OPCIÓN 1 No usar refrigerantes
4.3.5. Calidad Ambiental Interior
Q: Who are covered by the local business tax?
1. Manufacturers, assemblers and producers 2. Wholesalers, dealers and distributors 3. Exporters, manufacturers of essential
commodities
4. Retailers (if both wholesale and retail, then pay both taxes)
5. Contractors
6. Banks and other financial institutions28
28 DOF LOCAL FINANCE CIRCULAR 01-93 provides for the guidelines governing the power of municipalities and provinces to impose a business tax on banks and other banking institutions.
DOFLOCAL FINANCE CIRCULAR 2-93provides for the guidelines for insurance companies. DOF LOCAL FINANCE CIRCULAR 3-93 provides for guidelines for financing companies.
7. Peddlers
8. Other business not specified
Note: Those already subject to tax under (1) to (7) can no longer be subject to tax under (8) otherwise it will be deemed as double taxation. (see City of Manila v. Coco-Cola Bottlers [August 4, 2009])
A corporation with no business operation, and is merely an investor in another corporation, is not liable for local business tax. ORLEYTE COMPANY (PHILIPPINE BRANCH) VS. CITY OF MAKATI AND DULCE P.CRUZ, IN HER CAPACITY AS
TREASURER OF MAKATI, CTA AC NO. 80, NOVEMBER 14, 2012
The operator of the North Expressway falls within the classification of a contractor subject to local business tax based on its gross receipts. MANILA NORTH TOLLWAYS
CORPORATION VS.THE MUNICIPALITY OF GUIGUINTO BULACAN, CTAACNO.82,DECEMBER 03,2012
Q: What are the conditions before a business may be subject to local business tax?
Before a business may be subject to local business tax, the business must not be subject to VAT or percentage tax under the NIRC or if the business is subject to excise, VAT or percentage tax under the NIRC, the tax rate shall not exceed 2% of gross sales/ receipts of the preceding calendar year.
Q: Can an LGU tax a condominium corporation?
No. As held by the Supreme Court in YAMANE V.BA LEPANTO CONDOMINIUM CORP [OCTOBER 25, 2005], condominium corporations are not “businesses” as the same is defined under the LGC which is a
“commercial activity regularly engaged with a view to profit.” Even if a condominium corporation can levy fees, these are used merely to finance the expenses of the condominium and nothing more.
Q: What is the tax base of the local business tax?
The local business tax is imposed on gross receipts.
In ERICSSON TELECOMMUNICATIONS V. CITY OF PASIG [NOVEMBER 22, 2007], Ericsson was assessed for deficiency local business tax but countered that the assessment was erroneous for having been based on is gross revenue rather than just its gross receipts. The Supreme Court ruled that the local business tax must be imposed on gross receipts. In
the said case, the Supreme Court differentiated gross receipts and gross revenue. Gross receipts include money or its equivalent actually or constructively received in consideration of services rendered or articles sold, exchanged, or leased, whether actual or constructive whereas gross revenue covers money or its equivalent actually or constructively received, including the value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be received.
Q: What is the ceiling on business tax imposed on municipalities within Metro Manila?
The municipalities in Metro Manila may levy taxes at rates which shall not exceed by 50% the maximum rate prescribed in Section 143, LGC (see Section 144, LGC)
Q: What are the conditions before business may be considered officially retired?
A business subject to tax shall, upon termination thereof, submit a sworn statement of its gross sales or receipts for the current year. If he ax paid during the year be less than the tax due on said gross sales or receipts of the current year, the difference shall be paid before the business is considered officially retired (see Section 145, LGC)
Q: Are the local tax payments paid for the privilege of carrying on business in the year paid or for having engaged in business the previous year?
It is paid for the privilege of carrying on business in the year paid. In MOBIL PHILIPPINES V. THE CITY TREASURER OF MAKATI [JULY 14,2005], for the year 1998, Mobil paid a total of P2,262,122.48 to the City Treasurer of Makati as business taxes for the year 1998. The amount of tax as computed based on Mobil’s gross sales for 1998 is only P1,331,638.84.
Since the amount paid is more than the amount computed based on Mobil’s actual gross sales for 1998, Mobile upon its retirement is not liable for additional taxes to the City of Makati. The Supreme Court found that the City Treasurer erroneously reated the assessment and collection of tax as if it were an income tax by rendering an additional
assessment of P1,331,638.84 for the revenue generated for the year 1998.29
Q: What are the rules on payment of business tax?
a. The business taxes shall be payable for every separate and distinct establishment or place where business subject to tax is conducted and one line of business does not become exempt by being conducted with some other business for which such tax has been paid
b. In cases where a person conducts or operates 2 or more of the businesses subject to local business tax:
i. If both businesses are subject to the same rate – the tax shall be computed on the combined total gross sales or receipts ii. If both businesses are subject to different
rates – the gross sales or receipts of each business shall be separately reported for the purpose of computing the tax due from each business. (see Section 146, LGC)
Fees on business and occupation
Q: May a municipality impose a professional tax?
No. The municipality may impose and collect such reasonable fees and charges on business and occupation and on the practice of any profession or calling except professional tax which is reserved to the province. (see Section 147, LGC)
Q: What is the situs of local business taxes as stated in Section 150 of the LGC?
Section 150(a) –
29 Another example: A corporation whose gross sales was 10 million in 2008 and 20 million in 2009, the local business tax payable in January 2009 is based on 10 million (gross receipts for 2008) but the same is payment for the right to do business in 2009. Thus, on the year of retirement, the company will only be liable if the actual local business tax on the basis of current year sales is more than the local business tax paid based on previous year’s sales. To continue the example, if the sales of the company are also P10 million as of the date of retirement in 2010, this means that the payment made in January 2010 based on the 2009 gross receipts is sufficient to cover the local business tax due upon retirement.
If there is branch/sales office in the municipality or city where the sale or transaction is made, the tax shall accrue and shall be paid where such branch or sales outlet is located.
If there is no branch/sales office in the city or municipality where the sale or transaction is made, the sale shall be recorded in the principal office and the taxes shall accrue and shall be paid to such city or municipality (where the principal office is located) With
branch/sales office
Recorded at Allocation
Yes Branch/sales
office
None
No Principal office None
Note: An office may be considered a sales office (1) if the office only accepts orders but does not issue sales invoice; (2) if the office does not accept orders but issues sales invoices or (3) if the office accepts orders and issues sales invoices (see BLGF Opinion dated January 15, 2007)
Section 150(b) –
The following sales allocation shall apply to manufacturers with factories, plants and plantations, etc.:
If the plantation and factory are located in the same place
1. 30% of all sales recorded in the principal office shall be taxable by the city or municipality where principal office is located 2. 70% shall be taxable by the city or
municipality where
If the plantation and factory are not located in the same place, the 70% above shall be divided as follows
1. 60% to the city or municipality where the factory is located
2. 40% to the city or municipality where the plantation is located
Plantation &
factory in same location
Allocation to principal
Allocation to factory, etc
Yes 30% 70%
No 30% The 70% above
shall be divided:
1. Factory – 60%
2. Plantation – 40%
If two or more factories, etc = 70% is prorated Note: Section 150(b) is only resorted to if there is no branch or sales office. In addition, the allocation shall be applied irrespective of whether or not the sales are made in the locality where the factory, plant or plantation is located.
Q: ABC is engaged in manufacturing household products. It secured the services of an independent contractor XYZ to provide local physical distribution facilities within the specified places in the Philippines. XYZ has a warehouse in Tacloban City and makes deliveries to ABC’s customers outside the city. Under the contract, ABC can also make deliveries of its products in other places of the country from its own warehouse in Makati. What is the situs of taxation of the sales made by ABC and XYZ?
As held in BUREAU OF LOCAL GOVERNMENT OPINION DATED MARCH 7, 1994, the products taken from the warehouse of PBE in Tacloban City and delivered to CPI's customers outside the city should be recorded and the tax thereon paid in Tacloban City where said warehouse is situated. As to the deliveries or sales made by CPI of products taken from its warehouse in Makati to places where it does not have any branch, sales office, or another warehouse, the same should be recorded in Makati where its principal office is located and the taxes due thereon should likewise be paid to said municipality.
Q: MI is a corporation engaged in trading books. It holds an office in Pasig where all transactions are made. However, MI also maintains a warehouse in Mandaluying which serves as its storage area and no transactions are made therein. What is the situs of taxation of the sale of MI’s books?
As held in BUREAU OF LOCAL GOVERNMENT OPINION DATED MARCH 29,1993, Mi should be liable for gross sales tax to the then Municipality of Pasig. On the other hand, Mandaluyong, where the warehouse is
located but where no transactions are made, may only collect Mayor’s permit fee and other regulatory fees.
Q: Taxpayer has its principal office and also a branch in the City of Makati. At the same time, it has branches in the cities of Paranaque and Cebu. The City Treasurer of Makati assessed the taxpayer for deficiency local business tax for sales of the Paranaque branch allegedly not declared in the City of Paranaque. The City of Makati maintained that it had the authority to assess business taxes on revenues not properly taxed in Paranaque City and Cebu City. Is the City Treasurer of Makati correct?
No. For purposes of collection of local taxes, businesses maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet making the sale or transaction, and the tax thereon shall accrue and shall be paid to the municipality where such branch or sales outlet is located. Thus, the revenues of the branches outside Makati should not be part of the tax base for the determination of the local business tax to be paid in the City of Makati. In other words, Revenues of branches or sales outlet elsewhere should not be part of the tax base for the determination of the local business tax to be paid in the City where the principal office is located. (CITY OF MAKATI AND THE OFFICE OF THE CITY TREASURER OF MAKATI CITY VS. NIPPON EXPRESS PHILIPPINES CORPORATION [CTA AC CASE NO.76 DATED FEBRUARY 17,2012])
--- 6. Common limitations on the taxing power of LGUs
---
Read Section 133, LGCQ: What are the limitations on the taxing power of LGUs?
As provided in SECTION 133, LGUs cannot impose the following:
a. Income tax (except on bank and financial entities)
b. DST
c. Estate and Donor’s taxes d. Customs Duties
e. Taxes on goods passing through the LGU f. Taxes on agricultural and aquatic products
sold by marginal farmers and fisherman g. Taxes on BOI-registered enterprises
h. Excise taxes on articles under the Tax Code and taxes on petroleum products
i. Percentage tax and VAT
j. Taxes on gross receipts of transportation contractors
k. Taxes on premium paid by way of reinsurance
l. Taxes on registration of motor vehicles m. Taxes on Philippine products actually
exported
n. Taxes on Countryside and Barangay Business Enterprises and cooperatives o. Taxes and fees on the National Government As provided in SECTION 186, LGUs cannot impose taxes that are specifically enumerated or taxed under the provisions of the Tax Code.
Section 133(e)
Q: Is a municipal ordinance imposing fees on goods (corn) that pass through a municipality’s territory valid?
No. As held in PALMA DEVELOPMENT CORP V. ZAMBOANGA DEL SUR [OCTOBER 16, 2003], LGUs, through their Sanggunian, may impose taxes for the use of any public road such as a service fee imposed on vehicles using municipal roads to a wharf. However, Section 133(e) prohibits the imposition in the guise of wharfage, of fees as well as other taxes or charges in any form whatsoever on goods or merchandise. In this case, the LGU cannot tax the goods even in the guise of police surveillance fees.
Section 133(h)
Q: The Province of Bulacan passed an ordinance imposing tax on minerals extracted from public lands but went on to collect tax on minerals extracted from private lands. Since the LGC only provides for tax on public lands, is the action of the Province of Bulacan valid?
No. As held in PROVINCE OF BULACAN V. CA [NOVEMBER 27, 1998], generally, the LGU can impose such tax even if not in LGC since Section 186 of the Code is sweeping. However, the province cannot levy on minerals from private lands because it is an excise tax on an article already covered by the Tax Code.30
Q: Petron maintains a depot or bulk plant at the Navotas Fishport Complex where it engages in the selling of diesel fuels to vessels used in commercial fishing. Navotas City levied business taxes on its sale of petroleum products. Can the LGU levy the business tax on the sale of petroleum?
No, the LGU cannot impose any local tax on petroleum products. As held in PETRON CORP. V. TIANGCO [APRIL 16, 2008], the prohibition with respect to petroleum products extends not only to excise taxes but all taxes, fees, and charges.
Section 133(h) provides for two possible bases for exemption: (1) excise tax on articles enumerated under the Tax Code; and (2) taxes, fees, and charges on petroleum products. In the latter, the exemption refers not only to direct or excise taxes to be levied by the LGUs on petroleum products but on all types of taxes on petroleum products including business taxes.
Section 133(j)
Q: What is the rationale for the exemption of common carriers from local taxes?
As held in FIRST PHILIPPINE INDUSTRIAL CORP V. CA [DECEMBER 29, 1998], the legislative intent in excluding from the taxing power of the LGU the imposition of business tax against common carriers is to prevent a duplication of the so-called common carrier’s tax.
30 This applies the Preemption or Exclusionary Rule wherein the national government elects to tax a particular area, impliedly withholding from the LGU the delegated power to tax the same field.
Section 186
Q: Are broadcasting and telecommunication companies liable to pay local transfer taxes?
No. As held in both SMART COMMUNICATIONS V.THE CITY OF DAVAO [SEPTEMBER 16,2008] and QUEZON CITY V. ABS-CBN BROADCASTING CORPORATION [OCTOBER 6,2008],these franchise holders are now subject to VAT.31