NAVA, Maria Carlina J.

City of Manila vs. Coca-Cola Bottlers Philippines, Inc., 595 SCRA 299, August 04, 2009
Municipal Corporations; Local Government Units; It is apparent from a perusal of Section 143 of
the Local Government Code—the very source of the power of municipalities and cities to
impose a local business tax—that when a municipality or city has already imposed a business
tax on manufacturers, etc. of liquors, distilled spirits, wines, and any other article of commerce,
pursuant to Section 143(a) of the Local Government Code (LGC), said municipality or city may
no longer subject the same manufacturers, etc. to a business tax under Section 143(h) of the
same Code.—The distinction petitioners attempt to make between the taxes under Sections 14
and 21 of Tax Ordinance No. 7794 is specious. The Court revisits Section 143 of the LGC, the
very source of the power of municipalities and cities to impose a local business tax, and to
which any local business tax imposed by petitioner City of Manila must conform. It is apparent
from a perusal thereof that when a municipality or city has already imposed a business tax on
manufacturers, etc. of liquors, distilled spirits, wines, and any other article of commerce,
pursuant to Section 143(a) of the LGC, said municipality or city may no longer subject the same
manufacturers, etc. to a business tax under Section 143(h) of the same Code. Section 143(h)
may be imposed only on businesses that are subject to excise tax, VAT, or percentage tax
under the NIRC, and that are “not otherwise specified in preceding paragraphs.” In the same
way, businesses such as respondent’s, already subject to a local business tax under Section 14
of Tax Ordinance No. 7794 [which is based on Section 143(a) of the LGC], can no longer be
made liable for local business tax under Section 21 of the same Tax Ordinance [which is based
on Section 143(h) of the LGC].

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY vs. HON. FERDINAND J.

MARCOS, THE CITY OF CEBU, represented by its Mayor, HON. TOMAS R. OSMEA, and
EUSTAQUIO B. CESA [G.R. No. 120082. September 11, 1996]
The limited and restrictive nature of the tax exemption privileges under the Local Government
Code is consistent with the State policy to ensure autonomy of local governments and the
objective of the Local Government Code to grant genuine and meaningful autonomy to enable
local government units to attain their fullest development as self-reliant communities and make
them effective partners in the attainment of national goals. The obvious intention of the law is to
broaden the tax base of local government units to assure them of substantial sources of
revenue.
JOSEPH E. ICARD vs. THE CITY COUNCIL OF BAGUIO and THE CITY OF BAGUIO, G.R.
No. L-1281 May 31, 1949
The rule governing the taxing power of provinces, cities, municipalities and barangays is
summarized in Icard v. City Council of Baguio.
Is the City of Baguio empowered to levy a property tax on motor and an amusement tax
on night clubs?
It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent
power of taxation. The charter or statute must plainly show an intent to confer that power or the
municipality, cannot assume it. And the power when granted is to be construed in strictissimi
juris. Any doubt or ambiguity that power must be resolved against the municipality. Inferences,
implications, deductions all these have no place in the interpretation of the taxing power of a
municipal corporation.
Authority of the City of Baguio to levy taxes: That part of the charter of this city which deal with
the subject of taxation is found in section 2553 (b) of the Revised Administrative Code which
empowers its city council to provide for the levy and collection of taxes and other city revenues,
as provided by law and apply the same to the payment of the municipal expenses in accordance
with appropriations. This provision simply means that the city of Baguio may impose taxes only
in those cases specifically provided in any law. In other words for authority to levy a tax on
specific subjects one must look elsewhere in the statute book. For had the provision been
meant as a blanket authority to levy taxes, there would have been no need for the phrase "as
provided by law." The insertion of that phrase be speaks the legislative intent to have the city
exercise the law may provide.

Mactan Cebu International Airport Authority vs. Marcos

G.R. No. 120082, September 11, 1996
The power to tax is primarily vested in the Congress; however, it may be exercised by local
legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to
direct authority conferred by Section 5, Article X of the 1987 Constitution. The exercise of the
power may be subject to such guidelines and limitations as the Congress may provide which,
however, must be consistent with the basic policy of local autonomy.

Ferrer vs. Bautista, G.R. No. 210551, June 30, 2015

LGUs have no inherent power to tax except to the extent that such power might be delegated to
them either by the basic law or by the statute. Under the now prevailing Constitution, where
there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist
although Congress may provide statutory limitations and guidelines. The basic rationale for the
current rule is to safeguard the viability and self-sufficiency of local government units by directly
granting them general and broad tax powers. Nevertheless, the fundamental law did not intend
the delegation to be absolute and unconditional; the constitutional objective obviously is to
ensure that, while the local government units are being strengthened and made more
autonomous, the legislature must still see to it that (a) the taxpayer will not be over-burdened or
saddled with multiple and unreasonable impositions; (b) each local government unit will have its
fair share of available resources; (c) the resources of the national government will not be unduly
disturbed; and (d) local taxation will be fair, uniform, and just.

Petron Corporation v. Tiangco, G.R. No. 158881, April 16, 2008; Batangas City vs.
Pilipinas Shell Petroleum Corp., G.R. No. July 8, 2015
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.

City of Manila vs. Judge Colet, G.R. No. 120051, December 10, 2014
The Sanggunian of the municipality or city cannot enact an ordinance imposing business tax on
the gross receipts of transportation contractors, persons engaged in the transportation of
passengers or freight by hire, and common carriers by air, land, or water, when said
Sanggunian was already specifically prohibited from doing so. Any exception to the express
prohibition under Section 133(j) of the LGC should be just as specific and unambiguous.

Smart Communications vs. Municipality of Malvar, Batangas, G.R. No. 204429, February
18, 2014
Section 187 of the LGC, which outlines the procedure for questioning the constitutionality of a
tax ordinance, is inapplicable when the imposition is not in the nature of taxes, but of fees.
The municipality is empowered to impose taxes, fees and charges, not specifically enumerated
in the LGC or taxed under the Tax Code or other applicable law.

BASCO VS PAGCOR, G.R. No. 91649 May 14, 1991

Basco doctrine: No inherent right to impose taxes and therefore, an LGU needs to have a law
or statute that grants the power and this is already done through the LGC of 1991, subject to
control by congress and that local governments have no power to tax instrumentalities of the
national government.
This case involves the City of Manila trying to impose taxes on PAGCOR, but PAGCOR was
considered an instrumentality of the national government because PAGCOR was given the
power to regulate lawful games of chance and therefore, this was an exercise of the regulatory
power of the national government and as such, it is part of police power and since it’s part of
police power, to that extent, that is governmental, and because it’s governmental, PAGCOR,
while a GOCC, becomes instrumentality of the national government.
What are the reasons why congress retains the power to provide guidelines and limitations?
The legislature must still see to it that the taxpayer will not be overburdened or saddled with
multiple and unreasonable impositions.
What is the effect of the LGC on privileges and exemptions granted to GOCCs prior to the
LGC? Section 234 provides for the exemptions from payment of RPT and withdraws previous
exemptions therefrom granted to natural and juridical persons, including GOCCs, except as
provided therein. Section 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including government-owned or controlled corporations,
except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and
non-profit hospitals and educational institutions, business enterprises certified by the Board of
Investments (BOI) as pioneer or non-pioneer for a period of 6 and 4years, respectively, are
hereby withdrawn upon the effectivity of this Code.

JOSEPH E. ICARD vs. THE CITY COUNCIL OF BAGUIO and THE CITY OF BAGUIO
G.R. No. L-1281 May 31, 1949
It is a well settled rule that where the authority to tax is given in general terms and subject to the
qualification that the authority is to be exercised as provided by law, one must look elsewhere in
the statute book for specific subjects of taxation, that is to say, for subjects specifically
authorized by law to be taxed.

Batangas City vs. Pilipinas Shell Petroleum Corporation, G.R. No. 187631 July 8 2015
Is the LGU empowered under the LGC to impose business taxes on persons or entities
engaged in the business of manufacturing and distribution of petroleum products?
Section 133 of the LGC is a specific provision that explicitly withhold from LGUs the power to
impose taxes, fees and charges on petroleum products. Strictly speaking, as long as the subject
matter of the taxing powers of the LGUs is the petroleum products per se or even the activity or
privilege related to the petroleum products, such as manufacturing and distribution of said
products, it is covered by the said limitation and thus, no levy can be imposed; Article 232 of
LGC defines with more particularity the capacity of a municipality to impose business taxes on
businesses except businesses engaged in the production, manufacture, refining, distribution or
sale of oil, gasoline, and other petroleum products.

Punzalan vs. City of Manila, G.R. No. L-4817, May 26, 1954
Equality and uniformity in local taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate within the territorial jurisdiction of the taxing authority
or local government unit and not necessarily in comparison with other units although belonging
to the same political subdivision. In fine, uniformity is required only within the geographical limits
of the taxing authority.

Philippine Match Company vs. City of Cebu, G.R. No. L-30745January 18, 1978
A city can validly tax the sales to customers outside the city as long as the orders were booked
and paid for in the company’s branch office in the city. A different interpretation would defeat the
tax ordinance in question or encourage tax evasion by simply arranging for the delivery at the
outskirts of the city.

Nature of the Taxing Power of Local Government Units (1987 Constitution Article X Section 5,
LGC Sec. 129)
1. not inherent (Everett Steamship Corp. vs. Municipality of Medina, G.R. No. L-21191, 30
April 30, 1966)
2. exercised only if delegated to them by law or Constitution (Mactan Cebu International
Airport vs. Marcos, G.R. No. 120082, September 11, 1996)
3. not absolute subject to limitations provided for by law (Manila Electric Company vs.
Province of Laguna, G.R.No. 131359, May 5, 1995)

Situs of Local Taxation

a. Situs According to the Cases:
Excise Tax – not dependent on the domicile of the taxpayer, but on the place in which the act is
performed or the occupation is engaged in; not upon the location of the office, but the place
where the place is perfected. (Allied Thread Co., Inc. vs. City Mayor of Manila, G.R. No. L-
4029, November 21, 1984)
Sales Tax – it is the place of the consummation of the sale, associated with the delivery of the
things which are the subject matter of the contract that determines the situs of the contract for
purposes of taxation, and not merely the place of the perfection of the contract. (Shell Co., Inc.
vs. Municipality of Sipocot, Camarines Sur, 105 Phil 1263, March 20, 1959)

Pepsi Cola Bottling Co. vs. Municipality of Tanauan, G.R. No. L-31156, February 27, 1976
What is the nature of the local government units’ taxing power?
It is not inherent but since time immemorial the power to tax had been delegated by Congress to
the local government units; and under the 1973 and the present Constitution, this power has
been constitutionally granted to them subject such limitations as the law may impose.

Punzalan vs. City of Manila, 95 Phil 46

What is meant by uniformity?
Equality and uniformity in local taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate within the territory of the LGU, not necessarily in
comparison with other LGU within the same political subdivision. In other words, it merely
requires geographical uniformity. A tax is considered uniform when it operates with the same
force and effect in every place where the subject may be found.

Examples of valid taxes, licenses or fees

a. 5% tax on GR based on rentals on privately owned public markets is a valid license tax or fee
for regulations of the business rather than an income tax (Progressive Development Corp. vs.
Quezon City, GR 36081, Apr 24, 1989)
b. imposing tax based on capital investment or purchases during preceding period is not a sales
tax (Tatel vs. Municipality of Virac, G.R. No. 40243, March 11, 1992)
c. a tax of P30/hec is a tax on privilege, not a property, percentage, or forest concession tax (P
vs. Nazario, G.R. No. 44143, Aug 31, 1988)
d. a tax of P0.01/gal on all soft drinks produced or manufactured does not partake the nature of
a percentage tax on sales . The volume capacity is used only as basis. (Pepsi Cola Bottling
Co. vs. Municipality of Tanauan, G.R. No. L-31156, February 27, 1976)
Example of invalid taxes
a. Ordinance that charged a tax for selling and distributing refined and manufactured oils based
on the monthly allocation actually delivered, distributed and intended for sale clearly exacts a
tax based on sale thus void (Arabay, Inc. v. CFI, 66 SCRA 617)
b. In Province of Bulacan v. Court of Appeals (G.R. No. 126232, November 27, 1998), is
ultimately of little consequence, and so is Petron’s reliance on such ruling. The Court therein
had correctly nullified, on the basis of Section133(h) of the Code, a province-imposed tax of
10% of the fair market value in the locality per cubic meter of ordinary stones, sand, gravel,
earth and other quarry resources extracted from public lands, because it noted that under
Section 151 of the NIRC, all nonmetallic minerals and quarry resources were assessed with
excise taxes of two percent (2%) based on the actual market value of the gross output thereof at
the time of removal, in case of those locally extracted or produced.
Additionally, the Court also observed that the case had emanated from an attempt to impose the
said tax on quarry resources from private lands, despite the clear language of the tax ordinance
limiting the tax to such resources extracted from public lands. On that score alone, the case
could have been correctly decided. (Cited in Petron Corp v. Mayor Tobias Tatiangco)

Province of Bulacan v. CA, G.R. No.126232, November 27, 1998

Principle of Preemption or Exclusion
Where the national government elects to tax a particular area, it impliedly withholds from the
local government the delegated power to tax the same field. This doctrine principally rests on
the intention of Congress.
Excluded impositions pursuant to the doctrine of preemption
1. Taxes which are levied under the NIRC, unless otherwise provided by LGC of 1991;
2. Taxes, fees, etc. which are imposed under the TCC;
3. Taxes, fees, etc. the imposition of which contravenes existing governmental policies or which
violates the fundamental principles of taxation; A province may not levy excise taxes on articles
already taxed by the NIRC. The current Tax Code already imposes a tax on ALL quarry
resources, regardless of origin; hence, the Province may no longer impose any additional
amounts from Republic Cement.