o.

TAXES, FEES AND CHARGES ON THE NATIONAL GOVERNMENT, ITS AGENCIES AND
INSTRUMENTALITIES AND LGUS

1. THE CITY OF DAVAO, CITY TREASURER AND THE CITY ASSESSOR OF DAVAO CITY, Petitioners,
vs.
THE REGIONAL TRIAL COURT, BRANCH XII, DAVAO CITY AND THE GOVERNMENT SERVICE
INSURANCE SYSTEM (GSIS), Respondent.

G.R. No. 127383 August 18, 2005

SUPREME COURT’S RULING:

The Court concluded that as a general rule, as laid down in Section 133, the taxing
powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and
charges of any kind on the National Government, its agencies and instrumentalities, and local
government units"; however, pursuant to Section 232, provinces, cities, and municipalities in
the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real
property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person," as provided in item (a) of the first paragraph of Section 234.

As to tax exemptions or incentives granted to or presently enjoyed by natural or judicial

persons, including government-owned and controlled corporations, Section 193 of the LGC
prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except
those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-
stock and non-profit hospitals and educational institutions, and unless otherwise provided in
the LGC. The latter proviso could refer to Section 234 which enumerates the properties exempt
from real property tax. But the last paragraph of Section 234 further qualifies the retention of
the exemption insofar as real property taxes are concerned by limiting the retention only to
those enumerated therein; all others not included in the enumeration lost the privilege upon
the effectivity of the LGC. Moreover, even as to real property owned by the Republic of the
Philippines or any of its political subdivisions covered by item (a) of the first paragraph of
Section 234, the exemption is withdrawn if the beneficial use of such property has been
granted to a taxable person for consideration or otherwise.

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of
the LGC, exemptions from payment of real property taxes granted to natural or juridical
persons, including government-owned or controlled corporations, except as provided in the
said section, and the petitioner is, undoubtedly, a government-owned corporation, it
necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A.
No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner
can seek refuge under any of the exceptions provided in Section 234, but not under Section
133, as it now asserts, since, as shown above, the said section is qualified by Sections 232 and
234.
c. FRANCHISE TAX

2.

NATIONAL POWER CORPORATION, petitioner,

vs.
CITY OF CABANATUAN, respondent.

G.R. No. 149110            April 9, 2003

SUPREME COURT’S RULING

In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the
respondent city government to impose on the petitioner the franchise tax in question.

To determine whether the petitioner is covered by the franchise tax in question, the
following requisites should concur: (1) that petitioner has a "franchise" in the sense of a
secondary or special franchise; and (2) that it is exercising its rights or privileges under this
franchise within the territory of the respondent city government.

Petitioner fulfills the first requisite. Commonwealth Act No. 120, as amended by Rep.
Act No. 7395, constitutes petitioner's primary and secondary franchises. It serves as the
petitioner's charter, defining its composition, capitalization, the appointment and the specific
duties of its corporate officers, and its corporate life span. As its secondary franchise,
Commonwealth Act No. 120, as amended, vests the petitioner the powers which are not
available to ordinary corporations.

Petitioner also fulfills the second requisite. It is operating within the respondent city
government's territorial jurisdiction pursuant to the powers granted to it by Commonwealth
Act No. 120, as amended. From its operations in the City of Cabanatuan, petitioner realized a
gross income of P107,814,187.96 in 1992. Fulfilling both requisites, petitioner is, and ought to
be, subject of the franchise tax in question.

Moreover, a franchise tax is imposed based not on the ownership but on the exercise by
the corporation of a privilege to do business. The taxable entity is the corporation which
exercises the franchise, and not the individual stockholders. By virtue of its charter, petitioner
was created as a separate and distinct entity from the National Government. It can sue and be
sued under its own name,61 and can exercise all the powers of a corporation under the
Corporation Code.

3.

QUEZON CITY and THE CITY TREASURER OF QUEZON CITY, petitioners,

vs.
ABS-CBN BROADCASTING CORPORATION, respondent.

G.R. No. 166408 October 6, 2008

SUPREME COURT’S RULING

 The Court held that the “in lieu of all taxes” provision in RA 7966 does not exempt ABS-
CBN Broadcasting from the payment of local franchise tax imposed by the Quezon City since
statutes granting tax exemptions are strictly construed against the taxpayer and liberally in
favor of the taxing authority. In this case, RA 7966 failed to specify the taxing authority from
whose jurisdiction the taxing power is withheld. In fine, respondent failed to justify its claim for
exemption, by a grant “too plain to be mistaken”. Its claim for exemption from the local
franchise tax must fail.

4.

CITY OF IRIGA, Petitioner,
vs.
CAMARINES SUR III ELECTRIC COOPERATIVE, INC. (CASURECO III), Respondent.

G.R. No. 192945               September 5, 2012

SUPREME COURT’S RULING:

Indisputably, petitioner has the power to impose local taxes. The LGC was enacted
granting the local government units, like petitioner, the power to impose and collect franchise
tax, to wit:

SEC. 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special
law, the province may impose a tax on businesses enjoying a franchise, at a rate not exceeding
fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar
year based on the incoming receipt, or realized, within its territorial jurisdiction. xxx

To be liable for local franchise tax, the following requisites should concur: (1) that one
has a "franchise" in the sense of a secondary or special franchise; and (2) that it is exercising its
rights or privileges under this franchise within the territory of the pertinent local government
unit.

There is a confluence of these requirements in the case at bar. By virtue of PD 269, NEA
granted CASURECO III a franchise to operate an electric light and power service for a period of
fifty (50) years from June 6, 1979, 34 and it is undisputed that CASURECO III operates within Iriga
City and the Rinconada area. It is, therefore, liable to pay franchise tax notwithstanding its non-
profit nature.

5.

SMART COMMUNICATIONS, INC., Petitioner, v. 

THE CITY OF DAVAO, REPRESENTED HEREIN BY ITS MAYOR HON. RODRIGO R. DUTERTE, AND
THE SANGGUNIANG PANLUNGSOD OF DAVAO CITY, Respondents.

[G.R. NO. 155491, September 16, 2008]

SUPREME COURT’S RULING:

The Court ruled that the "in lieu of all taxes" clause applies only to national internal
revenue taxes and not to local taxes. As appropriately pointed out in the separate opinion of
Justice Antonio T. Carpio in a similar case involving a demand for exemption from local
franchise taxes:

[T]he "in lieu of all taxes" clause in Smart's franchise refers only to taxes, other than income tax,
imposed under the National Internal Revenue Code. The "in lieu of all taxes" clause does not
apply to local taxes. The proviso in the first paragraph of Section 9 of Smart's franchise states
that the grantee shall "continue to be liable for income taxes payable under Title II of the
National Internal Revenue Code." Also, the second paragraph of Section 9 speaks of tax returns
filed and taxes paid to the "Commissioner of Internal Revenue or his duly authorized
representative in accordance with the National Internal Revenue Code." Moreover, the same
paragraph declares that the tax returns "shall be subject to audit by the Bureau of Internal
Revenue." Nothing is mentioned in Section 9 about local taxes. The clear intent is for the "in
lieu of all taxes" clause to apply only to taxes under the National Internal Revenue Code and not
to local taxes. Even with respect to national internal revenue taxes, the "in lieu of all taxes"
clause does not apply to income tax.

If Congress intended the "in lieu of all taxes" clause in Smart's franchise to also apply to local
taxes, Congress would have expressly mentioned the exemption from municipal and provincial
taxes. However, Congress did not expressly exempt Smart from local taxes. Congress used the
"in lieu of all taxes" clause only in reference to national internal revenue taxes. The only
interpretation, under the rule on strict construction of tax exemptions, is that the "in lieu of all
taxes" clause in Smart's franchise refers only to national and not to local taxes.

Decision on Petitioner’s MOTION FOR RECONSIDERATION dated July 21, 2009

In denying its motion for reconsideration, the Court cited different jurisprudence which
suggests that aside from the national franchise tax, the franchisee is still liable to pay the local
franchise tax, unless it is expressly and unequivocally exempted from the payment thereof
under its legislative franchise. The "in lieu of all taxes" clause in a legislative franchise should
categorically state that the exemption applies to both local and national taxes; otherwise, the
exemption claimed should be strictly construed against the taxpayer and liberally in favor of the
taxing authority.

Republic Act No. 7716, otherwise known as the "Expanded VAT Law," did not remove or
abolish the payment of local franchise tax. It merely replaced the national franchise tax that
was previously paid by telecommunications franchise holders and in its stead imposed a ten
percent (10%) VAT in accordance with Section 108 of the Tax Code. VAT replaced the national
franchise tax, but it did not prohibit nor abolish the imposition of local franchise tax by cities or
municipalities. The imposition of local franchise tax is not inconsistent with the advent of the
VAT, which renders functus officio the franchise tax paid to the national government. VAT
inures to the benefit of the national government, while a local franchise tax is a revenue of the
local government unit.

d. Tax on Sand, Gravel and Quarry Resources

6.

MUNICIPALITY OF SAN FERNANDO, LA UNION represented by Mayor LORENZO L.

DACANAY, plaintiff-appellee, (respondent)
vs.
MAYOR TIMOTEO STA. ROMANA, MUNICIPAL TREASURER and their authorized Agents of Luna,
La Union and the MUNICIPALITY OF LUNA, LA UNION, defendants-appellants (petitioners).
G.R. No. L-30159 March 31, 1987

SUPREME COURT’S RULING:

Under the provisions of the Local Tax Code, there is no question that the authority to
impose the license fees in dispute, properly belongs to the province concerned and not to the
Municipality of Luna which is specifically prohibited under Section 22 of the same Code "from
levying taxes, fees and charges that the province or city is authorized to levy in this Code. " On
the other hand, the Municipality of San Fernando cannot extract sand and gravel from the
Municipality of Luna without paying the corresponding taxes or fees that may be imposed by
the province of La Union.

7.

THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN, FLORENCE CHAVES, and MANUEL

DJ SIAYNGCO in their capacity as PROVINCIAL GOVERNOR, PROVINCIAL TREASURER,
PROVINCIAL LEGAL ADVISER, respectively, petitioners,
vs.
THE HONORABLE COURT OF APPEALS (FORMER SPECIAL 12TH DIVISION), REPUBLIC CEMENT
CORPORATION, respondents.

G.R. No. 126232 November 27, 1998

SUPREME COURT’S RULING

The tax imposed by the Province of Bulacan is an excise tax, being a tax upon the
performance, carrying on, or exercise of an activity. 14 The Local Government Code provides:

Sec. 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:

x x x           x x x          x x x

(h) Excise taxes on articles enumerated under the National Internal Revenue
Code, as amended, and taxes, fees or charges on petroleum products;

x x x           x x x          x x x

A province may not, therefore, levy excise taxes on articles already taxed by the National
Internal Revenue Code. Unfortunately for petitioners, the National Internal Revenue Code
provides:

Sec. 151. — Mineral Products. —

(A) Rates of Tax. — There shall be levied, assessed and collected on minerals,

mineral products and quarry resources, excise tax as follows:

x x x           x x x          x x x
 (2) On all nonmetallic minerals and quarry resources, a tax 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; or the values used by the Bureau of Customs in
determining tariff and customs duties, net of excise tax and value-
added tax, in the case of importation.

x x x           x x x          x x x

It is clearly apparent from the above provision that the National Internal Revenue Code levies a
tax on all quarry resources, regardless of origin, whether extracted from public or private land.
Thus, a province may not ordinarily impose taxes on stones, sand, gravel, earth and other
quarry resources, as the same are already taxed under the National Internal Revenue Code. The
province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources
extracted from public land because it is expressly empowered to do so under the Local
Government Code. As to stones, sand, gravel, earth and other quarry resources extracted from
private land, however, it may not do so, because of the limitation provided by Section 133 of
the Code in relation to Section 151 of the National Internal Revenue Code.

e. Professional Tax

f. Amusement Tax

8.

PELIZLOY REALTY CORPORATION, represented herein by its President, GREGORY K.

LOY, Petitioner,
vs.
THE PROVINCE OF BENGUET, Respondent.

G.R. No. 183137               April 10, 2013

SUPREME COURT’S RULING

Indeed, theaters, cinemas, concert halls, circuses, and boxing stadia are bound by a
common typifying characteristic in that they are all venues primarily for the staging of
spectacles or the holding of public shows, exhibitions, performances, and other events meant
to be viewed by an audience. Accordingly, ‘other places of amusement’ must be interpreted in
light of the typifying characteristic of being venues "where one seeks admission to entertain
oneself by seeing or viewing the show or performances" or being venues primarily used to
stage spectacles or hold public shows, exhibitions, performances, and other events meant to be
viewed by an audience.

Considering these, it is clear that resorts, swimming pools, bath houses, hot springs and
tourist spots cannot be considered venues primarily "where one seeks admission to entertain
oneself by seeing or viewing the show or performances". While it is true that they may be
venues where people are visually engaged, they are not primarily venues for their proprietors
or operators to actively display, stage or present shows and/or performances.

Thus, resorts, swimming pools, bath houses, hot springs and tourist spots do not belong
to the same category or class as theaters, cinemas, concert halls, circuses, and boxing stadia. It
follows that they cannot be considered as among the ‘other places of amusement’
contemplated by Section 140 of the LGC and which may properly be subject to amusement
taxes.
COMPARE WITH PBA VS CA GR 119122, August 8, 2000

While Section 13 of the Local Tax Code mentions "other places of amusement",
professional basketball games are definitely not within its scope. Under the principle
of ejusdem generis, where general words follow an enumeration of persons or things, by words
of a particular and specific meaning, such general words are not to be construed in their widest
extent, but are to be held as applying only to persons or things of the same kind or class as
those specifically mentioned.9 Thus, in determining the meaning of the phrase "other places of
amusement", one must refer to the prior enumeration of theaters, cinematographs, concert
halls and circuses with artistic expression as their common characteristic. Professional
basketball games do not fall under the same category as theaters, cinematographs, concert
halls and circuses as the latter basically belong to artistic forms of entertainment while the
former caters to sports and gaming.

9.

ALTA VISTA GOLF AND COUNTRY CLUB, Petitioner,

vs.
THE CITY OF CEBU, HON. MAYOR TOMAS R. OSMEÑA, in his capacity as Mayor of Cebu,
and TERESITA C. CAMARILLO, in her capacity as the City Treasurer, Respondents.

G.R. No. 180235

SUPREME COURT’S RULING:

Section 42 of the Revised Omnibus Tax Ordinance, as amended, imposing amusement
tax on golf courses is null and void as it is beyond the authority of respondent Cebu City to
enact under the Local Government Code.
In light of Pelizloy Realty, a golf course cannot be considered a place of amusement. As
petitioner asserted, people do not enter a golf course to see or view a show or performance.
Petitioner also, as proprietor or operator of the golf course, does not actively display, stage, or
present a show or performance. People go to a golf course to engage themselves in a physical
sport activity, i.e., to play golf; the same reason why people go to a gym or court to play
badminton or tennis or to a shooting range for target practice, yet there is no showing herein
that such gym, court, or shooting range is similarly considered an amusement place subject to
amusement tax. There is no basis for singling out golf courses for amusement tax purposes
from other places where people go to play sports. This is in contravention of one of the
fundamental principles of local taxation: that the "[t]axation shall be uniform in each local
government unit." Uniformity of taxation, like the kindred concept of equal protection, requires
that all subjects or objects of taxation, similarly situated, are to be treated alike both in
privileges and liabilities.

g. Annual Fixed Tax on Delivery Trucks/Vans

ii. MUNICIPALITIES

a. Business Taxes

10.
ERICSSON TELECOMMUNICATIONS, INC., petitioner,
vs.
CITY OF PASIG, represented by its City Mayor, Hon. Vicente P. Eusebio, et al.*, respondents.

G.R. No. 176667             November 22, 2007

SUPREME COURT’S RULING
Respondent committed a palpable error when it assessed petitioner's local business tax
based on its gross revenue as reported in its audited financial statements, as Section 143 of the
Local Government Code and Section 22(e) of the Pasig Revenue Code clearly provide that the
tax should be computed based on gross receipts.

11.

LUZ R. YAMANE, in her capacity as the CITY TREASURER OF MAKATI, petitioner vs. BA LEPANTO
CONDOMINIUM CORPORATION, respondent.
G.R. No. 154993 October 25, 2005
SUPREME COURT’S RULING
Section 143 of the Code specifically enumerates several types of business on which
municipalities and cities may impose taxes. However, the BA Lepanto Corporation does not fall
under such law. Moreover, nowhere in the Makati Revenue Code that would serve as the legal
authority for the collection of business taxes from condominiums in Makati. We can elicit from
the Condominium Act that a condominium corporation is precluded by statute from engaging in
corporate activities other than the holding of the common areas, the administration of the
condominium project, and other acts necessary, incidental or convenient to the
accomplishment of such purposes. Neither the maintenance of livelihood, nor the procurement
of profit, fall within the scope of permissible corporate purposes of a condominium corporation
under the Condominium Act. None of these stated corporate purposes are geared towards
maintaining a livelihood or the obtention of profit. Even though the Corporation is empowered
to levy assessments or dues from the unit owners, these amounts collected are not intended
for the incurrence of profit by the Corporation or its members, but to shoulder the multitude of
necessary expenses that arise from the maintenance of the Condominium Project.

12.

THE CITY OF MANILA, LIBERTY M. TOLEDO, in her capacity as THE TREASURER OF MANILA and
JOSEPH SANTIAGO, in his capacity as the CHIEF OF THE LICENSE DIVISION OF CITY OF
MANILA, petitioners,
vs.
COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent.

G.R. No. 181845               August 4, 2009

SUPREME COURT’S RULING

 The Court ruled that there was indeed double taxation if respondent is subjected to the
taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being imposed:
(1) on the same subject matter – the privilege of doing business in the City of Manila; (2) for the
same purpose – to make persons conducting business within the City of Manila contribute to
city revenues; (3) by the same taxing authority – petitioner City of Manila; (4) within the same
taxing jurisdiction – within the territorial jurisdiction of the City of Manila; (5) for the same
taxing periods – per calendar year; and (6) of the same kind or character – a local business tax
imposed on gross sales or receipts of the business.
The Court revisited 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].