Common Limitations on Local Government
Unit
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:
(a) Income tax, except when levied on
banks and other financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts,
legacies and other acquisitions mortis
causa, except as otherwise provided
herein;
(d) Customs duties, registration fees of
vessel and wharfage on wharves,
tonnage dues, and all other kinds of
customs fees, charges and dues except
wharfage on wharves constructed and
maintained by the local government unit
concerned;
(e) Taxes, fees, and charges and other
impositions upon goods carried into or
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;
(f) Taxes, fees or charges on agricultural
and aquatic products when sold by
marginal farmers or fishermen;
(g) Taxes on business enterprises
certified to by the Board of Investments
as pioneer or non-pioneer for a period of
six (6) and four (4) years, respectively
from the date of registration;
(h) Excise taxes on articles enumerated
under the national Internal Revenue
Code, as amended, and taxes, fees or
charges on petroleum products;
(i) Percentage or value-added tax (VAT)
on sales, barters or exchanges or similar
transactions on goods or services
except as otherwise provided herein;
(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;
(k) Taxes on premiums paid by way or
reinsurance or retrocession;
(l) Taxes, fees or charges for the
registration of motor vehicles and for the
issuance of all kinds of licenses or
permits for the driving thereof, except
tricycles;
(m) Taxes, fees, or other charges on
Philippine products actually exported,
except as otherwise provided herein;
(n) Taxes, fees, or charges, on
Countryside and Barangay Business
Enterprises and cooperatives duly
registered under R.A. No. 6810 and
Republic Act Numbered Sixty-nine
hundred thirty-eight (R.A. No. 6938)
otherwise known as the "Cooperative
Code of the Philippines" respectively;
and
(o) Taxes, fees or charges of any kind
on the National Government, its
agencies and instrumentalities, and local
government units.
Petron Corp vs Tiangco GR No. 158881
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." The stated total amount due
was P6,259,087.62, a figure derived
from the gross sales of the depot during
the years in question. The computation
sheets that were attached to the letter
made reference to Ordinance 92-03, or
the New Navotas Revenue Code
(Navotas Revenue Code), though such
enactment was not cited in the letter
itself.
 Petron duly filed with Navotas a letter-
protest to the notice of assessment
pursuant to Section 195 of the Code. It
argued that it was exempt from local
business taxes in view of Art. 232(h) of
the Implementing Rules (IRR) of the
Code, 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. The letter-protest was denied
by the Navotas Municipal Treasurer
 Petron filed with the Malabon RTC a
Complaint for Cancellation of
Assessment for Deficiency Taxes with
Prayer for the Issuance of a Temporary
Restraining Order (TRO) and/or
Preliminary Injunction. The quested
TRO was not issued by the Malabon
RTC upon manifestation of respondents
that they would not proceed with the
closure of Petron’s Navotas bulk plant
until after the RTC shall have decided
the case on the merits.
  The Malabon RTC rendered its
Decision dismissing Petron’s complaint
and ordering the payment of the
assessed amount. Eleven days later,
Petron received a Closure Order from
the Mayor, directing Petron to cease and
desist from operating the bulk plant.
Petron sought a TRO from the Malabon
RTC, but this was denied. Petron also
filed a motion for reconsideration of the
order of denial, but this was likewise
denied.
 This Court issued a TRO, enjoining the
respondents from closing Petron’s
Navotas bulk plant or otherwise
interfering in its operations.
Issue: Whether or not the clause taxes, fees or
charges on petroleum products" in Section
133(h) precludes local government units from
imposing business taxes based on the sale of
petroleum products.?
Held: Yes. As earlier observed, Section 133(h)
provides two kinds of taxes which cannot be
imposed by local government units: "excise
taxes on articles enumerated" under the NIRC,
as amended; and "taxes, fees or charges on
petroleum products." There is no doubt that
among the excise taxes on articles enumerated
under the NIRC are those levied on petroleum
products, per Section 148 of the NIRC.
Congress has the constitutional authority to
impose limitations on the power to tax of local
government units, and Section 133 of the Code
is one such limitation. Indeed, the provision is
the explicit statutory impediment to the
enjoyment of absolute taxing power by local
government units, not to mention the reality that
such power is a delegated power. To cite one
example, under Section 133(g), local
government units are disallowed from levying
business taxes on "business enterprises certified
to by the Board of Investments as pioneer or
non-pioneer for a period of six (6) and (4) four
years, respectively from the date of registration."
Section 133(h) states that local government
units "shall not extend to the levy of xxx taxes,
fees or charges on petroleum products."
Respondents assert that the phrase "taxes, fees
or charges on petroleum products" pertains to
the imposition of direct or excise taxes on
petroleum products, and not business taxes. If
the phrase actually pertains to excise taxes, then
it would be an exercise in utter redundancy,
since the preceding phrase already prohibits the
imposition of excise taxes on articles already
subject to such taxes under the NIRC, such as
petroleum products. There would be no sense
on the part of the legislature to twice emphasize
in the same sentence that excise taxes on
petroleum products are beyond the pale of local
government taxation.
The language of Section 133(h) makes plain that
the prohibition with respect to petroleum
products extends not only to excise taxes
thereon, but all "taxes, fees and charges." The
earlier reference in paragraph (h) to excise taxes
comprehends a wider range of subjects of
taxation: all articles already covered by excise
taxation under the NIRC, such as alcohol
products, tobacco products, mineral products,
automobiles, and such non-essential goods as
jewelry, goods made of precious metals,
perfumes, and yachts and other vessels
intended for pleasure or sports. In contrast, the
later reference to "taxes, fees and charges"
pertains only to one class of articles of the many
subjects of excise taxes, specifically, "petroleum
products". While local government units are
authorized to burden all such other class of
goods with "taxes, fees and charges," excepting
excise taxes, a specific prohibition is imposed
barring the levying of any other type of taxes
with respect to petroleum products.
While Section 133(h) does not generally bar
the imposition of business taxes on articles
burdened by excise taxes under the NIRC, it
specifically prohibits local government units
from extending the levy of any kind of "taxes,
fees or charges on petroleum products."
Accordingly, the subject tax assessment
is ultra vires and void.
Batangas City vs Pilipinas Shell Petroleum
Corporation GR No. 187631
Facts:
Petitioner Batangas City is a local government
unit (LGU) with the capacity to sue and be sued
under its Charter and Section 22(a)(2) of the
Local Government Code (LGC) of 1991.
Petitioners Teodulfo A. Deguito and Benjamin E.
Pargas are the CityLegal Officer and City
Treasurer, respectively, of Batangas City.
Respondent Pilipinas Shell Petroleum
Corporation operates an oil refinery and depot in
Tabagao, Batangas City, which manufactures
and produces petroleum products that are
distributed nationwide.
 In 2002, respondent was only paying the
amount of ₱98,964.71 for fees and other
charges which include the amount of
₱1,180.34 as Mayor’s Permit. However,
on February 20, 2001, petitioner
Batangas City, through its City Legal
Officer, sent a notice of assessment to
respondent demanding the payment of
₱92,373,720.50 and ₱312,656,253.04
as business taxes for its manufacture
and distribution of petroleum products.
In addition, respondent was also
required and assessed to pay the
amount of ₱4,299,851.00 as Mayor’s
Permit Fee based on the gross sales of
its Tabagao Refinery. The assessment
was allegedly pursuant of Section 134 of
the LGC of 1991 and Section 23 of its
Batangas City Tax Code of 2002.
 Respondent filed a protest on April 17,
2002 contending among others that it is
not liable for the payment of the local
business tax either as a manufacturer or
distributor of petroleum products. It
further argued that the Mayor’s Permit
Fees are exorbitant, confiscatory,
arbitrary, unreasonable and not
commensurable with the cost of issuing
a license.
 Petitioners denied respondent’s protest
and declared that under Section 14 of
the Batangas City Tax Code of 2002,
they are empowered to withhold the
issuance of the Mayor’s Permit for
failure of respondent to pay the business
taxes on its manufacture and distribution
of petroleum products. Respondent filed
a Petition for Review pursuant to
Section 195 of the LGC of 1991 before
the Regional Trial Court (RTC) of
Batangas City.1âwphi1
 In its petition, respondent maintained
that petitioners have no authority to
impose the said taxes and fees, and
argued that the levy of local business
taxes on the business of manufacturing
and distributing gasoline and other
petroleum products is contrary to law
and against national policy. It further
contended that the Mayor’s Permit Fee
levied by petitioners were unreasonable
and confiscatory.
  In its Answer, petitioners contended that
the City of Batangas can legally impose
taxes on the business of manufacturing
and distribution of petroleum products,
including the Mayor’s Permit Fees upon
respondent.
 The RTC of Batangas City rendered a
Decision sustaining the imposition of
business taxes by petitioners upon the
manufacture and distribution of
petroleum products by respondent.
 CTA Second Division granted
respondent’s petition. It held that
respondent is not subject to the
business taxes on the manufacture and
distribution of petroleum products
because of the express limitation
provided under Section 133(h) of the
LGC
Issue: Whether or not an LGU is empowered
under the LGC to impose business taxes on
persons or entities engaged in the business of
manufacturing and distribution of petroleum
products?
Held: No. At the outset, it must be emphasized
that although the power to tax is inherent in the
State, the same is not true for LGUs because
although the mandate to impose taxes granted
to LGUs is categorical and long established in
the 1987 Philippine Constitution, the same is not
all encompassing as 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.
This Court expounded that the LGUs’ power to
tax is subject to the limitations set forth under
Section 133 of the LGC. Thus: It is already well-
settled that although the power to tax is inherent
in the State, the same is not true for the LGUs to
whom the power must be delegated by
Congress and must be exercised within the
guidelines and limitations that Congress may
provide
Section 133 provides for the common
limitations on the taxing powers of LGUs.
Among the common limitations on the taxing
powers of LGUs under Section 133 of the
LGC is paragraph (h)
Section 133(h) clearly specifies the two kinds
of taxes which cannot be imposed by LGUs:
(1) excise taxes on articles enumerated
under the NIRC, as amended; and (2) taxes,
fees or charges on petroleum products.
Indisputably, the power of LGUs to impose
business taxes derives from Section 143 of
the LGC. However, the same is subject to the
explicit statutory impediment provided for
under Section 133(h) of the same Code which
prohibits LGUs from imposing "taxes, fees or
charges on petroleum products." It can,
therefore, be deduced that although
petroleum products are subject to excise tax,
the same is specifically excluded from the
broad power granted to LGUs under Section
143(h) of the LGC to impose business taxes.
Section 133(h) of the LGC makes plain that the
prohibition with respect to petroleum products
extends not only to excise taxes thereon, but all
"taxes, fees or charges." The earlier reference in
paragraph 143(h) to excise taxes comprehends
a wider range of subject of taxation: all articles
already covered by excise taxation under the
NIRC, such as alcohol products, tobacco
products, mineral products, automobiles, and
such non-essential goods as jewelry, goods
made of precious metals, perfumes, and yachts
and other vessels intended for pleasure or
sports. In contrast, the later reference to "taxes,
fees and charges" pertains only to one class of
articles of the many subjects of excise taxes,
specifically, "petroleum products." While LGUs
are authorized to burden all such other class of
goods with "taxes, fees and charges," excepting
excise taxes, a specific prohibition is imposed
barring the levying of any other type of taxes
with respect to petroleum products