Iloilo Bottlers Inc.
v City of Iloilo
August 19, 1988
FACTS
1. Plaintiff Iloilo Bottlers Inc. is engaged in the business of
bottling soft drinks (Pepsi Cola and 7-Up.)
2. In September 1966, Iloilo Bottlers bought and operated its
plant in Muelle Loney St., Iloilo City, during which time the
municipal license fees were still being paid by the former
owner (Santiago Syjuco Inc.), followed by herein plaintiff.
3. When the plant was transferred to Pavia, Iloilo Bottlers
stopped paying the fees because:
a. its principal business is bottling of softdrinks, to which
selling is merely incidental, and
b. only bottlers with plants inside the territorial jurisdiction
of the city are covered by the ordinance.
4. However, defendant still demanded from the plaintiff
payment of its back taxes from the time its plant was
transferred, on the basis of Ordinance No. 5.
5. The said ordinance orders those engaged in the distribution,
manufacture or bottling of soft drinks within the territorial
jurisdiction of the City of Iloilo to pay a municipal license
tax of P0.10 for every 24 bottles, or a P0.015 per case of 24
bottles (for softdrinks sold to the public at not more than
P0.05).
6. Plaintiff does not maintain any store or commercial
establishment in the City of Iloilo from which its products
are distributed. Instead, a fleet of delivery trucks is used to
distribute its products from its plant to the different parts of
Iloilo.
ISSUE
W/N Iloilo Bottlers Inc. is liable for a municipal tax license under
Iloilo City tax Ordinance No. 5
HELD/RATIO
YES, Iloilo Bottlers Inc. is liable for said tax.
1. The tax imposed under Ordinance No. 5 is an EXCISE TAX,
a tax on the privilege of distributing, manufacturing, or
bottling soft drinks. It can only be levied by the taxing
authority when the acts, privileges or businesses are done
WITHIN the jurisdiction of the said authority. In this case,
the situs of the act of distributing, bottling or manufacturing
soft.drinks must be within city limits, before an entity
engaged in any of the activities may be taxed in Iloilo City.
2. This Court has always recognized that the right to
manufacture implies the right to sell/distribute the
manufactured products
3. For tax purposes, a manufacturer does not necessarily
become engaged in the separate business of selling simply
because it sells the products it manufactures.
4. In certain cases, however, a manufacturer may also be
considered as engaged in the separate business of selling its
products.
5. To determine whether an entity engaged in the principal
business of manufacturing is also engaged in the separate
business of selling, its marketing system or sales operations
must be looked into. There are two:
a. Manufacturer enters into sales transactions and invoices
at its main office and the orders are then delivered. 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.
b. Sales transactions are entered into and perfected at
stores/warehouses maintained by the company, with
 these stores/warehouses serving as selling centers.
Entities adopting this marketing system are thus engaged
in the separate business of selling.
6. Iloilo Bottlers Inc. falls under the second category. The
Court ruled that plaintiff's delivery trucks were not used
solely for the purpose of delivering soft drinks previously
sold at Pavia (the plant site). The delivery trucks themselves
served as selling units or "rolling stores," wherein route
salesmen perfected and consummated sales transactions.
7. Plaintiff is thus engaged in the separate business of selling
or distributing soft drinks, independently of its business of
bottling them
8. Hence, it can be lawfully taxed by Iloilo City under
Ordinance No. 5 for transactions made within the
jurisdiction of Iloilo City.

Dispositive Portion
WHEREFORE, the appealed decision is hereby REVERSED.
The complaint in Civil Case No. 9046 is ordered DISMISSED.
No Costs.