FACTS:

Petitioner is a Build Operate Transfer (BOT) corporation under Philippine law. It

constructs power plants. Its head office is in Makati and it has plants and offices
all over the Philippines (Laguna, Cavite, Batangas, Cebu, Camarines Norte).

Respondent Makati City (MC) reclassified petitioner from "holding or investment"

company to a "contractor".

Petitioner questions March 7 2003 assessment. Contests deficiency business taxes in

said assessment on three main grounds:

1. Petitioner was incorrectly reclassified as "contractor" from "holding/

investment" company akin to a financial institution.

2. Assuming that the reclassification was valid, that the uncollected sales and
labor/ materials expenses should be deducted from the tax base.

3. Respondent could not impose tax on the income of the petitioner from its plants
and offices outside of its taxing jurisdiction.

ISSUES:
1. W/N MC validly reclassified petitioner
2. W/N uncollected sales and materials expenses should be included in the tax base
3. W/N MC can tax petitioner for sources of income outside of the taxing
jurisdiction of the latter

HELD:
1. Yes. The reclassification is valid. S131(h) of the LGC provides that a
contractor is any person, natural or juridical, not subject to professional tax,
whose activity consists essentially of the sale of all kinds of serices 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 court ruled that such definition is so broad, it already covers any conceivable
service rendered for a fee and that the only qualification is that the person,
natural or juridical, is not subject to professional tax.

In this case, petitioner is a contractor on account of the evidence presented. It

builds power plants under BOT schemes for its customers. Second, its articles of
incorporation states plainly that its primary purpose is to manage and operate
power plants. Lastly, petitioner's financial statements show that it serves as an
independent contractor resposible for the management, oepration, maintenance, and
repair of power plants.

2. Yes. LGC defines "Gross sales or receipts" as 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 deposits or advance
payments actually and constructively received during the taxable quarter for the
services performed (or not) for another person excluding discounts (if determinable
at the time of sales, sales return, excise tax, and VAT). In short, gross sales or
receipts includes only compensation or fees which were received, actually, or
constructively, by the taxpayer.

Petitioner is correct only as to uncollected sales as these were not received.

Labor and materials expenses incurred may not be deducted. These do not actually
reduce the actual amount received by the petitioner for its services.

3. No. Under the LGC, a corporation which maintains or operates branch or sales
outlets outside the municipality or city where the principal office is located
should record the sale in the branch or sales outlet making the sale or
transaction. Accordingly, the tax on such sale should accrue and be paid to the
municipality or city where such outlet is located.