April 8, 2016

BLGF OPINION NO. 007-2016

CO-LGUOS-PPPSD

Ms. Lydia P. Fernandez

President
LBP Service Corporation
Unit C & D
21/F Petron Megaplaza Bldg.
358 Sen. Gil Puyat Ave., Makati City
SUBJECT : Letter-Request for Opinion on LBP Service Corporation's
Liability to Pay Business Tax and Other Regulatory Fees and
Its Obligation to Secure a Permit to Operate

Madam :

This has reference to your letter-query dated April 1, 2016, requesting

this Bureau to shed some light on whether or not LBP Service Corporation
(LBPSC) is required to secure a permit to operate and pay business tax and
other regulatory fees in Tagaytay City despite the fact that LBPSC allegedly
does not have an office in said area.
The factual antecedents as chronicled in your letter are as follows:
1. LBP Service Corporation (LBPSC) is a private corporation duly
registered with Securities and Exchange Commission and with
Department of Labor and Employment engaged in providing
manpower outsourcing services nationwide;
2. The principal place of business of LBPSC is Makati City;
3. Makati City already subjects LBPSC to local business tax and
other regulatory fees;
4. LBPSC was awarded a contract by PAGCOR-Tagaytay;
5. Tagaytay City requires LBPSC to secure a permit to operate and
pay the business tax for the service income earned from said
contract and other regulatory fees with the local government;
6. LBPSC allegedly has no office in Tagaytay City.
The threshold question in the instant petition is whether a business
establishment awarded with a contract in a place separate and distinct from
where its principal office is located is still required to obtain a business
permit and to pay regulatory fees in the place stated in the contract in order
to execute its functions despite the fact that it allegedly maintains no office
therein. AIDSTE

In order to resolve the issues at hand, attached is a copy of our letter

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 dated January 27, 2015 addressed to the Managing Director for STERIX
Incorporated bearing on similar matters, the pertinent portions of which is
quoted as follows:
"Based on the representation made above, STERIX's principal
office is located in Muntinlupa City where it is paying its business
taxes based on its 100% gross sales. All sales invoices are recorded
in the principal office and there are no other registered branches or
warehouses in other local government units being maintained by the
Company.
In view thereof and since STERIX has no branch office, sales
outlet or warehouse in said localities the 70%-30% allocation
mentioned by Atty. Telan in her letter of January 7, 2015 is not
applicable to the issue at hand. Such allocation scheme provided
under Article 243(b)(3) of the Implementing Rules & Regulations (IRR)
implementing Section 150(b) of the Local Government Code (LGC) of
1991 is applicable only in cases where the business maintains a
factory, project office, plant or plantation.
In the instant case, the applicable provisions of law is Article
243(b)(2), quoted as follows:
"ARTICLE 243. Situs of the Tax. — (a) . . . .
xxx xxx xxx
(b) Sales Allocation —
(1) ...
(2) In cases where there is no such branch,
sales office, or warehouse in the locality where the
sale is made, the sale shall be recorded in the
principal office along with the sales made by said
principal office and the tax shall accrue to the city
or municipality where said principal office is
located." (Emphasis ours)
With regard to the required business permit, this Bureau, based
on the information submitted, believes that there is no need for
STERIX to secure business permit from local government units
concerned as the presence of its personnel to said localities is merely
to fulfill its contractual obligation to its clientele and their presence to
carry out this obligation contracted by the business from their clients
is only temporary.
This opinion is expressed in view of the tenets embodied in
Section 147 which provides that the imposition and collection of such
regulatory fee (business permit fee) "commensurate with the cost of
regulation, inspection and licensing before any person may engage in
such business."
To elucidate and affirm our stand on the issue and as viewed
from a different perspective, the absence of any branch office, sales
outlet or warehouse of STERIX repudiate the requirement of securing
business permit as, in the first place, there is no fixed business
establishment to regulate, inspect, and issue license to justify the
imposition. For after all how can a regulating authority impose its
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 authority to regulate when the very subject of the regulation is non-
existent.
Lastly, on the issue of business permit fee being computed
based on the entire revenue of the operations of STERIX, Article 233
of the Implementing Rules & Regulations (IRR) implementing Section
147, in relation to Section 151, all of the LGC, is quoted as follows:
"ARTICLE 233. Fees and Charges. — The
municipality may impose and collect such reasonable fees
and charges on businesses and occupations and, except
as reserved to the province in Article 229 of this Rule, on
the practice of any profession or calling before any person
may engage in such business or occupation, or practice
such profession or calling provided that such fees or
charges shall only be commensurate to the cost of issuing
the license or permit and the expenses incurred in the
conduct of the necessary inspection or surveillance.
No such fee or charge shall be based on
capital investment or gross sales or receipts of the
person or business liable therefor." (Emphasis ours)
It is hoped that we have clarified matters.

Very truly yours,

(SGD.) JOCELYN T. PENDON

OIC-Executive Director

ATTACHMENT
LGU Operations Service
Tracking Slip

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 LBP SERVICE CORPORATION
Beyond People . . .
April 1, 2016
MS. JOCELYN T. PENDON
OIC-Executive Director
Bureau of Local Government Finance
Bangko Sentral ng Pilipinas Complex,
Roxas Boulevard, Manila
Dear Ms. Pendon,
LBP Service Corporation (LBPSC) is a private corporation duly registered
with the Securities and Exchange Commission and with the Department of Labor
and Employment (under DOLE Order 18-A) engaged in providing manpower
outsourcing services nationwide. AaCTcI

Our principal place of business is Makati City, thus, we are subjected to the
local ordinance of the City Government of Makati for local business tax and other
regulatory fees. LBPSC is also registered with the Large Taxpayer Division of the
Bureau of Internal Revenue in Makati City.
Lately, LBPSC was awarded a contract by PAGCOR-Tagaytay and is now
being required by the City Treasurer of Tagaytay to secure a permit to operate
and pay the business tax for the service income earned from said contract and
other regulatory fees with the local government despite the fact that we do not
have an office in the said area.
In view of the above, may we request for an opinion from your good office if
LBPSC is still required to secure a permit to operate and pay the business tax and
other regulatory fees in Tagaytay City because of stated contract.
We hope for your immediate response on the above matter.
Thank you very much.
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 Very truly yours,

(SGD.) LYDIA P. FERNANDEZ

President
Handwritten Note:
4/7
Marz,
Pls. prepare our draft action. Per info LBPSC has no office in Tagaytay City
and their presence is purely the deployment of service personnel at PAGCOR-
Tagaytay.

Thanks,

Kuya Tom

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