Iloilo Bottlers v City of Iloilo | G.R. No.

L-52019 (August 19, 1988)

FACTS

Iloilo Bottlers Inc., a company in the business of bottling and selling soft drinks, was demanded by the
City of Iloilo to pay an amount of 59,505 in the form of an license tax the city claims were due to it under
Ordinance No. 5, Series of 1960. It provides that manufacturers, bottlers, and distributers of soft drinks
in Iloilo are subject to a municipal license tax of 10 centavos per case of 24 bottles. Iloilo Bottling Inc.
asserted however that since their plant base has moved to municipality of Pavia shortly after the
aforementioned ordinance was enacted, they are not liable for any taxes. The city however, still
demanded taxes and also demanded back taxes under the claim that Iloilo Bottlers is still distributing in
the city of Iloilo since its transfer. Iloilo Bottlers paid the demanded license tax and back taxes under
protest.

ISSUE

WoN Iloilo Bottlers Inc. is free from liability and is thus entitled to a tax refund.

HOLDING

NO. Situs of taxation (place of taxation) depends on various factors including the nature of the tax and
subject matter thereof both of which must be scrutinized to reach a fair decision. The tax ordinance
enacted by the City of Iloilo imposes a tax on persons, firms, and corporations engaged in the business
of distribution of soft-drinks, manufacture of soft-drinks, and bottling of soft drinks within the territorial
jurisdiction of the City of Iloilo. There is no question that Iloilo Bottlers has moved out of Iloilo City’s
jurisdiction and into the municipality of Pavia where its plant now stands; therefore, the latter two
conditions for taxation are no longer applicable. The ruling now depends upon whether or not Iloilo
Bottlers can be considered as distributing its products within Iloilo city. Iloilo Bottlers disclaims liability,
saying that it does not independently distribute but rather actively sells directly to its consumers.
Distribution is therefore only incidental to its business. Iloilo Bottlers is indeed considered as distributing
within the city since while the manufacturing and bottling occurs outside of Iloilo City, the drinks are
sold in Iloilo city to consumers in a “moving store” fashion. The transactions are considered to occur
within the city. The tax imposed under Ordinance No. 5 is an excise tax. By its nature, the power to levy
an excise tax depends upon the place where the business is done, or the occupation is engaged in, or
where the transaction took place. In this case, it is a tax on the privilege of distributing, manufacturing
or bottling soft drinks. Even though the base of operations is at Pavia, the areas of transactions where it
conducts its business are within Iloilo City limits. The situs for excise tax is the area of transaction, not
necessarily base of operation. Since Iloilo Bottlers does distribute within city limits, it is therefore subject
to the ordinance and therefore should pay the pertinent amounts to the city of Iloilo.