BATCH 3 – TAXATION 1 / ATTY.

DANTE MARANAN

ARTURO M. TOLENTINO, PETITIONER, VS. THE SECRETARY OF FINANCE AND THE

COMMISSIONER OF INTERNAL REVENUE, RESPONDENTS.
G.R. No. 115455, October 30, 1995

FACTS: These are motions seeking reconsideration of our decision dismissing the petitions filed
in these cases for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the
Expanded Value-Added Tax Law. The motions, of which there are 10 in all, have been filed by
the several petitioners in these cases, with the exception of the Philippine Educational Publishers
Association, Inc. and the Association of Philippine Booksellers, petitioners in G.R. No.
115931. CREBA asserts that R.A. No. 7716 (1) impairs the obligations of contracts.
It is claimed that the application of the tax to existing contracts of the sale of real property by
installment or on deferred payment basis would result in substantial increases in the monthly
amortizations to be paid because of the 10% VAT. The additional amount, it is pointed out, is
something that the buyer did not anticipate at the time he entered into the contract.

ISSUE: Does R.A. 7716 impairs the obligations and contracts?

HELD: The short answer to this is the one given by this Court in an early case: "Authorities from
numerous sources are cited by the plaintiffs, but none of them show that a lawful tax on a new
subject, or an increased tax on an old one, interferes with a contract or impairs its obligation,
within the meaning of the Constitution. Even though such taxation may affect particular contracts,
as it may increase the debt of one person and lessen the security of another or may impose
additional burdens upon one class and release the burdens of another, still the tax must be paid
unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing
contract in its true legal sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 Phil.
567, 574 (1919)) Indeed not only existing laws but also "the reservation of the essential attributes
of sovereignty, is . . . read into contracts as a postulate of the legal order." (Philippine-American
Life Ins. Co. v. Auditor General, 22 SCRA 135, 147 (1968)) Contracts must be understood as
having been made in reference to the possible exercise of the rightful authority of the government
and no obligation of contract can extend to the defeat of that authority. (Norman v. Baltimore and
Ohio R.R., 79 L.Ed. 885 (1935))

CAGAYAN ELECTRIC POWER & LIGHT CO., INC., PETITIONER, VS. COMMISSIONER OF
INTERNAL REVENUE AND COURT OF TAX APPEALS, RESPONDENTS.
G.R. No. 60126, September 25, 1985

FACTS: The petitioner is the holder of a legislative franchise, Republic Act No. 3247, under which
its payment of 3% tax on its gross earnings from the sale of electric current is "in lieu of all taxes
and assessments of whatever authority upon privileges, earnings, income, franchise, and poles,
wires, transformers, and insulators of the grantee, from which taxes and assessments the grantee
is hereby expressly exempted" (Sec. 3). On June 27, 1968, Republic Act No. 5431 amended
section 24 of the Tax Code by making liable for income tax all corporate taxpayers not specifically
exempt under paragraph (c)(1) of said section and section. 27 of the Tax Code notwithstanding
the "provisions of existing special or general laws to the contrary". Thus, franchise companies
were subjected to income tax in addition to franchise tax. However, in petitioner's case, its
franchise was amended by Republic Act No. 6020, effective August 4, 1969, by authorizing the
petitioner to furnish electricity to the municipalities of Villanueva and Jasaan, Misamis Oriental in

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addition to Cagayan de Oro City and the municipalities of Tagoloan and Opol. The
amendment reenacted the tax exemption in its original charter or neutralized the modification
made by Republic Act No. 5431 more than a year before. By reason of the amendment to section
24 of the Tax Code, the Commissioner of Internal Revenue in a demand letter dated February
15, 1973 required the petitioner to pay deficiency income taxes for 1968 to 1971. The petitioner
contested the assessments. The Commissioner cancelled the assessments for 1970 and 1971
but insisted on those for 1968 and 1969.

ISSUE: Is the petitioner's franchise is a contract which can be impaired by an implied repeal?

HELD: We hold that Congress could impair petitioner's legislative franchise by making it liable for
income tax from which heretofore it was exempted by virtue of the exemption provided for in
section 3 of its franchise. The Constitution provides that a franchise is subject to amendment,
alteration or repeal by the Congress when the public interest so requires (Sec. 8, Art. XIV, 1935
Constitution; Sec. 5, Art. XIV, 1973 Constitution). Section 1 of petitioner's franchise, Republic Act
No. 3247, provides that it is subject to the provisions of the Constitution and to the terms and
conditions established in Act No. 3636 whose section 12 provides that the franchise is subject to
amendment, alteration or repeal by Congress. Republic Act No. 5431, in amending section 24 of
the Tax Code by subjecting to income tax all corporate taxpayers not expressly exempted therein
and in section 27 of the Code, had the effect of withdrawing petitioner’s exemption from income
tax.

The Tax Court acted correctly in holding that the exemption was restored by the subsequent
enactment on August 4, 1969 of Republic Act No. 6020 which reenacted the said tax
exemption. Hence, the petitioner is liable only for the income tax for the period from January 1 to
August 3, 1969 when its tax exemption was modified by Republic Act No. 5431.

ABRA VALLEY COLLEGE, INC. REPRESENTED BY PEDRO V. BOKGONL A, PETITIONER,

VS. HON. JUAN P. AQUINO, JUDGE, COURT OF FIRST INSTANCE, ABRA; ARMIN M.
CARIAGA, PROVINCIAL TREASURER, ABRA; GASPAR V. BOSQUE, MUNICIPAL
TREASURER, BANGUED, ABRA; HEIRS OF PATERNO MILLARE, RESPONDENTS
G.R. No. L-39086, June 15, 1988

FACTS: Petitioner, an educational corporation and institution of higher learning duly incorporated
with the Securities and Exchange Commission in 1948, filed a complaint on July 10, 1972 in the
court a quo to annul and declare void the "Notice of Seizure" and the "Notice of Sale" of its lot
and building located at Bangued, Abra, for non-payment of real estate taxes and penalties
amounting to P5,140.31. Said "Notice of Seizure" of the college lot and building covered by
Original Certificate of Title No. Q-83 duly registered in the name of petitioner, plaintiff below, on
July 6, 1972, by respondents Municipal Treasurer and Provincial Treasurer, defendants below,
was issued for the satisfaction of the said taxes thereon. The "Notice of Sale" was caused to be
served upon the petitioner by the respondent treasurers on July 8, 1972 for the sale at public
auction of said college lot and building, which sale was held on the same date. Dr. Paterno Millare,
then Municipal Mayor of Bangued, Abra, offered the highest bid of P6,000.00 which was duly
accepted. The certificate of sale was correspondingly issued to him.

ISSUE: What is the proper interpretation of the phrase "used exclusively for educational
purposes."?

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HELD: The test of exemption from taxation is the use of the property for purposes mentioned in
the Constitution (Apostolic Prefect v. City Treasurer of Baguio, 71 Phil. 547 [19411).

It must be stressed however, that while this Court allows a more liberal and non-restrictive
interpretation of the phrase "exclusively used for educational purposes" as provided for in Article
VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always
been made that exemption extends to facilities which are incidental to and reasonably necessary
for the accomplishment of the main purposes. Otherwise stated, the use of the school building or
lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while the
use of the second floor of the main building in the case at bar for residential purposes of the
Director and his family, may find justification under the concept of incidental use, which is
complimentary to the main or primary purpose — educational, the lease of the first floor thereof
to the Northern Marketing Corporation cannot by any stretch of the imagination be considered
incidental to the purpose of education.

G. R. No. L-19201, June 16, 1965

REV. FR. CASIMIRO LLADOC, PETITIONER, VS. THE COMMISIONER OF THE INTERNAL
REVENUE AND THE COURT OF TAX APPEALS, RESPONDENTS.

FACTS: Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash
to Rev. Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental, and predecessor of
herein petitioner, for the construction of a new Catholic Church in the locality. The total amount
was actually spent for the purpose intended.

On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of April
29, 1960, the respondent Commissioner of Internal Revenue issued V an assessment for donee's
gift tax against the Catholic Parish of Victorias, Negros Occidental, of which petitioner was the
priest. The tax amounted to P1,370.00 including surcharges, interests of 1% monthly from May
15, 1958 to June 15, 1960, and the compromise for the late filing of the return.

Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest
and the motion for reconsideration presented to the Commissioner , of Internal Revenue were
denied. The petitioner appealed to the Court of Tax Appeals on November 2, 1960. In the petition
for Review, the Rev. Pr. Caslmiro Lladoc, claimed among others, that at the time of the donation,
he was not the parish priest in Victorias; that there is no legal entity or juridical person known as
the "Catholic Parish Priest of Victorias," and therefore, he should not be liable for the donee's gift
tax. It was also asserted that the assessment of the gift tax, even against the Roman Catholic
Church, would not be valid, for such would be a clear violation of the provisions of the Constitution.

ISSUE: Is the respondent exempted from gift donor’s tax being a religious institution?

HELD: Section 22(3), Art. VI of the Constitution of the Philippines, exempts from taxation
cemeteries, churches and parsonages or convents, appurtenant thereto, and all lands, buildings,
and improvements used exclusively for religious purposes. The exemption is only from the
payment of taxes assessed on such properties enumerated, as property taxes, as contra-
distinguished from excise taxes. In the present case, what the Collector assessed was a donee's
gift tax; the assessment was not on the properties themselves. It did not rest upon general
ownership; it was an excise upon the use made of the properties, upon the exercise of the

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privilege of receiving the properties (Phipps vs. Com. of Int. Rev., 91 F [2d7] 627.) Manifestly, gift
tax is not within the exempting provisions of the section just mentioned. A gift tax is not a property
tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the imposition
of which on property used exclusively for religious purposes, do not constitute an impairment of
the Constitution. As well observed by the learned respondent Court, the phrase "exempt from
taxation," as employed in the Constitution (supra) should not be interpreted to mean exemption
from all kinds of taxes. And there being ip no clear, positive or express grant of such privilege by
law, in favor of the petitioner, the exemption herein must be denied.

G.R. No. L-15270, September 30, 1961

JOSE V. HERRERA AND ESTER OCHANGCO HERRERA, PETITIONERS, VS. THE QUEZON
CITY BOARD OF ASSESSMENT APPEALS, RESPONDENT.

FACTS: On July 24, 1952, the Director of the Bureau of Hospitals authorized the petitioners to
establish and operate the 'St. Catherine's Hospital,' located at 58 D. Tuazon, Sta. Mesa Heights,
Quezon City. On or about January 3, 1953, the petitioners sent a letter to the Quezon City
Assessor requesting exemption from payment of real estate tax on the lot, building and other
improvements comprising the hospital stating that the same was established for charitable and
humanitarian purposes and not for commercial gain. After an inspection of the premises in
question and after a careful study of the case, the exemption from real property taxes was granted
effective the years 1953, 1954 and 1955.

"Subsequently, however, in a letter dated August 10, 1955 the Quezon City Assessor notified the
petitioners that the aforesaid properties were re-classified from 'exempt' to 'taxable' and thus
assessed for real property taxes effective 1956, enclosing therewith copies of Tax Declaration
Nos. 19321 to 19322 covering the said properties. The petitioners appealed the assessment to
the Quezon City Board of Assessment Appeals, which, in a decision dated March 31, 1956 and
received by the former on May 17, 1956, affirmed the decision of the City Assessor. A motion for
reconsideration thereof was denied on March 8, 1957. From this decision, the petitioners instituted
the instant appeal.

ISSUE: Is the hospital exempted from imposition of tax being a charitable institution?

HELD: Within the purview of the Constitutional exemption from taxation, the St. Catherine's
Hospital is, therefore, a charitable institution, and the fact that it admits pay-patients does not bar
it from claiming that it is devoted exclusively to benevolent purposes, it being admitted that the
income derived from pay-patients is devoted to the improvement of the charity wards, which
represent almost two-thirds (2/3) of the bed capacity of the hospital, aside from "out-charity
patients" who come only for consultation.

Again, the existence of "St. Catherine's School of Midwifery", with an enrollment of about 200
students, who practice partly in St. Catherine's Hospital and partly in St. Mary's Hospital, which,
likewise, belongs to petitioners herein, does not, and cannot, affect the exemption to which St.
Catherine's Hospital is entitled under our fundamental law. On the contrary, it furnishes another
ground for exemption. Seemingly, the Court of Tax Appeals was impressed by the fact that the

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size of said enrollment and the matriculation fee charged from the students of midwifery, aside
from the amount they paid for board and lodging, including transportation to St. Mary's Hospital,
warrants the belief that petitioners derive a substantial profit from the operation of the school
aforementioned. Such factor is, however, immaterial to the issue in the case at bar, for "all lands,
buildings and improvements used exclusively for religious, charitable or educational purposes
shall be exempt from taxation," pursuant to the Constitution, regardless of whether or not material
profits are derived from the operation of the institutions in question. In other words, Congress
may, if it deems fit to do so, impose taxes upon such "profits", but said "lands, buildings and
improvements" are beyond its taxing power.

Similarly, the garage in the building above referred to—which was obviously essential to the
operation of the school of midwifery, for the students therein enrolled practiced, not only in St.
Catherine's Hospital, but, also, in St. Mary's Hospital, and were entitled to transportation thereto—
and the fact that petitioner's family resided in said building—for Mrs. Herrera received no
compensation as directress of St. Catherine's Hospital—were incidental to the operation of the
latter and of said school, and, accordingly, did not affect the charitable character of said hospital
and the educational nature of said school.

G.R. No. L-49336, August 31, 1981

THE PROVINCE OF ABRA, REPRESENTED BY LADISLAO ANCHETA, PROVINCIAL

ASSESSOR, PETITIONER, VS. HONORABLE HAROLD M. HERNANDO, IN HIS CAPACITY
AS PRESIDING JUDGE OF BRANCH I, COURT OF FIRST INSTANCE ABRA; THE ROMAN
CATHOLIC BISHOP OF BANGUED, INC., REPRESENTED BY BISHOP ODILO ETSPUELER
AND REVEREND FELIPE FLORES, RESPONDENTS.

FACTS: It was the submission of counsel that an action for declaratory relief would be proper
only before a breach or violation of any statute, executive order or regulation.[5] Moreover, there
being a tax assessment made by the Provincial Assessor on the properties of respondent Roman
Catholic Bishop, petitioner failed to exhaust the administrative remedies available under
Presidential Decree No. 464 before filing such court action. Further, it was pointed out to
respondent Judge that he failed to abide by the pertinent provision of such Presidential Decree
which provides as follows: "No court shall entertain any suit assailing the validity of a tax
assessed under this Code until the taxpayer, shall have paid, under protest, the tax assessed
against him nor shall any court declare any tax invalid by reason of irregularities or informalities
in the proceedings of the officers charged with the assessment or collection of taxes, or of failure
to perform their duties within this time herein specified for their performance unless such
irregularities, informalities or failure shall have impaired the substantial rights of the taxpayer; nor
shall any court declare any portion of the tax assessed under the provisions of this Code invalid
except upon condition that the taxpayer shall pay the just amount of the tax, as determined by the
court in the pending proceeding."[6]

When asked to comment, respondent Judge began with the allegation that there "is no question
that the real properties sought to be taxed by the Province of Abra are properties of the respondent
Roman Catholic Bishop of Bangued, Inc."[7] The very next sentence assumed the very point it
asked when he categorically stated: "Likewise, there is no dispute that the properties including
their produce are actually, directly and exclusively used by the Roman Catholic Bishop of
Bangued, Inc. for religious or charitable purposes."[8] For him then: "The proper remedy of the
petitioner is appeal and not this special civil action."[9] A more exhaustive comment was submitted
by private respondent Roman Catholic Bishop of Bangued, Inc. It was, however, unable to lessen

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the force of the objection raised by petitioner Province of Abra, especially the due process
aspect. It is to be admitted that his opposition to the petition, pressed with vigor, ostensibly finds
a semblance of support from the authorities cited. It is thus impressed with a scholarly aspect. It
suffers, however, from the grave infirmity of stating that only a pure question of law is presented
when a claim for exemption is made.

ISSUE: Whether the Roman Catholic Bishop of Bangued, Inc’ property shall be exempted from
tax?

HELD: The present Constitution with that appearing in the 1935 Charter on the tax exemption of
"lands, buildings, and improvements." There is a marked difference. Under the 1935
Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all
lands, buildings, and improvements used exclusively for religious, charitable, or educational
purposes shall be exempt from taxation."[10] The present Constitution added "charitable insti-
tutions, mosques, and non-profit cemeteries" and required that for the exemption of "lands,
buildings, and improvements," they should not only be "exclusively" but also "actually" and
"directly" used for religious or charitable purposes.[11] The Constitution is worded differently. The
change should not be ignored. It must be duly taken into consideration. Reliance on past
decisions would have sufficed were the words "actually" as well as "directly" not added. There
must be proof therefore of the actual and direct use of the lands, buildings, and improvements for
religious or charitable purposes to be exempt from taxation. According to Commissioner of
Internal Revenue v. Guerrero:[12] "From 1906, in Catholic Church v. Hastings to 1966, in Esso
Standard Eastern, Inc. v. Acting Commissioner of Customs, it has been the constant and uniform
holding that exemption from taxation is not favored and is never presumed, so that if granted it
must be strictly construed against the taxpayer. Affirmatively put, the law frowns on exemption
from taxation, hence, an exempting provision should be construed strictissimi juris."[13] In Manila
Electric Company v. Vera,[14] a 1975 decision, such principle was reiterated, reference being
made to Republic Flour Mills, Inc. v. Commissioner of Internal Revenue;[15] Commissioner of
Customs v. Philippine Acetylene Co. & CTA;[16] and Davao Light and Power Co., Inc. v.
Commissioner of Customs.[17]

G.R. No. 108524, November 10, 1994

MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC., PETITIONER, VS.

DEPARTMENT OF FINANCE SECRETARY, COMMISSIONER OF THE BUREAU OF
INTERNAL REVENUE (BIR), AND REVENUE DISTRICT OFFICER, BIR MISAMIS ORIENTAL,
RESPONDENTS.

FACTS: Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation
whose members, individually or collectively, are engaged in the buying and selling of copra in
Misamis Oriental. The petitioner alleges that prior to the issuance of Revenue Memorandum
Circular 47-91 on June 11, 1991, which implemented VAT Ruling 190-90, copra was classified as
agricultural food product under § 103(b) of the National Internal Revenue Code and, therefore,
exempt from VAT at all stages of production or distribution.

Respondents represent departments of the executive branch of government charged with the
generation of funds and the assessment, levy and collection of taxes and other imposts.

The pertinent provision of the NIRC states:

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SEC. 103. Exempt Transactions. – The following shall be exempt from the value-added tax:
(a) Sale of nonfood agricultural, marine and forest products in their original state by the primary
producer or the owner of the land where the same are produced;
(b) Sale or importation in their original state of agricultural and marine food products, livestock
and poultry of a kind generally used as, or yielding or producing foods for human consumption,
and breeding stock and genetic material therefor;

Under § 103(a), as above quoted, the sale of agricultural non-food products in their original state
is exempt from VAT only if the sale is made by the primary producer or owner of the land from
which the same are produced. The sale made by any other person or entity, like a trader or dealer,
is not exempt from the tax. On the other hand, under § 103(b) the sale of agricultural food products
in their original state is exempt from VAT at all stages of production or distribution regardless of
who the seller is.

The question is whether copra is an agricultural food or non-food product for purposes of this
provision of the NIRC. On June 11, 1991, respondent Commissioner of Internal Revenue issued
the circular in question, classifying copra as an agricultural non-food product and declaring it
"exempt from VAT only if the sale is made by the primary producer pursuant to Section 103(a) of
the Tax Code, as amended."[2]

The reclassification had the effect of denying to the petitioner the exemption it previously enjoyed
when copra was classified as an agricultural food product under § 103(b) of the NIRC. Petitioner
challenges RMC No. 47-91 on various grounds, which will be presently discussed although not in
the order raised in the petition for prohibition.

ISSUE: Is the reclassification of copra from “food” to “non-food” violative of the equal protection
clause.

HELD: In the case at bar, we find no reason for holding that respondent Commissioner erred in
not considering copra as an "agricultural food product" within the meaning of § 103(b) of the NIRC.
As the Solicitor General contends, "copra per se is not food, that is, it is not intended for human
consumption. Simply stated, nobody eats copra for food." That previous Commissioners
considered it so, is not reason for holding that the present interpretation is wrong. The
Commissioner of Internal Revenue is not bound by the ruling of his predecessors. To the contrary,
the overruling of decisions is inherent in the interpretation of laws.

Petitioner likewise claims that RMC No. 47-91 is discriminatory and violative of the equal
protection clause of the Constitution because while coconut farmers and copra producers are
exempt, traders and dealers are not, although both sell copra in its original state. Petitioners add
that oil millers do not enjoy tax credit out of the VAT payment of traders and dealers.

The argument has no merit. There is a material or substantial difference between coconut farmers
and copra producers, on the one hand, and copra traders and dealers, on the other. The
former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the
differential treatment of persons so long as there is a reasonable basis for classifying them
differently.

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G.R. NO. 81311, June 30, 1988

KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC.,

HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, AND MARIO C. VILLANUEVA,
PETITIONERS, VS. HON. BIENVENIDO TAN, AS COMMISSIONER OF INTERNAL REVENUE,
RESPONDENT.

FACTS: These four (4) petitions, which have been consolidated because of the similarity of the
main issues involved therein, seek to nullify Executive Order No. 273 (EO 273, for short), issued
by the President of the Philippines on 25 July 1987, to take effect on 1 January 1988, and which
amended certain sections of the National Internal Revenue Code and adopted the value-added
tax (VAT, for short), for being unconstitutional in that its enactment is not allegedly within the
powers of the President; that the VAT is oppressive, discriminatory, regressive, and violates the
due process and equal protection clauses and other provisions of the 1987 Constitution.

ISSUE: Is the imposition of VAT violative of the provisions of the 1987 Constitution?

HELD: The petitioners' assertions in this regard are not supported by facts and circumstances
to warrant their conclusions. They have failed to adequately show that the VAT is oppressive,
discriminatory or unjust. Petitioners merely rely upon newspaper articles which are actually
hearsay and have no evidentiary value. To justify the nullification of a law, there must be a clear
and unequivocal breach of the Constitution, not a doubtful and argumentative implication.

As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. The Court,
in City of Baguio vs. De Leon, said:

"x x x In Philippine Trust Company v. Yatco (69 Phil. 420), Justice Laurel, speaking for the
Court, stated: 'A tax is considered uniform when it operates with the same force and effect
in every place where the subject may be found.'

"There was no occasion in that case to consider the possible effect on such a constitutional
requirement where there is a classification. The opportunity came in Eastern Theatrical
Co. v. Alfonso (83 Phil. 852, 862). Thus: 'Equality and uniformity in taxation means that all
taxable articles or kinds of property of the same class shall be taxed at the same rate. The
taxing power has the authority to make reasonable and natural classifications for purposes
of taxation; x x x.' About two years later, Justice Tuason, speaking for this Court in Manila
Race Horses Trainers Assn. v. de la Fuente (88 Phil. 60, 65) incorporated the above
excerpt in his opinion and continued; 'Taking everything into account, the differentiation
against which the plaintiffs complain conforms to the practical dictates of justice and equity
and is not discriminatory within the meaning of the Constitution.'

"To satisfy this requirement then, all that is needed as held in another case decided two
years later, (Uy Matias v. City of Cebu, 93 Phil. 300) is that the statute or ordinance in
question 'applies equally to all persons, firms and corporations placed in similar situation.'
This Court is on record as accepting the view in a leading American case (Carmichael v.
Southern Coal and Coke Co., 301 US 495) that 'inequalities which result from a singling

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out of one particular class for taxation or exemption infringe no constitutional limitation.'
(Lutz v. Araneta, 98 Phil. 148, 153)."

The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public,
which are not exempt, at the constant rate of 0% or 10%. The disputed sales tax is also equitable.
It is imposed only on sales of goods or services by persons engaged in business with an
aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are
consequently exempt from its application. Likewise exempt from the tax are sales of farm and
marine products, so that the costs of basic food and other necessities, spared as they are from
the incidence of the VAT, are expected to be relatively lower and within the reach of the general
public.

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