CIR v. Algue G.R. No. L-28896 February 17, 1988 Deductions from Gross Income, and operate it.

Income, and operate it. Hence, despite the natural reluctance to surrender part of
Lifeblood Doctrine, Benefits-Protection Theory (Symbiotic Relationship Doctrine)
FACTS:
The Philippine Sugar Estate Development Company (PSEDC) appointed
private respondent Algue as its agent, authorizing it to sell its land, factories
and oil manufacturing process; and Algue and company worked for the
formation of the Vegetable Oil Investment Corporation, inducing other
persons to invest in it.
Veg Oil Investment Corp purchased the PSEDC properties. Hence, Algue
received as agent a commission and claimed the P75,000.00 promotional
fees that was paid to Algue and company as tax deduction.
The Commissioner of Internal Revenue or CIR contends that the claimed
deduction was properly disallowed because it was not an ordinary
reasonable or necessary business expense since these payments are
fictitious because most of the payees are members of the same family in
control of Algue, and  it serves as an attempt to evade a legitimate
assessment by involving an imaginary deduction.
However, the (Court of Tax Appeal) or CTA agreed with Algue, it held that
the said amount had been legitimately paid by the private respondent for
actual services rendered, in the form of promotional fees. 
one’s hard earned income to the taxing authorities, every person who is able
to must contribute his share in the running of the government.
The government for its part, is expected to respond in the form of tangible
and intangible benefits intended to improve the lives of the people and
enhance their moral and material values. This symbiotic relationship is the
rationale of taxation and should dispel the erroneous notion that it is an
arbitrary method of exaction by those in the seat of power.
But even as we concede the inevitability and indispensability of taxation, it is
a requirement in all democratic regimes that it be exercised reasonably and
in accordance with the prescribed procedure. If it is not, then the taxpayer
has a right to complain and the courts will then come to his succor. For all
the awesome power of the tax collector, he may still be stopped in his tracks
if the taxpayer can demonstrate, as it has here, that the law has not been
observed.
We hold that the claimed deduction by the private respondent was permitted
under the Internal Revenue Code and should therefore not have been
disallowed by the petitioner.

ISSUE:
Whether or not the Collector of Internal Revenue correctly disallowed the
P75,000.00 deduction claimed by private respondent Algue as legitimate
business expenses in its income tax returns.

RULING:

No.
The test of deductibility in the case of compensation payments is whether
they are reasonable and are, in fact, payments purely for service.

It is said that taxes are what we pay for civilization society. Without taxes,
the government would be paralyzed for lack of the motive power to activate
PAL v. Sec of Finance
GR No. 115852; 30 October 1995
F A C T S: The Value-Added Tax [VAT] is levied on the sale, barter or
exchange of goods and properties as well as on the sale or exchange of
services. These are various suits for certiorari and prohibition challenging
the constitutionality of RA 7716:
In the case at bar, PAL attacks the formal validity of Republic Act No. 7716.
PAL contends that it violates Art. VI, Section 26[1] which provides that
"Every bill passed by Congress shall embrace only one subject which shall
be expressed in the title thereof." It is contended that neither H. No. 11197
nor S. No. 1630 provided for removal of exemption of PAL transactions from
the payment of the VAT and that this was made only in the Conference
Committee bill which became Republic Act No. 7716 without reflecting this
fact in its title.
The constitutional requirement that every bill passed by Congress shall
embrace only one subject which shall be expressed in its title is intended to
prevent surprise upon the members of Congress and to inform the people of
pending legislation so that, if they wish to, they can be heard regarding it. If,
in the case at bar, petitioner did not know before that its exemption had been
withdrawn, it is not because of any defect in the title but perhaps for the
same reason other statutes, although published, pass unnoticed until some
event somehow calls attention to their existence.
Republic Act No. 7716 expressly amends PAL's franchise [P. D. No. 1590]
by specifically excepting from the grant of exemptions from the VAT PAL's
exemption under P. D. No. 1590. This is within the power of Congress to do
under Art. XII, Section 11 of the Constitution, which provides that the grant
of a franchise for the operation of a public utility is subject to amendment,
alteration or repeal by Congress when the common good so requires.

The title of Republic Act No. 7716 is:

AN ACT RESTRUCTURING THE VALUE-ADDED TAX [VAT] SYSTEM,

WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION,
AND FOR THESE PURPOSES AMENDING AND REPEALING THE
RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE
CODE, AS AMENDED, AND FOR OTHER PURPOSES.

I S S U E: Whether or not this amendment of Republic Act No. 7716 vioalted

Art. VI, Section 26[1] of the Constiturion?

H E L D: No. The title states that the purpose of the statute is to expand the
VAT system, and one way of doing this is to widen its base by withdrawing
some of the exemptions granted before. To insist that P. D. No. 1590 be
mentioned in the title of the law, in addition to Section 103 of the NIRC, in
which it is specifically referred to, would be to insist that the title of a bill
should be a complete index of its content.
 provisions are put in the Constitution as moral incentives to legislation, not
as judicially enforceable rights.
ARTURO M. TOLENTINO, petitioner, vs. THE SECRETARY OF FINANCE
G.R. No. 115455 August 25, 1994 Caltex Philippines, Inc. v Commission on Audit GR No. 92585, May 8, 1992 

FACTS: Herein various petitioners seek to declare RA 7166 as QUICK FACTS: Caltex Philippines questions the decisions of COA for disallowing the offsetting of its
claims for reimbursement with its due OPSF remittance
unconstitutional as it seeks to widen the tax base of the existing VAT system
and enhance its administration by amending the National Internal Revenue
FACTS:
Code.
In 1989, COA sent a letter to Caltex, directing it to remit its collection to the
Oil Price Stabilization Fund (OPSF), excluding that unremitted for the years
Finally, it is contended, for the reasons already noted, that R.A. No. 7716
1986 and 1988, of the additional tax on petroleum products authorized under
also violates Art. VI, Section 28(1) which provides that "The rule of taxation
the PD 1956. Pending such remittance, all of its claims for reimbursement
shall be uniform and equitable. The Congress shall evolve a progressive
from the OPSF shall be held in abeyance. The grant total of its unremitted
system of taxation."
collections of the above tax is P1,287,668,820. 
Caltex submitted a proposal to COA for the payment and the recovery of
ISSUE: Whether or not RA 7166 violates the principle of progressive system
claims. COA approved the proposal but prohibited Caltex from further
of taxation.
offsetting remittances and reimbursements for the current and ensuing
years. Caltex moved for reconsideration but was denied. Hence, the present
HELD: No, there is no justification for passing upon the claims that the law
petition. 
also violates the rule that taxation must be progressive and that it denies
petitioners' right to due process and that equal protection of the laws. The
ISSUE:
reason for this different treatment has been cogently stated by an eminent
Whether the amounts due from Caltex to the OPSF may be offsetted against
authority on constitutional law thus: "When freedom of the mind is imperiled
Caltex’s outstanding claims from said funds 
by law, it is freedom that commands a momentum of respect; when property
is imperiled it is the lawmakers' judgment that commands respect. This dual
RULING:
standard may not precisely reverse the presumption of constitutionality in
No. Taxation is no longer envisioned as a measure merely to raise revenue
civil liberties cases, but obviously it does set up a hierarchy of values within
to support the existence of government. Taxes may be levied with a
the due process clause."
regulatory purpose to provide means for the rehabilitation and stabilization of
a threatened industry which is affected with public interest as to be within the
Regressivity is not a negative standard for courts to enforce. What Congress
police power of the State. 
is required by the Constitution to do is to "evolve a progressive system of
PD 1956, as amended by EO 137, explicitly provides that the source of
taxation." This is a directive to Congress, just like the directive to it to give
OPSF is taxation. A taxpayer may not offset taxes due from the claims he
priority to the enactment of laws for the enhancement of human dignity and
may have against the government. Taxes cannot be subject of
the reduction of social, economic and political inequalities (Art. XIII, § 1), or
compensation because the government and taxpayer are not mutually
for the promotion of the right to "quality education" (Art. XIV, § 1). These
creditors and debtors of each other and a claim for taxes is not such a debt,
demand,, contract or judgment as is allowed to be set-off.  ISSUES:
DOCTRINE: [1] Is MCIAA a taxable person?
A taxpayer may not offset taxes due from the claims that he may have against the
government. [2] Is MCIAA exempt from realty taxation?
MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs.
HON. FERDINAND J. MARCOS, in his capacity as the Presiding Judge of HELD: 
the Regional Trial Court, Branch 20, Cebu City, (G.R. No. 120082; [1] Yes, although it previously enjoyed exemption from realty tax under its
September 11, 1996) charter (which has already been withdrawn by the LGC), this exemption
extended only to said tax, not to other taxes. Hence, MCIAA is still a taxable
FACTS: person.
Under its charter, the MCIAA shall be exempt from realty taxes imposed by
the National Government or any of its political subdivisions, agencies and [2] No, MCIAA is not exempt from realty tax by the City of Cebu. First, its tax
instrumentalities. In 1994, the Local Government Unit (LGU) of Cebu exemption under its charter has already been withdrawn. Second, while it is
City demanded payment for realty taxes on several parcels of land true that LGUs cannot levy tax on property of the Republic of the Philippines
belonging to MCIAA. or the National Government (outside Metro Manila), the beneficial use of
property should not be given to a taxable person.
MCIAA objected to the same as baseless and unjustified, claiming its
exemption under its charter. Also, it cites the LGC stating that LGUs taxing Here, MCIAA is already the owner of the parcels of land in question. Hence,
power does not extend to taxes, fees or charges of any kind on the National even the exemption under the LGC cannot apply.
Government, its agencies and instrumentalities, and local government units.

Cebu City countered, however, citing Sections 193 and 234 of the LGC
which withdraw tax exemptions of GOCCs and realty tax exemptions
previously granted to ore presently enjoyed by all persons, whether natural
or juridical, including GOCCs.

MCIAA paid tax under protest. It insisted that the taxing powers of LGUs do
not extend to the levy of taxes or fees of any kind on an instrumentality of
the national government. It also insisted that while it is indeed a GOCC, it
nonetheless stands on the same footing as an agency or instrumentality of
the national government by the very nature of its powers and functions.
 channeled directly to private persons, constitute expenditure of tax money
for private purposes. 

Hence, the tax is valid. 

LUTZ V ARANETA GR No L-7859 December 22, 1955 
LORENZO V. POSADAS ()G.R. No. L-43082 (64 PHIL 353) June 18, 1937
FACTS:
Walter Lutz, as Judicial Administrator of the Intestate Estate of Antonio FACTS:
Jayme Ledesma, sought to recover the sum of  Lorenzo, in his capacity as trustee of the estate of Thomas Hanley, brought
P14,666.40 paid by the estate as taxes from the Commissioner under an action against the Collector of Internal Revenue Posadas for the refund
Section e of Commonwealth Act 567 or the Sugar Adjustment Act, alleging of P2,052.74 inheritance taxes. The properties under the will were to pass to
that such tax is unconstitutional as it levied for the aid and support of the Matthew Hanley after 10 years.
sugar industry exclusively, which is in his opinion not a public purpose. 
Petitioner alleges the respondent to have exceeded in its tax collection,
ISSUE: Disregarding the allegation, respondent filed a motion praying that the
Is the tax valid?  trustee be made to pay such tax. The motion was granted. Petitioner paid
the amount in protest, however notified the respondent that until a refund is
HELD: prompted, suit would be bought for its recovery. Respondent overruled the
Yes. The tax is levied with a regulatory purpose, i.e. to provide means for protest. Hence, the case at bar.
the rehabilitation and stabilization of the threatened sugar industry. The act
is primarily an exercise of police power and is not a pure exercise of taxing  Issue: Whether or not the provisions of Act No. 3606 (Tax Law) which is
power.  favorable to the taxpayer be given retroactive effect?

As sugar production is one of the great industries of the Philippines and its
promotion, protection and advancement redounds greatly to the general
welfare, the legislature found that the general welfare demanded that the
industry should be stabilized, and provided that the distribution of benefits
had to sustain.  testator died in 1922. Laws cannot be applied retroactively. The Court states
Further, it cannot be said that the devotion of tax money to experimental
stations to seek increase of efficiency in sugar production, utilization of by-
products, etc., as well as to the improvement of living and working conditions
in sugar mills and plantations without any part of such money being
 Held and Reasoning: No. The respondent levied and assessed the
inheritance tax collected from the petitioner under the provisions of section
1544 of the Revised Administrative Code as amended by Act No. 3606.
However, the latter only enacted in 1930 – not the law in force when the
that it is a well-settled principle that inheritance taxation is governed by the
statue in force at the time of the death of the decendent. The Court also
emphasized that “a statute should be considered as prospective in its
operation, unless the language of the statute clearly demands or expresses
that it shall have retroactive effect…”  Act No. 3606 does not contain any
provisions indicating a legislative intent to give it a retroactive effect.
Therefore, the provisions of Act No. 3606 cannot be applied to the case at
bar.
GOMEZ VS. PALOMAR G.R. No. L-23645            October 29, 1968
Facts: 
Petitioner questions the constitutionality of the statute, claiming that R.A.
1635 otherwise known as as the Anti-TB Stamp Law, is violative of the equal
protection clause of the Constitution because it constitutes mail users into a
class for the purpose of the tax while leaving untaxed the rest of the
population and that even among postal patrons the statute discriminatory
grant exemptions.  its purpose is undoubtedly true in some contexts, it has no application to a
Moreover, petitioner contends that the statutory classification of taxpayers
has no relation to the object sought by the Anti-TB law.
Issue:
Whether or not the Anti-Tb law violates the equal protection clause of the
constitution.
convenience. The classification is likewise based on considerations of
administrative convenience. For it is now a settled principle of law that
"consideration of practical administrative convenience and cost in the
administration of tax laws afford adequate ground for imposing a tax on a
well recognized and defined class. Lastly, mail users were already a class by
themselves even before the enactment of the statue and all that the
legislature did was merely to select their class. Legislation is essentially
empiric and Republic Act 1635, as amended, no more than reflects a
distinction that exists in fact. As Mr. Justice Frankfurter said, "to recognize
differences that exist in fact is living law; to disregard [them] and concentrate
on some abstract identities is lifeless logic."
        The court explained that while the principle that there must be a
reasonable relationship between classification made by the legislation and
measure whose sole purpose is to raise revenue, so long as the
classification imposed is based upon some standard capable of reasonable
comprehension, be that standard based upon ability to produce revenue or
some other legitimate distinction, equal protection of the law has been
afforded."

Ruling:
        No, Supreme Court reiterated that the legislature has the inherent
power to select the subjects of taxation and to grant exemptions.  The
reason for this is that traditionally, classification has been a device for fitting
tax programs to local needs and usages in order to achieve an equitable
distribution of the tax burden. The legislative classifications must be
reasonable is of course undenied in this case. 

        The classification of mail users is not without any reason. It is based on
ability to pay, let alone the enjoyment of a privilege, and on administrative
 Different articles may be taxed at different amounts provided the rate is
uniform on the same class everywhere, with all people, at all times. 

Herein, the Act imposes a tax of P2 per square meter or a fraction thereof
upon every electric sign, billboard, etc. Wherever found in the Philippine
Islands. The rule of taxation upon such signs is uniform throughout the
CHURCHILL V CONCEPCION islands. The rule does not require taxes to be graded according to the value
of the subjects upon which they are imposed, especially those levied as
GR No 11572, September 22, 1916  privilege or occupation taxes. 

FACTS:
Section 100 of Act 2339 imposed an annual tax of P4 per square meter
upon electric signs, billboards, and spaces used for posting or displaying
temporary signs, and all signs displayed on premises not occupied by
buildings. The section was amended by Act 2432, reducing the tax to P2 per
square meter. Francis A. Churchill and Stewart Tait, co-partners in
Mercantile Advertising Agency, owned a billboard to which they were taxes
at P104. The tax was paid under protest. Churchill and Tait instituted the
action to recover the amount.
ISSUE:
Is the statute and the tax imposed void for lack of uniformity?  constantly and intimately all the relations of life than through the exactions
RULING:
No, the tax is valid.
It cannot be held that the Legislature has gone beyond the power conferred
upon it by the Philippine Bill in so far as the amount of the tax is concerned.
The power to impose taxes is one so unlimited in force and so searching in
extent, that the courts scarcely venture to declare that it is subject to any
restrictions whatever, except such as rest in the discretion of the authority
which exercises it. It reaches to every trade or occupation; to every object of
industry, use, or enjoyment; to every species of possession; and it imposes
a burden which, in case of failure to discharge it, may be followed by seizure
and sale or confiscation of property. No attribute of sovereignty is more
pervading, and at no point does the power of the government affect more
made under it.

Uniformity in taxation means that all taxable articles or kinds of property, of

the same class, shall be taxed at the same rate.

It does not mean that all lands, chattels, securities, incomes, occupations,
franchises, privileges, necessities, and luxuries shall all be assessed at the
same rate.
SERAFICA V TREASURER OF ORMOC GR No L-24813, April 28, 1969  APOSTOLIC PREFECT OF MOUNTAIN PROVINCE V CITY TREASURER
OF BAGUIO CITY GR No 47252, April 18, 1941 
FACTS:
Serafica seeks to nullify Ordinance 13 imposing a tax on every 1,000 board FACTS:
feet of lumber. He contends that the charter of Ormoc authorizes it to The Apostolic Prefect is a corporation sole, of religious character, organized
regulate and not tax. He alleges that the tax on the lumber constitutes under the Philippine laws, and with residence 
double taxation.  in Baguio. The City imposed a special assessment against properties within
its territorial jurisdiction, including those of the Apostolic Prefect, which
ISSUE: benefits from its drainage and sewerage system. The Apostolic Prefect
Is the city authorized to tax?  contends that its properties should be free from tax. 
RULING:
ISSUE:
Yes. Under the Local Autonomy Act, the power is broad and sufficiently
Is the Apostolic Prefect exempt from paying? 
plenary to cover everything, except those mentioned. Regulation and
taxation are two different things, the first being an exercise of police power RULING:
and the latter is not. Double taxation is not prohibited in the Philippines.  No, it is liable.
Regulation and taxation are two different things, the first being an exercise In its broad meaning, tax includes both general taxes and special
of police power,whereas the latter involves the exercise of the power of assessment. Yet actually, there is a recognized distinction between them in
taxation. While R.A. 2264 provides thatno city may impose taxes on forest that assessment is confined to local impositions upon property for the
products and although lumber is a forest product, the tax inquestion is payment of the cost of public improvements in its immediate vicinity and
imposed not on the lumber but upon its sale; thus, there is no double levied with reference to special benefits to the property assessed. 
taxation andeven if there was, it is not prohibited. A special assessment is not, strictly speaking, a tax; and neither the decree
nor the Constitution exempt the Apostolic Prefect from payment of said
special assessment. 
Furthermore, arguendo that exemption may encompass such assessment,
the Apostolic Prefect cannot claim exemption as it has not proven the
property in question is used exclusively for religious purposes; but that it
appears that the same is being used to other non-religious purposes. 
Thus, the Apostolic Prefect is required to pay the special assessment.  27 June 1968 to 9 April 1979, where its tax exeption in the franchise was
PHILIPPINE AIRLINES VS. EDU
HR L-41383, 15 August 1988
Facts: The Philippine Airlines (PAL) is engaged in the air transportation
business under a legislative franchise, Act 4271, wherein it is exempt from
the payment of taxes. On the strength of an opinion of the Secretary of
Justice (Opinion 307 of 1956), PAL was determined to have not been paying
motor vehicle registration fees since 1956. The Land Transportation
Commissioner required all tax exempt entities, including PAL, to pay motor
vehicle registration fees. PAL protested.
Issue: Whether registration fees as to motor vehicles are taxes to which
Philippine Airlines is exempt.
Held: Taxes are for revenue, whereas fees are exactions for purposes of
regulation and inspection, and are for that reason limited in amount to what
is necessary to cover the cost of the services rendered in that connection. It
is the object of the charge, and not the name, that determines whether a
charge is a tax or a fee.
The money collected under the Motor Vehicle Law is not intended for the
expenditures of the Motor Vehicle Office but accrues to the funds for the
construction and maintenance of public roads, streets and bridges.
As the fees are not collected for regulatory purposes as an incident to the
enforcement of regulations governing the operation of motor vehicles on
public highways, but to provide revenue with which the Government is to
construct and maintain public highways for everyone’s use, they are
veritable taxes, not merely fees.
PAL is, thus, exempt from paying such fees, except for the period between
repealed.
PHYSICAL THERAPY ORGANIZATION V MUNICIPAL BOARD
GR No L-10448, August 30, 1957 
FACTS:
Petitioner, an association of registered massagists and licensed operators of
massage clinics in the City of Manila and other parts of the country, filed an
action for declaratory judgment regarding the validity of ordinance 3659
which sought to collect fees for regulation of massage clinics. 
Issue: Whether or not license fee enforced by the Municipal Board is valid?
Ruling: Yes.
Section 18 of the Charter of Manila gives legislative powers to the municipal
board to enact all ordinances it may deem necessary and proper.
Here, the end sought to be attained in the Ordinance is to prevent the
commission of immorality and the practice of prostitution in an establishment
masquerading as a massage clinic where the operators thereof offer to
massage or manipulate superficial parts of the bodies of customers for
hygienic and aesthetic purposes.
The permit fee is made payable by the operator of a massage clinic who
may not be a massagist himself. Compared to permit fees required in other
operations, P100.00 may appear to be too large and rather unreasonable.
Manila Municipal Board considered the practice of hygienic and aesthetic engaged in business for profit. Ordinance 2529 and 3000 are not applicable
massage not as a useful and beneficial occupation which will promote and is to the Society.
conducive to public morals, and consequently, imposed the said permit fee
for its regulation.

AMERICAN BIBLE SOCIETY VS. MANILA

GR L-9637, 30 April 1957

Facts: In the course of its ministry, the Philippine agency of the American
Bible Society has been distributing and selling bibles and/or gospel portions
thereof throughout the Philippines and translating the same into several
Philippine dialets. The acting City Treasurer of Manila required the society to
secure the corresponding Mayor’s permit and municipal license fees,
together with compromise covering the period from the 4th quarter of 1945
to the 2nd quarter of 1953. The society paid such under protest, and filed
suit questioning the legality of the ordinances under which the fees are being
collected.

Issue: Whether the municipal ordinances violate the freedom of religious

profession and worship.

Held: A tax on the income of one who engages in religious activities is

different from a tax on property used or employed in connection with those
activities. It is one thing to impose a tax on the income or property of a
preacher, and another to exact a tax for him for the privilege of delivering a
sermon. The power to tax the exercise of a privilege is the power to control
or suppress its enjoyment. Even if religious groups and the press are not
altogether free from the burdens of the government, the act of distributing
and selling bibles is purely religious and does not fall under Section 27 (e) of
the Tax Code (CA 466). The fact that the price of bibles, etc. are a little
higher than actual cost of the same does not necessarily mean it is already
 be satisfied if the classification is based upon substantial distinctions which
makes real differences; these are germane to the purpose of legislation or
ordinance; the classification applies not only to present conditions but also to
future conditions substantially identical to those of the present; and the
classification applies equally to all those who belong to the same class.
PEPSI-COLA BOTTLING CO. VS. CITY OF BUTUAN GR L-22814, 28 These conditions are not fully met by the ordinance in question.
August 1968
The classification made in the exercise of the taxing authority, to be valid
Quick Facts: Pepsi Cola seeks to recover the sums paid by iut to the City of Butuan which must undergo 4 requisites of a VALID CLASSIFICATION to wit. 
was collected by the city pursuant to its ordninace as amended.
1. It must be based on substantial distinction 
Facts: Ordinance 110 was enacted by the City of Butuan imposing a tax per
2. It must germane to the purpose of law 
case of 24 bottles of softdrinks or carbonated drinks. The tax was imposed
3. It must apply equally to each member of the same class and 
upon dealers engaged in selling softdrinks or carbonated drinks. When
4. It must not be limited to existing conditions only.
Ordinance 110, the tax was imposed upon an agent or consignee of any
person, association, partnership, company or corporation engaged in selling
softdrinks or carbonated drinks, with “agent or consignee” being particularly
defined on the inserted provision Section 3-A. In effect, merchants engaged
in the sale of softdrinks, etc. are not subject to the tax unless they are
agents or consignees of another dealer who must be one engaged in
business outside the City. Pepsi-Cola Bottling Co. filed suit to recover sums
paid by it to the city pursuant to the Ordinance, which it claims to be null and
void.

Issue: Whether the Ordinance is discriminatory.

Held: The Ordinance, as amended, is discriminatory 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, would be exempt from the tax. The classification made in the
exercise of the authority to tax, to be valid must be reasonable, which would
G.R. NO. L-35048, April 23, 1974

WILLIAM LINES, INC., VS. THE CITY OF OZAMIS

FACTS: A petition for declaratory relief to annul an city ordinance of

respondent City of Ozamis was filed asserting that the imposition of a gross
sales tax on the gross freight and fares of the cargo and passengers
shipped or transported from Ozamis City collectible on owners, operators or
agents of shipping companies with shipping offices or shipping agencies
therein is tainted by legal and constitutional infirmity.

ISSUE:

Is the ordinance valid?

HELD: Yes. The 1935 Constitution declares that “each local government unit
shall have the power to create its own sources of revenue and to levy taxes,
subject to such limitations as may be provided by law.” A city can impose a
gross sales tax of a certain percentage on the gross freight and fares of the
cargo and passengers shipped or transported, since there is no restriction in
the Local Tax Code on such a revenue measure of this character. With the
enactment of Republic Act No. 2264, the widest latitude to the efforts of
municipal corporations to meet the ever-increasing need for revenues with
the appropriate taxing ordinances is recognized.