tax credit certificate of the same amount and covering the same period. On January 6, 2003, petitioner filed with the same lower court a Supplemental Complaint with an application for the issuance of a temporary restraining order and/or a writ of spirits, cigarettes and tobacco products. Such provision of the Revenue Code implements Section 143 (b) of the Local Government Code (LGC) of 1991 .

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preliminary injunction. Petitioner likewise sought the declaration of nullity of Section 2 of the Muntinlupa City Ordinance No. 98-015, as well as, a claim for the refund of the amount of P2,066,509.19 representing the payments made for the period from December 16, 2000 to December 15, 2002, in addition to the amount in the original Complaint. Petitioners Contention: Petitioner submits that the partial denial of its claim for refund of business taxes paid under respondent's illegal tax ordinance is unfair and contrary to law. It stresses that although Section 196 of the LGC requires the filing of a written claim for refund with the local treasurer prior to the filing of a judicial claim for refund within two (2) year period stated therein, it should be noted that, however, that the same provision does not state that the two (2) year period shall automatically commence exclusively from the date of the payment of the tax claimed to be. refunded but instead, "from the date the taxpayer is entitled to refund or credit". As such, petitioner alleges that, at the very least, the anticipated finality of this Court's judicial pronouncement that respondents' tax ordinance is excessive and contrary to law should be considered as a supervening cause entitling a taxpayer to a tax refund from which the date to file a claim for refund should be reckoned from. Thus, it opined that it could not be adjudged to have failed to file an administrative claim for refund since the two (2) year period from the finality of this Court's declaration that the respondents' tax ordinance is illegal thus entitling petitioner to a refund has yet to lapse. Respondents Contention: Respondent on the other har:~d forward the argument that Section 196 of the LGC is explicit that it is necessary for the claimant of refund of any tax, fee or charge to file its claim with the local treasurer within two (2) years from the payment of the tax, fee or charge and no case shall be entertained in any court absent this written claim being shown or proven. Such period is set in the law to accomplish the intention of the legislature to give the taxpayer the time to question a tax imposed by the government at the earliest opportune time for it is basic in taxation that taxes collected is the lifeblood of the government.It further argues that the interpretation of petitioner of the phrase "from the date the taxpayer becomes entitled to a refund or credit" to mean that it has been given the right to file for a refund after the court declared the tax law or ordinance as null and yoid without a timely claim for refund is bereft of utter merit, whimsical and arbitrary. TC: The RTC disallowed petitioner's claim for refund on the ground that Ordinance No. 98-015 was enacted and approved with the end purpose of applying its proceeds to support the existence of the local government and as an aid to pursue its governmental objectives and therefore, the public purpose character of the imposition was then justified; and that it was not shown, or there was failure of showing that the questioned imposition was oppressive, excessive nor prohibitive. CTA: CTA partially granted petitioner's claim for refund. However, due to the absence of any evidence or document to show or compute for the exact amount of business taxes that petitioner is liable to pay, the Court in Division remanded the case to the lower court for the proper determination of petitioner's business tax liability covering the period from January 2, 1999 to December 15, 2000 only, taking into consideration Section 191 of the LGC. Any excess on the amount already paid was ordered to be refunded by way of a tax credit. ISSUE: WON Alabang Supermarket's claim of refund should be granted. HELD: No. CTA En Banc upheld the previous CTA rulings. RATIO: The Court would like to state for emphasis that in the case at bar, no administrative claim for refund has been filed by petitioner on the portion denied by this Court.

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Relative thereto, We find that the Court in Division appropriately denied petitioner's claim for refund pertaining to the period from December 16, 2000 to December 2002, due to petitioner's failure to file an administrative claim for refund before the City Government of Muntinlupa as required under Section 196 of the LGC prior to judicial recourse. Said provision reads thus: "Section 196. Claim for Refund of Tax Credit.- No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of two (2) years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit." Clearly from the above quoted provision, no case or proceeding may be entertained by any courts absent showing that petitioner has a written claim for refund of erroneous or excessive payment of any tax, free or charge filed with the local treasurer prior to its filing before any court. Moreover, it should be noted that two ' reckoning periods are provided by law for the filing of a case or proceeding, that is from the date of payment of the tax, and "from the date the taxpayer becomes entitled to the refund. However, petitioner's interpretation of the phrase "from the date the taxpayer becomes entitled to the refund" is not inconsonance with the intent of the law since Section 196 should not be read in isolation, but in relation with other provisions of the LGC. The CTA En Banc emphasized the ruling of the CTA division: "The reckoning periods for the filing of a claim for refund in Section 1,96 of the Local Government Code should be interpreted so as to accomplish the evident purpose, viz., the settlement of the rights of the taxpayer vis-a-vis the government, at the earliest opportunity. The phrase "from the date the taxpayer becomes entitled to a refund or credit" E2014: Arnel, Teph, Zoe, Azy, VJ, Marshall, Jayson, Shiree, Bern, Floyd, Rubb, Diega, Jessie, Macel, Rod, Bianca, Dotty, Raj, Bobby, Jasper, Leslie| 107 in Section 196 should not be interpreted to mean the finality of the decision of a court declaring the tax measure void, even without a timely claim for refund. Otherwise, claims for refund will be filed even after s.everal years from payment of the tax due, merely because the tax ordinance was declared void. And the filing of administrative and judicial claims for refund shall be endless. This interpretation would give the taxpayer, who was not able to question the legality or constitutionality of the tax measure within the period provided in Section 187, the right to instead file a claim for refund with the court under Section 196, absent the filing of a timely administrative claim. In effect, the prescriptive periods provided by law would be rendered naught and meaningless."

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