G.R. No. 154092 July 14, 2005MOBIL PHILIPPINES, INC. vs.

THE CITY TREASURER OF

MAKATI and the CHIEFOF THE LICENSE DIVISION OF THE CITY OF MAKATI
FACTS: On August 20, 1998, Petitioner, a domestic corporation engaged in themanufacturing,
importing, exporting and wholesaling of petroleum products, filed anapplication with the City
Treasurer of Makati for the retirement of its business within theCity of Makati as it moved its
principal place of business to Pasig City. In its application,petitioner declared its gross
sales/receipts as follows: Gross Sales Receipt for CalendarYear 1997 - P453,799,493.29 and
Gross Sales Receipt for Calendar Year 1998,January to August - P267,952,766.67.
Upon evaluation of petitioners application, then
OIC of the License Division, Ms. Jesusa E. Cuneta, issued to petitioner, a billing slipassessing
the following taxes against petitioner: P 566,468.12 For the 4
th
Quarter of1998 (based on 1997 gross sales) and P 1,331,638.84 For the Gross Sales made
in1998, with the total assessed business taxes of P 1,898,106.96. On September 11,1998,
petitioner paid the assessed amount of P1,898,106.96 under protest. The CityTreasurer issued
therefor
Official Receipt No. 9065025C and approved the petitioners
application for retirement of business from Makati to Pasig City. On July 21, 1999,petitioner filed
a claim for P1,331,638.84 refund which was denied. Subsequently,petitioner filed a petition with
the RTC of Pasig City, seeking the refund of businesstaxes erroneously collected by the City of
Makati. In its Decision, the trial court ruledthat the assessment of the Chief of the License
Division of Makati is therefore with legalbasis and does not constitute double taxation. Petitioner
filed a Motion forReconsideration which was denied and, hence this appeal.ISSUE: Whether or
not the business taxes paid by petitioner in 1998 is for its businesstaxes for 1997 or 1998?
HELD: Business taxes imposed in the exercise of police power for regulatory purposesare paid
for the privilege of carrying on a business in the year the tax was paid. It ispaid at the beginning
of the year as a fee to allow the business to operate for the rest ofthe year. It is deemed a
prerequisite to the conduct of business. Income tax, on theother hand, is a tax on all yearly
profits arising from property, professions, trades or
offices, or as a tax on a persons income, emoluments, profits and the like.
It is tax onincome, whether net or gross realized in one taxable year. It is due on or before the
15
th
day of the 4

th

month following the close of the taxpayers taxable year and is generally
regarded as an excise tax, levied upon the right of a person or entity to receive incomeor
profits.Under the Makati Revenue Code, it appears that the business tax, like income tax, is
computed based on the previous years figures. This is the reason for the confusion. A
newly-started business is already liable for business taxes (i.e. license fees) at the startof the
quarter when it commences operations. In computing the amount of tax due for
the first quarter of operations, the business capital investment is used as the basis.
Forthe subsequent quarters of the first year, the tax is based on the gross sales/receipts forthe
previous quarter. In the following year(s), the business is then taxed based on the