Reyes vs Court of Appeals

320 SCRA 486 [GR No. 118233 December 10, 1999]

Facts: The Sangguniang Bayan of San Juan, Metro Manila implemented several tax ordinances – 87, 91, 95, 100 and
101. On May 21, 1993, petitioners filed an appeal with the Department of Justice assailing the constitutionality of
these tax ordinances allegedly because they were promulgated without previous public hearings thereby constituting
deprivation of property without due process of law. However the same was dismissed.

Issue: Whether or not the assailed ordinances are valid.

Held: Yes. A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the
most effective way or instrument to raise needed revenues to finance and support the myriad activities of the local
government units for delivery of basic services essential to the promotion of general welfare and enhancement of
peace, progress and prosperity of the people. Consequently, any delay in implementing tax measures would be to the
detriment of the public. It is for this reason that protest over tax ordinance are required to be done within certain time
frames. In the instant case, it is our view that the failure of petitioners to appeal to the secretary of justice within 30
days as required by section 187 of Republic Act No. 7160 is fatal to their cause.

Petitioners have not proved in the case before us that the Sangguniang Bayan of San Juan failed to conduct the
required public hearings before the enactment of Ordinances 87, 95, 91, 100, and 101. Although the Sanggunian had
the control of records or better means of proof regarding the facts alleged, petitioners are not relieved from the
burden of proving their averments. Proof that public hearings were not held falls on the petitioner’s shoulders. For
failing to discharge that burden, their petition was properly dismissed.

For the purpose of securing certainty where doubt would be intolerable, it is a general rule that the regularity of the
enactment of an officially promulgated statute or ordinance may not be impeached by parol evidence or oral
testimony either of individual officers and members, or of strangers who may be interested in nullifying legislative
action. This rules supplements the presumption in favor of the regularity of official conduct which we have upheld
repeatedly, absent a clear showing to the contrary.

The Province of Bulacan vs Court of Appeals

299 SCRA 442 [GR No. 126232 November 27, 1998]

Facts: On June 26, 1992, the Sangguniang Panlalawigan passed provincial ordinance no. 3 known as “Ordinance
Enacting The Revenue Code Of The Bulacan Province” which was to take effect on July 1, 1992 Section 21 of the
ordinance provides as follows:

Sec 21. Imposition of Tax – There is hereby levied and collected a tax of 10% of the fair market value in the locality
per cubic meter of ordinary stores, sand, gravel, earth and other quarry resources, such but not limited to marble,
granite, volcanic cinders, basalt, tuff and rock phosphate, extracted from public lands or from beds of seas, lakes,
rivers, streams, creeks and other public waters within its territorial jurisdiction.

Pursuant thereto, the provincial treasurer of Bulacan in a letter dated November 11, 1992, assessed private
respondent Republic Cement Corporation Php2,524,692.13 for extracting lime stones, shale and silica from several
parcels of private land in the province during the third quarter of 1992 until the second quarter of 1993. Believing that
the province, on the bases of the above-said ordinance, had no authority to impose taxes on quarry resources
extracted from private lands, Republic Cement formally contested the same on December 23, 1993. The same was,
however, denied by the provincial treasurer on January 17, 1994. Republic Cement, consequently filed a petition for
declaratory relief with the Regional Trial Court (RTC) of Bulacan on February 14, 1993. The province filed a motion to
dismiss Republic Cement’s petition which was granted by the trial court on May 13, 1993, which ruled that declaratory
relief was improper, allegedly because a breach of the ordinance had been committed by Republic Cement.

Issue: Whether or not provincial ordinance no. 3 is valid to allow the petitioner to impose taxes on ordinary stones,
sand, gravel, earth, and other quarry resources.

Held: No. On the basis of section 134 of Republic Act No. 7169, the local government code, ruled that a province was
empowered to impose taxes only on sand, gravel, and other quarry resources extracted from public lands, its
authority to tax being limited to by said provision only to those taxes, fees and charges provided in article 1, chapter
2, title I of Book II of the local government code.

As correctly pointed out by petitioners, section 186 of the same code allows petitioners to levy taxes other than those
specifically enumerated under the code, subject to the conditions specified therein.

The tax imposed by the province of Bulacan is an excise tax, being a tax upon the performance, carrying or an excise
of an activity. Under section 133 of the local government code, a province may not, therefore, levy excise taxes on
articles already taxed by the National Internal Revenue Code (NIRC).

The NIRC 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 NIRC. The province can, however, impose a tax on stones, sand, gravel, earth and
other quarry resources extracted from public lands 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 NIRC.

Given the above disquisition, petitioners cannot claim that the appellate court unjustly deprived them of the power to
create their sources of revenue, their assessment of taxes against Republic Cement being ultra vires, traversing as it
does the limitations set by the local government code.

Furthermore, section 21 of provincial ordinance no. 3 is practically only a reproduction of section 138 of the local
government code. A cursory reading of both could show that both refer to ordinary sand, gravel, stone, earth and
other quarry resources extracted from public lands. Even if we disregard the limitation set by section 133 of the local
government code, petitioners, may not impose taxes on stone, sand, gravel, earth and other quarry resources
extracted from private lands. Petitioners may not involve the regalian doctrine to extend coverage of their ordinance
to quarry resources extracted from private lands, for taxes, being burdens, are not to be presumed beyond what the
applicable statute expressly and clearly declares, tax statutes being construed strictissimi juris against the
government.

Palma Development Corporation vs Municipality of Malangas

413 SCRA 572 [GR No. 152492 October 16, 2003]

Facts: Petitioner Palma Development Corporation is engaged in milling and selling rice and corn to wholesalers in
Zamboanga City. It uses the municipal port of Malangas, Zamboanga del Sur as transshipment port for its goods. The
port, as well as the surrounding roads leading to it, belong to and are maintained by the Municipality of Malangas,
Zamboanga del Sur. On January 16, 1994, the municipality passed municipal revenue code no. 09 series of 1993,
which was subsequently approved by the Sangguniang Panlalawigan of Zamboanga del Sur in resolution no. 1330
dated August 4, 1994. Section 56.01 of the ordinance reads as follows:

Sec 56.01 Imposition of Fees. There shall be collected service fee for its use of the municipal roads or streets leading
to the wharf and to any point along the shorelines within the jurisdiction of the municipality and for police surveillance
on all goods and all equipment harboured or sheltered in the premises of the wharf and other within the jurisdiction of
the municipality [xxx]

Accordingly, the service fees imposed by section 56.01 of the ordinance was paid by petitioner under protest. It
contended that under Republic Act No. 7160, otherwise known as the local government code of 1991, municipal
governments did not have authority to tax goods and vehicles that passed through their jurisdictions. Thereafter,
before the Regional Trial Court of Pagadian City, petitioner filed against the Municipality of Malangas on November
29, 1995, an action for declaratory relief assailing the validity of section 56.01 of the municipal ordinance.

Issue: Whether or not the imposition of service fee is proper and valid.

Held: No. By the express language of section 153 and 155 RA 7160, local government units, through their
sanggunian, may prescribe the terms and conditions for the imposition of toll fees or charges for the use of any public
road, pier or wharf funded and constructed by them. A service fee imposed on vehicles using municipal roads leading
to the wharf is thus valid, however, section 133 (e) of RA 7160 prohibits the imposition, in the guise of wharfage fees
— as well as other taxes or charges in any form whatsoever on goods or merchandise. It is therefore irrelevant if the
fee imposed are actually for police surveillance on the goods, because any other form of imposition on goods passing
through the territorial jurisdiction of the municipality is clearly prohibited by section 133 (e).

Philippine Petroleum Corporation vs Municipality of Pililla Rizal

198 SCRA 82 [GR No. 90776 June 3, 1991]

Facts: Philippine Petroleum Corporation is a business enterprise engaged in the manufacture of lubricated oil base
stocks which is a petroleum product, with its refinery plant situated at Malaya, Pilillia Rizal, conducting its business
activities within the territorial jurisdiction of municipality of Pilillia, Rizal and is in continuous operation up to the
present. PPC owns and maintains an oil refinery including 49 storage tanks for its petroleum products in Malaya,
Pililla, Rizal. Under section 142 of NIRC of 1939, manufactured oils and other fuels are subject to specific tax.
Respondent municipality of Pilillia, Rizal through municipal council resolution no. 25-s-1974 enacted municipal tax
ordinance no. 1-s-1974 otherwise known as “The Pililla Tax Code Of 1974” on June 14, 1974 which took effect on
July 1, 1974. Sections 9 and 10 of the said ordinance imposed a tax on business, except for those which fixed taxes
are provided in the local tax code on manufacturers, importers, or producers of any article of commerce of whatever
kind or nature, including brewers, distiller, rectifiers, repackers and compounders of liquors distilled spirits and/or
wines in accordance with the schedule found in the local tax code, as well as mayor’s permit sanitary inspection fee
and storage permit fee for flammable, combustible or explosive substances, while section 139 of the disputed
ordinance imposed surcharges and interests on unpaid taxes, fees or charges. Enforcing the provisions of the above
mentioned ordinance, the respondent filed a complaint on April 4, 1986 docketed as civil case no. 057-T against PPC
for the collection of the business tax from 1979 to 1986; storage permit fees from 1975 to 1986; mayor’s permit fee
and sanitary permit inspection fees from 1975 to 1984. PPC, however, have already paid the last named fees starting
1985.

Issue: Whether or not the Municipality may validly impose taxes on petitioner’s business.

Held: No. While section 2 of PD 436 prohibits the imposition of local taxes on petroleum products, said decree did not
amend sections 19 and 19 (a) of PD 231 as amended by PD 426, wherein the municipality is granted the right to levy
taxes on business of manufacturers, importers, producers of any article of commerce of whatever kind or nature. A
tax on business is distinct from a tax on the article itself. Thus, if the imposition of tax on business of manufacturers,
etc. in petroleum products contravenes a declared national policy, it should have been expressly stated in PD No.
436.

The exercise by local governments of the power to tax is ordained by the present constitution. To allow the
continuous effectivity of the prohibition set forth in PC no. 26-73 would be tantamount to restricting their power to tax
by mere administrative issuances. Under section 5, article X of the 1987 constitution, only guidelines and limitations
that may be established by congress can define and limit such power of local governments.

The storage permit fee being imposed by Pilillia’s tax ordinance is a fee for the installation and keeping in storage of
any flammable, combustible or explosive substances. In as much as said storage makes use of tanks owned not by
the Municipality of Pilillia but by petitioner PPC, same is obviously not a charge for any service rendered by the
municipality as what is envisioned in section 37 of the same code.

First Holdings v Batangas

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and
operate oil pipelines. The original pipeline concession was granted in 1967 and renewed by the Energy Regulatory
Board in 1992. Some time in January 1995, petitioner applied for a mayor’s permit with the office of the mayor of
Batangas City. However, before the mayor’s permit could be issued, the respondent city treasurer required petitioner
to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the local government code. The
respondent city treasurer assessed a business tax on the petitioner amounting to Php956,076.04 payable in four
installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to
Php181,151. In order not to hamper its operations, petitioner paid the tax under protest in the amount of
Php239,019.01 for the first quarter of 1993.
Issue: Whether or not petitioner is exempt from paying the alleged business tax as a common carrier.

Held: Yes. The definition of common carrier in the civil code makes no distinctions as to the means of transporting, as
long as it’s by land, water or air. It does not provide that the transportation of the passengers or goods should be by
motor vehicle. In fact, in the United States, oil pipe line operations are considered common carriers.

Under the petroleum act of the Philippines (RA 387), petitioner is considered a common carrier.

In BIR Ruling no. 069-83, the Bureau of Internal Revenue otherwise considers the petitioners as a common carrier.

From the foregoing disquisitions, there is no doubt that petitioner is a common carrier and, therefore, exempt from the
business tax as provided for in section 133 (j) of the local government code, to wit:

Sec 133 Common limitations on the taxing power 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:

xxx

j. Taxes on gross receipts of transportation contractors and persons engaged in the transportation of passengers or
freight by hire and common carriers by air, land, or water except as provided in this code.

It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of
business tax against common carriers is to prevent duplication of the so-called common carriers’s tax.

Petitioner is already paying 3% common carrier’s tax on its gross sales/earnings under the NIRC. To tax petitioner
again on its gross receipts in its transportation of petroleum business would defeat the purpose of the local
government code.

Manila International Airport Authority vs Court of Appeals

GR No. 155650 July 20, 2006

Facts: Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA)
complex in Parañaque City under Executive Order No. 9303, otherwise known as the revised charter of the MIAA. EO
903 was issued on July 21, 1983 by then President Ferdinand E. Marcos. Subsequently EO 909 and 298 amended
the MIAA charter as operator of the international operator, MIAA administers the land, improvements, and
equipments within the NAIA complex. The MIAA charter transferred to MIAA approximately 600 hectares of land,
including the runways and buildings then under the Bureau of Air Transportation. The MIAA charter provides that no
portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically
approved by the President of the Philippines. On March 21, 1997, the Office of the Government Corporate Counsel
issued opinion no. 061. The OGCC opined that the local government code of 1991 withdraw the exemption from real
estate tax granted to MIAA under section 21 of the MIAA charter. Thus, MIAA negotiated with respondent city of
Parañaque to pay the real estate tax imposed by the city. MIAA then paid some of the real estate tax already due. On
July 17, 2001, the City of Parañaque, through its city treasurer issued notices of levy and warrants of levy on the
airport lands and buildings. The mayor of the city of Parañaque threatened to sell at public auction the airport lands
and buildings should MIAA fail to pay the real estate tax deliquency. MIAA thus sought clarification of OGCC opinion
no. 061. On August 9, 2001, the OGCC issued opinion no. 147 clarifying OGCC opinion no. 061. The OGCC pointed
out that section 206 of the local government code requires persons exempt from real estate tax to show proof of
exemption. The OGCC opined that section 21 of the MIAA charter is the proof that MIAA is exempt from real estate
tax.

Issue: Whether or not the airport lands and buildings are exempt from real estate tax.

Held: Yes. MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental
functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate
powers. Section 21 (10) of the introductory provisions of the administrative code defines a government instrumentality
as follows:
Sec 2 General terms defined

xxx

10.) Instrumentality refers to any agency of the national government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a charter.

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the
governmental powers of eminent domain, police authority and the surging of fees and charges. At the same time,
MIAA exercises all the powers of a corporation under the corporation law, in so far as these powers are not
inconsistent with the provisions of this executive order.

A government instrumentality like MIAA falls under section 133 (o) of the local government code, which states:

Sec 133 Common limitations on the taxing powers of the local government units – Unless otherwise provided herein,
the exercise of the taxing power of the provinces, cities, municipalities and barangays shall not extend to the levy of
the following:

xxx

o.) Taxes, fees or charges of any kind on the national government, its agencies and instrumentalities and local
government units.

Section 133 (0) recognizes the basic principles that local governments cannot tax the national government, which
historically, merely delegated to the local governments the power to tax. While the 1987 constitution now includes
taxation as one of the powers of the local governments, local governments may only exercise such powers subject to
such guidelines and limitations as the congress may provide.

Basco vs Philippine Amusements and Gaming Corporation

197 SCRA 52 [GR No. 91649 May 14, 1991]

Facts: A TV ad proudly announces: “The New PAGCOR – Responding Through Responsible Gaming.” But the
petitioners think otherwise, that is why, they filed the instant petition seeking to annul the PAGCOR charter – PD
1869, because it is allegedly contrary to morals, public policy and order, and because –

a. It constitutes a waiver of a right prejudicial to a third person with a right recognized by law. It waived the Manila city
government’s right to impose taxes and license fees, which is recognized by law;

b. For the same reason stated in the immediately preceeding paragraph, the law has intruded into the local
government’s right to impose local taxes and license fees. This, in contravention of the constitutionally enshrined
principle of local autonomy;

c. It violates the equal protection clause of the constitution in that it legalizes PAGCOR – conducted gambling, while
most other forms of gambling are outlawed, together with prostitution, drug trafficking and other vices;

d. It violates the avowed trend of the Cory government away from the monopolistic and crony economy, and toward
free enterprise and privatization.

Issue: Whether or not the city of Manila may levy taxes on PAGCOR.

Held: No. The city of Manila, being a mere municipal corporation has no inherent right to impose taxes. Thus, the
charter or statute must plainly show an intent to confer that power or the municipality cannot assume it. Its power to
tax therefore must always yield to a legislative act which is superior having been passed upon by the state itself
which has the inherent power to tax.
The city of Manila’s power to impose license fees on gambling has long been revoked. As early as 1975, the power of
local governments to regulate gambling thru the grant of “franchise, licenses or permits” was withdrawn by PD no.
771 and was vested exclusively on the national government.

Therefore, only the national government has the power to issue “license or permits” for the operation of gambling.
Necessarily the power to demand or collect license fees which is a consequence of the issuance of “licenses or
permits” is no longer vested in the City of Manila.

Local governments has no power to tax instrumentalities of the National Government. PAGCOR is a government
owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the
national government.

The power of the local government to “impose taxes and fees” is always subject to “limitations” which congress may
provide by law. Since PD 1869 remains an operative law until amended, repealed or revoked, its exemption clause
remains as an exception to the exercise of the power of local governments to impose taxes and fees. It cannot
therefore be violative but rather is consistent with the principle of local autonomy.

Besides, the principle of local autonomy under the 1987 constitution simply means “decentralization.” It does not
make local governments sovereign within the state or an “imperium in imperio.”

What is settled is that the matter of regulating; taxing or otherwise dealing with gambling in a state concern and
hence, it is the sole prerogative of the state to retain it or delegate it to local governments.

Mactan Cebu International Airport Authority vs City of Cebu

261 SCRA 667 [GR No. 120082 September 11, 1996]

Facts: Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No. 6958
mandated to principally undertake the economical, efficient and effective control, management and supervision of the
MCIAA in the province of Cebu and the Lahug airport in Cebu City, and such other airports as may be established in
the province of Cebu. Since the time of its creation, petitioners MCIAA enjoyed the privilege of exemption from
payment of realty taxes in accordance with section 14 of its charter:

Sec 14 Tax Exemptions – The authority shall be exempt from realty taxes imposed by the national government or any
of its political subdivisions, agencies and instrumentalities.

On October 11, 1994, however, Mr. Eustaquio B. Cesa, demanded payment for realty taxes on several parcels of
land belonging to the petitioner, located at Barrio Apas and Barrio Kasambagan, Lahug, Cebu City, in the total
amount of Php2,229,078.79. Petitioner objected to such demand for payment as baseless and unjustified, claiming in
its favor the aforecited in section 14 of RA 6958 which exempts it from payment of realty taxes. It was also asserted
that it is an instrumentality of the government performing governmental functions, citing section 133 of the local
government code of 1991 which puts limitations on the taxing power of local government code.

Issue: Whether or not MCIAA is exempt from realty taxes.

Held: Yes. As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledge
in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature
which imposes the tax on constituency who are to pay it. Nevertheless, effective limitations thereon may be imposed
by the people through their constitutions. Our constitution, for instance, provides that the rule of taxation shall be
uniform and equitable and congress shall evolve a progressive system of taxation. So potent indeed is the power that
it was once opined that the power to tax involves the power to destroy. Verily, taxation is a destructive power which
interferes with the personal and property rights of the people and takes from them a portion of their property for the
support of the government. Accordingly, tax statutes must be construed strictly against the government liberally in
favor of the taxpayer. But since taxes are what we pay for civilized society, as are the life blood of the nation, the law
frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris
against the taxpayer and liberally in favor of the taxing authority. A claim of exemption from tax payments must be
clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule,
exemption there from is the exception. However, if the grantee of the exemption is a political subdivision or
instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to
reduce the amount of money that has to be handled by the government in the course of taxation.

The petitioner cannot claim that it was never a taxable person under its charter. It was only exempted from the
payment of real property taxes. It was only exempted from the payment of real property taxes. The grant of the
privilege only in respect of this tax is conclusive proof of the legislative intent to make it a taxable person subject to all
taxes except real property tax.

Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in light of the
foregoing disquisitions, it had already become, even if it be conceded to be an agency or instrumentality of the
government, a taxable person for such purpose in view of the withdrawal in the last paragraph of section 234 of
exemptions from the payment of real property taxes, which, as earlier adverted to, applies to the petitioner.

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including
government-owned or 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 RA 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 in so far 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. Morever, as to even on 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.

Light Rail Transit Authority vs Central Board of Assessment Appeals

342 SCRA 692 [GR No. 127316 October 12, 2000]

Facts: The LRTA is a government-owned and controlled corporation created and organized under EO 603, dated July
12, 1980 primarily responsible for the construction, operation, maintenance and/or lease of light rail transit system in
the Philippines, giving due regard to the reasonable requirements of the public transportation of the country. LRTA
acquired real properties, constructed structional improvements, such as buildings, carriage ways, passenger terminal
stations and installed various kinds of machinery and equipment and facilities for the purpose of its operations. For an
effective maintenance, operation and management, it entered into a contract of management with the MERALCO
transit organization in which the latter undertook to manage, operate and maintain the light rail transit system owned
by the LRTA subject to the specific stipulations contained in said agreement, including payments of a management
fee and real property taxes. That it commenced its operations in 1984, and that sometime that year, respondent-
appellee city of assessor of manila assessed the real properties of petitioner consisting of lands, buildings, carriage
ways and passenger terminal stations machinery and equipment which he considered real property under the real
property tax code, to commence with the year 1985. That petitioner paid its real property taxes on all its real property
holdings, except the carriage ways and passenger terminal stations including the land where it constructed on the
ground that the same are not real properties under the real property tax code, and if the same are real property, these
are for public use/purpose, therefore exempt from realty taxation which claim was denied by the respondent-appellee
city assessor of Manila.

Issue: Whether or not petitioner’s carriage ways and passenger terminal stations are subject to real property tax.

Held: No. Under the real property tax code, real property owned by the Republic of the Philippines or any of its
political subdivisions and any government-owned or controlled corporation so exempt by its charter, provided,
however, that this exemption shall not apply to real property of the above named entities the beneficial use of which
has been granted, for consideration or otherwise, to a taxable person.

EO 603, the charter of petitioner, does not provide for any real estate tax exemption in its favor. Its exemption is
limited to direct and indirect taxes, duties or fees in connection with the importation of equipment not locally available.
Even granting that the national government indeed owns the carriage ways and terminal stations, the exemption
would not apply because their beneficial use has been granted to petitioner, a taxable entity.

Taxation is the rule and exemption is the exception. Any claim for tax exemption is strictly construed against the
claimant. LRTA has not shown its eligibility for exemption; hence, it’s subject to tax.

Land Transportation Office vs City of Butuan

322 SCRA 805 [GR No. 131512 January 20, 2000]

Facts: Respondent city of Butuan asserts that one of the salient provisions introduced by the local government code
is in the area of local taxation which allows LGUs to collect registration fees or charges along with, its view, the
corresponding issuance of all kinds of licenses or permits for the driving of tricycles. Relying on the provisions of the
local government code, the sangguniang panlungsod of Butuan, on August 16, 1992 passed SP Ordinance no. 916-
42 entitled “An Ordinance Regulating The Operation Of Tricycles-For-Hire, Providing Mechanism For The Issuance of
Franchise, Registration and Permit and Imposing Penalties For Violations Thereof and for Other Purposes.” The
ordinance provided for among other things, the payment of franchise fees for the grant of the franchise of tricyles-for-
hire, fees for the registration of the vehicle, and fees for the issuance of a permit for the driving thereof. Petitioner
LTO explains that one of the functions of the national government that, indeed, has been transferred to local
government units is the franchising authority over tricycles-for-hire of the land transportation franchising and
regulatory board but not, it asseverates, the authority of LTO to register all motor vehicles and to issue qualified
persons of licenses to drive such vehicles.

Issue: Whether or not respondent city of Butuan may issue license and permit and collect fees for the operation of
tricycle.

Held: No. LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant franchises
for the operation thereof. “To regulate” means to fix, establish or control; to adjust by rule, method or established
made; to direct by rule or restriction; or to subject to governing principles of law. A franchise is defined to be a special
privilege to do certain things conferred by government on an individual or corporation and which does not belong to
citizens generally of common right. On the other hand, to register means to record formally and exactly, to enroll, or
to enter precisely in a list or the like, and a driver’s license is the certificate or license issued by the government which
authorizes a person to operate a motor vehicle. The devolution of the functions of the DOTC, performed by the
LTFRB, to the LGUs, as so aptly observed by the solicitor general is aimed at curbing the alarming in on case of
accidents in national highways involving tricycles. It has been the perception that local governments are in good
position to achieve the end desired by the law making body because of their proximity to the situation that can enable
them to address that serious concern better than the national government.

It may not be amiss to state nevertheless, that under article 458 (a) [3-VI] of the local government code, the power of
the LGUs to regulate the operation of tricycles and to grant franchises for the operation thereof is still subject to the
guidelines prescribed by the DOTC. In compliance therewith, the Department of Transportation and Communications
(DOTC) issued guidelines to implement the devolution of LTFRBs franchising authority over tricycles-for-hire to local
government units pursuant to the local government code.

The reliance made by the respondents on the broad taxing power of local government units, specifically under section
133 of the local government code, is tangential. Police power and taxation, along with eminent domain, are inherent
powers of sovereignty which the state might share with local government units by delegation or given under a
constitutional or a statutory fiat. All these inherent powers are for a public purpose and legislative in nature but the
similarities just about end there. The basic aim of police power is public good and welfare. Taxation, in its case,
focuses on the power of government to raise revenue in order to support its existence and carry out its legitimate
objectives. Although correlative to each other in many respects, the grant of one does not necessarily carry with it the
grant of the other. The two powers are by tradition and jurisprudence separate and distinct powers, varying in their
respecting concepts, character, scopes, and limitations. To construe the tax provisions of section 133 (1)
indistinctively would result in the repeal to that extent of LTOs regulatory power which evidently has not been
intended. If it were otherwise, the law could have just said so in section 447 and 458 of Book III of the local
government code in the same manner that the specific devolution of LTFRBs power on franchising of tricycles has
been provided. Repeal by implication is not favored. The power over tricycles granted under section 458 (8) (3) (VI) of
the local government code to LGUs is the power to regulate their operation and to grant franchises for the operation
thereof. The government’s exclusionary clause contained in the tax provisions of section 133 (1) of the local
government code must be held to have had the effect of withdrawing the express powers of LTO to cause the
registration of all motor vehicles and the issuance of license for the driving thereof. These functions of the LTO are
essentially regulatory in nature, exercised pursuant to the police power of the state, whose basic objectives are to
achieve road safety by insuring the road worthiness of these motor vehicles and the competence of drivers
prescribed by RA 4136. Not insignificant is the rule that a statute must not be construed in isolation but must be taken
in harmony with the extent body of laws.

The Province of Misamis Oriental vs Cagayan Electric Power and Light Company

181 SCRA 38 [GR No. L-45355 January 12, 1990]

Facts: Cagayan Electric Power and Light Company Inc. was granted a franchise on June 17, 1961 under Republic
Act No. 3247 to install, operate and maintain an electric light, heat and power system in the City of Cagayan de Oro
and its suburbs. Said franchise was amended on June 21, 1963 by RA 3570 which added the municipalities of
Tagoloan and Opol to CEPALCO’s sphere of operation, and was further amended on August 4, 1969, by RA 6020
which extended its field of operation to the municipalities of Villanueva and Jasaan. Pursuant thereto, the province of
Misamis Oriental enacted provincial revenue ordinance no. 9 whose section 12 reads:

Sec 12 Franchise tax – There shall be levied, collected and paid on businesses enjoying franchise tax of 1/2 of 1% of
their gross annual receipts for the preceding calendar year realized within the territorial jurisdiction of the province of
Misamis Oriental.

The provincial treasurer of Misamis Oriental demanded payment of the provincial franchise tax from CEPALCO. The
company refused to pay, alleging that it is exempt from all taxes except the franchise tax required by RA 6020.
Nevertheless, in view of the opinion rendered by the provincial fiscal, upon CEPALCO’s request, upholding the
legality of the revenue ordinance, CEPALCO paid under protest on May 27, 1974 the sum of Php4,276.28 and
appealed the fiscal’s ruling to the secretary of justice who reversed it and ruled in favor of CEPALCO.

Issue: Whether or not CEPALCO is exempt from the payment of franchise tax.

Held: Yes. RA 3247, 3570 and 6020 are special laws applicable only to CEPALCO, while PD 231 is a general tax
law. The presumption is that the special statutes are exceptions to the general law because they pertain to a special
charter granted to meet a particular set of conditions and circumstances. The franchise of respondent CEPALCO
expressly exempts it from payment of “all taxes of whatever authority” except the 3% tax on its gross income.

This court pointed out that such exemption is part of the inducement for the acceptance of the franchise and the
rendition of public service by the grantee. As a charter is in the nature of a private contract, the imposition of another
franchise tax on the corporation by the local authority would constitute an impairment of the contract between the
government and the corporation.

Local tax regulation no. 3-75 issued by the secretary of finance on June 26, 1976, has made it crystal clear that the
franchise tax provided in the local tax code may only be imposed on companies with franchises that do not contain
the exempting clause. Thus it provides:

The franchise tax imposed under local tax ordinance pursuant to section 9 of the local tax code, as amended shall be
collected from businesses holding franchise but not from business establishments whose franchise contain the “in
lieu of all taxes proviso.”

City Government of San Pablo, Laguna vs Reyes

305 SCRA 353 [GR No. 127708 March 25, 1999]

Facts: Act 3648 granted the Escudero Electric Service Company a legislative franchise to maintain and operate an
electric light and power system in the city of San Pablo and nearby municipalities. Section 10 of said act provides:
In consideration of the franchise and rights hereby granted, the grantee shall pay unto the municipal treasury of each
municipality in which it is supplying electric current to the public under this franchise, a tax equal to two percentum of
the gross earning from electric current sold or supplied under this franchise in each said municipality. Said tax shall
be due and payable quarterly and shall be in lieu of any and all taxes of any kind nature or description levied,
established or collected by any authority whatsoever, municipal, provincial or insular, now or in the future, or its pole
wires, insulator, switches, transformers, and structures, installations, conductors and accessories placed in and over
and under all public property, including public streets and highways, provincial roads, bridges and public squares, and
on its franchises, rights, privileges, receipts, revenues and profits from which taxes the grantee is hereby expressly
exempted.

Escudero’s franchise was transferred to the plaintiff MERALCO under RA 2340.

On October 5, 1992, the sangguniang panlungsod of San Pablo City enacted ordinance no. 56 otherwise known as
the Revenue Code of the City of San Pablo. Pursuant to sec 2.09 article D of the said ordinance, the petitioner city
treasurer sent to private respondent a letter demanding payment of the aforesaid franchise tax.

Issue: Whether or not the city of San Pablo may impose a local franchise tax to MERALCO.

Held: Yes. A general law cannot be construed to have repealed a special law by mere implication unless the intent to
repeal or alter is manifest and it must be convincingly demonstrated that the two laws are so clearly repugnant and
patently inconsistent that they cannot co-exist.

It is our view that petitions correctly rely on the provisions of sections 137 and 193 of the LGC to support their position
that MERALCO’s tax exemption has been withdrawn. The explicit language of section 137 which authorizes the
province to impose franchise tax not withstanding any exemption granted by law or other special law is all
encompassing and clear. The franchise is imposable despite any exemption enjoyed under special law.

Sec 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise provided in this
code, tax exemptions or incentives granted to or presently enjoyed all persons whether natural or juridical, including
GOCCs except: 1.) local water districts; 2.) Cooperatives duly registered under RA 6938; 3.) Non-stock and non-profit
hospitals and education institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the
exemptions to the 3 enumerated entities. It is a basic precept of statutory construction that the express mention of
one person, thing, act or consequences excludes all others as expressed in the familiar maxim expressio unius est
exclusio alterus. In the absence of any provision of the code to the contrary, and we find no other provision in point,
any existing tax exemption or incentive enjoyed by the MERALCO under the existing law was clearly intended to be
withdrawn.

Reading together section 193 and 137 of the LGC conclude that under the LGC, the local government unit may now
impose a local tax at a rate not excluding 50% of 1% of the gross annual receipts for the preceding calendar year
based on the incoming receipts realized within its territorial jurisdiction. The legislative purpose to withdraw tax
privilege only enjoy and an existing law or charter is clearly manifested by the language used in sections 137 and 193
categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be not only
tedious and impractical to attempt to enumerate all the existing statutes providing for special tax exemptions or
privileges, the LGC provided for an express, albeit general withdrawal of such exemptions or privileges. No more
unequivocal language could have been used.

It is true that the phrase “in lieu of all taxes” found in special franchises has been held in several cases to exempt the
franchise holder from payment of tax on its corporate franchise imposed of the internal revenue code, as the charter
is in the nature of a private contract and the exemption is part of the inducement for the acceptance of the franchise,
and that the imposition of another franchise tax by the local authority would constitute an impairment of contract
between the government and the corporation. But these “magic words” contained in the phrase “shall be in lieu of all
taxes” have to give way to the premptory language of the LGC specifically providing for the withdrawal of such
exemption privileges.

Meralco v Laguna

Facts: Certain municipalities of the Province of Laguna by virtue of existing laws then in effect, issued resolutions
through their respective municipal councils granting franchise in favor of petitioner for the supply of electric light, heat
and power within their concerned areas. In 1991, RA 7160, otherwise known as the “Local Government Code of
1991,” was enacted to take effect on 01 January 1992 enjoining local government units to create their own sources of
revenue and to levy taxes, fees and charges, subject to the limitations expressed therein, consistent with the basic
policy of local autonomy. Pursuant to the provisions of the Code, respondent enacted an Ordinance imposing a tax
on businesses enjoying a franchise. Petitioner paid the tax under protest. A formal claim for refund was thereafter
sent by the petitioner to the Provincial Treasurer claiming that the franchise tax it had paid and continued to pay to
the National Government. Petitioner contended that the imposition of a franchise tax under the said Ordinance
contravened the provisions of P.D. 551. In 1995, the claim for refund of petitioner was denied. In 1996, petitioner filed
with the RTC a complaint for refund, with a prayer for the issuance of a writ of preliminary injunction and/or TRO,
against the Respondent. The trial court dismissed the complaint. Hence this petition.

Issue: Whether the imposition of a franchise tax under Provincial Ordinance authorized by RA 7160, otherwise known
Local Government Code of 1991, insofar as petitioner is concerned, is violative of the non-impairment clause of the
Constitution.

Held: No, the local governments do not have the inherent power to tax except to the extent that such power might be
delegated to them either by the basic law or by statute. Presently, under Article X of the 1987 Constitution, a general
delegation of that power has been given in favor of local government units. 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.
The Local Government Code of 1991 has incorporated and adopted, by and large, the provisions of the now repealed
Local Tax Code. The Local Government Code explicitly authorizes provincial governments, notwithstanding “any
exemption granted by any law or other special law, . . . (to) impose a tax on businesses enjoying a franchise.”
Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to local
government units, the Local Government Code has effectively withdrawn under Section 193 thereof, tax exemptions
or incentives theretofore enjoyed by certain entities. The Code, in addition, contains a general repealing which all
general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations,
or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly. These policy considerations are consistent with the State policy to ensure autonomy to local
governments and the objective of the LGC that they enjoy genuine and meaningful local autonomy to enable them to
attain their fullest development as self-reliant communities and make them effective partners in the attainment of
national goals. The power to tax is the most effective instrument to raise needed revenues to finance and support
myriad activities if local government units for the delivery of basic services essential to the promotion of the general
welfare and the enhancement of peace, progress, and prosperity of the people. It may also be relevant to recall that
the original reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled
corporations and all other units of government were that such privilege resulted in serious tax base erosion and
distortions in the tax treatment of similarity situated enterprises, and there was a need for these entities to share in
the requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them.

While the Court has, not too infrequently, referred to tax exemptions contained in special franchises as being in the
nature of contracts and a part of the inducement for carrying on the franchise, these exemptions, nevertheless, are
far from being strictly contractual in nature. Contractual tax exemptions, in the real sense of the term and where the
non-impairment clause of the Constitution can rightly be invoked, are those agreed to by the taxing authority in
contracts, such as those contained in government bonds or debentures, lawfully entered into by them under enabling
laws in which the government, acting in its private capacity, sheds its cloak of authority and waives its governmental
immunity. Truly, tax exemptions of this kind may not be revoked without impairing the obligations of contracts. 14
These contractual tax exemptions, however, are not to be confused with tax exemptions granted under franchises. A
franchise partakes the nature of a grant which is beyond the purview of the non-impairment clause of the
Constitution.15 Indeed, Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the 1935 and
the 1973 Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under
the condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the
common good so requires.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. (PLDT)
vs.
CITY OF DAVAO and ADELAIDA B. BARCELONA, in her capacity as City Treasurer of Davao

Facts:

PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise tax was paid “in lieu of all
taxes on this franchise or earnings thereof” pursuant to RA 7082. The exemption from “all taxes on this franchise or
earnings thereof” was subsequently withdrawn by RA 7160 (LGC), which at the same time gave local government
units the power to tax businesses enjoying a franchise on the basis of income received or earned by them within their
territorial jurisdiction. The LGC took effect on January 1, 1992.

The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part provides: Notwithstanding any
exemption granted by law or other special laws, there is hereby imposed a tax on businesses enjoying a franchise, a
rate of seventy-five percent (75%) of one percent (1%) of the gross annual receipts for the preceding calendar year
based on the income receipts realized within the territorial jurisdiction of Davao City.

Subsequently, Congress granted in favor of Globe Mackay Cable and Radio Corporation (Globe) and Smart
Information Technologies, Inc. (Smart) franchises which contained “in leiu of all taxes” provisos.

In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines, Sec. 23 of which provides
that any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be
granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded
immediately and unconditionally to the grantees of such franchises. The law took effect on March 16, 1995.

In January 1999, when PLDT applied for a mayor’s permit to operate its Davao Metro exchange, it was required to
pay the local franchise tax which then had amounted to P3,681,985.72. PLDT challenged the power of the city
government to collect the local franchise tax and demanded a refund of what had been paid as a local franchise tax
for the year 1997 and for the first to the third quarters of 1998.

Issue:

Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption from payment of the local
franchise tax in view of the grant of tax exemption to Globe and Smart.

Held:

Petitioner contends that because their existing franchises contain “in lieu of all taxes” clauses, the same grant of tax
exemption must be deemed to have become ipso facto part of its previously granted telecommunications franchise.
But the rule is that tax exemptions should be granted only by a clear and unequivocal provision of law “expressed in a
language too plain to be mistaken” and assuming for the nonce that the charters of Globe and of Smart grant tax
exemptions, then this runabout way of granting tax exemption to PLDT is not a direct, “clear and unequivocal” way of
communicating the legislative intent.

Nor does the term “exemption” in Sec. 23 of RA 7925 mean tax exemption. The term refers to exemption from
regulations and requirements imposed by the National Telecommunications Commission (NTC). For instance, RA
7925, Sec. 17 provides: The Commission shall exempt any specific telecommunications service from its rate or tariff
regulations if the service has sufficient competition to ensure fair and reasonable rates of tariffs. Another exemption
granted by the law in line with its policy of deregulation is the exemption from the requirement of securing permits
from the NTC every time a telecommunications company imports equipment.

Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of language too plain
to be mistaken.

PBA v. QUEZON CITY (137 SCRA 358)

Facts:

The city government enacted a tax ordinance trying to collect amusement tax including amusement tax on
the PBA (inAraneta, Cubao); but PBA and “no, we are already paying amusement tax to the national

government through the BIR because of §125 of the IRC”

Held:

QC government can no longer collect on the ground that it is already being collected by the national

government and secondly, in the enumerations of amusement under Section 140, you will never see

professional basketball. Most of all, it is the intention of the author that it is only the national government.

Iloilo Bottlers

CORTES, J.:

The fundamental issue in this appeal is whether the Iloilo Bottlers, Inc., which had its bottling plant in Pavia, Iloilo, but
which sold softdrinks in Iloilo City, is liable under Iloilo City tax Ordinance No. 5, series of 1960, as amended, which
imposes a municipal license tax on distributors of softdrinks.

On July 12, 1972, Iloilo Bottlers, Inc. filed a complaint docketed as Civil Case No. 9046 with the Court of First
Instance of Iloilo praying for the recovery of the sum of P3,329.20, which amount allegedly constituted payments of
municipal license taxes under Ordinance No. 5, series of 1960, as amended, that the company paid under protest.

On November 15, 1972, the parties submitted a partial stipulation of facts, the material portions of which state:

***

2. That plaintiff is engaged in the business of bottling soft-drinks under the trade name of Pepsi Cola and 7-up
and selling the same to its customers, with a bottling plant situated at Barrio Ungca, Municipality of Pavia,
Iloilo, Philippines and which is outside the jurisdiction of defendant;

3. That defendant enacted an ordinance on January 11, 1960 known as Ordinance No. 5, Series of 1960 which
ordinance was successively amended by Ordinance No. 28, Series of 1960; Ordinance No. 15, Series of
1964; and Ordinance No. 45, Series of 1964; which provides as follows:

Section 1. - Any person, firm or corporation engaged in the distribution, manufacture or bottling of coca-cola,
pepsi cola, tru-orange, seven-up and other soft drinks within the jurisdiction of the City of Iloilo, shall pay a
municipal license tax of ten (P0.10) centavos for every case of twenty-four bottles; PROVIDED, HOWEVER,
that soft drinks sold to the public at not more than five (P0.05) centavos per bottle shall pay a tax of one and
one half (P0.015) (centavos) per case of twenty four bottles.

Section 1-A. - For purposes of this Ordinance, all deliveries and/or dispatches emanating or made at the
plant and all goods or stocks taken out of the plant for distribution, sale or exchange irrespective (of) where it
would take place shall be covered by the operation of this Ordinance.

4. That prior to September, 1966, Santiago Syjuco Inc., owned and operated a bottling plant at Muelle Loney
Street, Iloilo City, which was doing business under the name of Seven-up Bottling Company of the
Philippines and bottled the soft-drinks Pepsi-Cola and 7-up; however sometime on September 14, 1966,
Santiago Syjuco, Inc., informed all its employees that it (was) closing its Iloilo Plant due to financial losses
and in fact closed the same and later sold the plant to the plaintiff Iloilo Bottlers, Inc.

5. That thereafter, plaintiff operated the said plant by bottling the soft drinks Pepsi-Cola and 7-up; however,
sometime in July 1968, plaintiff closed said bottling plant at Muelle Loney, Iloilo City, and transferred its
bottling operations to its new plant in Barrio Ungca, Municipality of Pavia, Province of Iloilo, and which is
outside the jurisdiction of the City of Iloilo;

6. That from the time of (the) enactment (of the ordinance), the Seven Up Bottling Company of the Philippines
under Santiago Syjuco, Inc., had been religiously paying the defendant City of Iloilo the above-mentioned
 municipal license tax due therefrom for bottler because its bottling plant was then still situated at Muelle
Loney St., Iloilo City; but the plaintiff stopped paying the municipal license tax (after) October 21, 1968
(when) it transferred its plant to Barrio Ungca, Municipality of Pavia, Iloilo which is outside the jurisdiction of
the City of Iloilo;

7. That sometime on July 31, 1969, the defendant demanded from the plaintiff the payment of the municipal
license tax under the above-mentioned ordinance, a xerox copy of the said letter is attached to the complaint
as Annex "A" and made an integral part hereof by reference.

8. That plaintiff explained in a letter to the defendant that it could not anymore be liable to pay the municipal
license fee because its bottling plant (was) not anymore inside the City of Iloilo, and that moreover, since it
itself (sold) its own products to its (customers) directly, it could not be considered as a distributor in line with
the doctrines enunciated by the Supreme Court in the cases of City of Manila vs. Bugsuk Lumber Co., L-
8255, July 11, 1957; Manila Trading & Supply Co., Inc. vs. City of Manila L-12156, April 29, 1959; Central
Azucarera de Don Pedro vs. City of Manila, et al., G.R. No. L-7679, September 29, 1955; Cebu Portland
Cement vs. City of Manila and City Treasurer of Manila, L-14229, July 26, 1960. A xerox copy of the said
letter is attached as Annex "B" to the complaint and made an integral part hereof by reference. As a result of
the said letter of the plaintiff, the defendant did not anymore press the plaintiff to pay the said municipal
license tax;

9. That sometime on January 25, 1972, the defendant demanded from the plaintiff compliance with the said
ordinance for 1972 in view of the fact that it was engaged in distribution of the softdrinks in the City of Iloilo,
and it further demanded from the plaintiff payment of back taxes from the time it transferred its bottling plant
to the Municipality of Pavia, Iloilo;

10. That the plaintiff demurred to the said demand of the defendant raising as its justification the reason that its
bottling plant is situated outside the City of Iloilo and as bottler could not be considered as distributor under
the said ordinance although it sells its product directly to the consumer, in line with the jurisprudence
enunciated by the Supreme Court but due to insistence of the defendant, the plaintiff paid on April 20, 1972,
the first quarter payment of the municipal license tax in the sum of P3,329.20, under protest, and thereafter
has been paying defendant every quarter under protest;

11. That on June 15, 1972, the defendant informed the plaintiff that it must pay all the taxes due since July,
1968 up to the last quarter of 1971, otherwise it shall be constrained to cancel the operation of the business
of the plaintiff, and because of this threat, and so as not to occasion disruption of its business operation, the
plaintiff under protest agreed to the payment of the back taxes, on staggered basis, which was acceded to
by the defendant;

12. That as computed by the plaintiff the following are its softdrinks sold in Iloilo City since it transferred its
bottling plant from the City of Iloilo to Barrio Ungca, Pavia, Iloilo in July 1968, to wit:

No. of Cases sold

SEVEN- PEPSI- TOTAL TAX
UP COLA DUE

1968 - Jul. to Dec. 39,340 49,060 88,400 P 8,840

1969 - Jan. to Dec. 81,240 87,660 168,900 16,890
1970 - Jan. to Dec. 79,389 89,211 168,600 16,600
1971 - Jan. to Dec. 80,670 88,480 169,150 16,915

TOTAL 280,639 314,411 595,050 59,505

13.
14. That the plaintiff does not maintain any store or commercial establishment in the City of Iloilo from which it
distributes its products, but by means of a fleet of delivery trucks, plaintiff distributes its products from its
bottling plant at Barrio Ungca, Municipality of Pavia, Iloilo, directly to its customers in the different towns of
the Province of Iloilo as well as the City of Iloilo;
 15. That the plaintiff is already paying the National Government a percentage Tax of 7% as manufacturer's sales
tax on all the softdrinks it manufactures as follows:

O.R. No. 4683995-January 1972 Sales P 17,222.90

O.R. No. 5614767-February " " 17,024.81
O.R. No. 5614870-March " " 17,589.19
O.R. No. 5614891-April " " 18,726.77
O.R. No. 5614897-May " " 16,710.99
O.R. No. 5614935- June " " 14,791.20
O.R. No. 5614967-July
" " 13,952.00

O.R. No. 5614973-August " " 15,726.16

O.R. No. 5614999-September " ' 19,159.54

16.
and is also paying the municipal license tax to the municipality of Pavia, Iloilo in the amount of P10,000.00
every year, plus a municipal license tax for engaging in its business to the municipality of Pavia in the
amount of P2,000.00 every year.

***

[Rollo, p. 10 (Record on Appeal, pp. 25-31).]

On the basis of the above stipulations, the court a quo rendered on January 26, 1973 a decision in favor of Iloilo
Bottlers, Inc., declaring the Corporation not liable under the ordinance, and directing the City of Iloilo to pay the sum
of P3,329.20. The decision was amended in an Order dated March 15, 1973, so as to include the amounts paid by
the company after the filing of the complaint. The City of Iloilo appealed to the Court of Appeals which certified the
case to this Court.

The tax ordinance imposes a tax on persons, firms, and corporations engaged in the business of:

1. distribution of softdrinks

2. manufacture of softdrinks, and

3. bottling of softdrinks

within the territorial jurisdiction of the City of Iloilo.

There is no question that after it transferred its plant to Pavia, Iloilo province, Iloilo Bottlers, Inc. no longer
manufactured/bottled its softdrinks within Iloilo City. Thus, it cannot be taxed as one falling under the second or the
third type of business. The resolution of this case therefore hinges on whether the company may be considered
engaged in the distribution of softdrinks in Iloilo City, even after it had transferred its bottling plant to Pavia, so as to
be within the purview of the ordinance.

Iloilo Bottlers, Inc. disclaims liability on two grounds: First, it contends that since it is not engaged in the independent
business of distributing softdrinks, but that its activity of selling is merely an incident to, or is a necessary
consequence of its main or principal business of bottling, then it is NOT liable under the city tax ordinance. Second, it
claims that only manufacturers or bottlers having their plants inside the territorial jurisdiction of the city are covered by
the ordinance.

The second ground is manifestly devoid of merit. It is clear from the ordinance that three types of activities are
covered: (1) distribution, (2) manufacture and (3) bottling of softdrinks. A person engaged in any or all of these
activities is subject to the tax.

The first ground, however, merits serious consideration.

This Court has always recognized that the right to manufacture implies the right to sell/distribute the manufactured
products [See Central Azucarera de Don Pedro v. City of Manila and Sarmiento, 97 Phil. 627 (1955); Caltex
(Philippines), Inc. v. City of Manila and Cudiamat, G.R. No. L-22764, July 28, 1969, 28 SCRA 840, 843.] Hence, for
tax purposes, a manufacturer does not necessarily become engaged in the separate business of selling simply
because it sells the products it manufactures. In certain cases, however, a manufacturer may also be considered as
engaged in the separate business of selling its products.

To determine whether an entity engaged in the principal business of manufacturing, is likewise engaged in the
separate business of selling, its marketing system or sales operations must be looked into.

In several cases [See Central Azucarera de Don Pedro v. City of Manila and Sarmiento, supra; Cebu Portland
Cement Co. v. City of Manila and the City Treasurer, 108 Phil. 1063 (1960); Caltex (Philippines), Inc v. City of Manila
and Cudiamat, supra], this Court had occasion to distinguish two marketing systems:

Under the first system, the manufacturer enters into sales transactions and invoices the sales at its main office where
purchase orders are received and approved before delivery orders are sent to the company's warehouses, where in
turn actual deliveries made. No warehouse sales are made nor are separate stores maintained where products may
be sold independently from the main office. The warehouses only serve as storage sites and delivery points of the
products earlier sold at the main office.

Under the second system, sales transactions are entered into and perfected at stores or warehouses maintained by
the company. Any one who desires to purchase the product may go to the store or warehouse and there purchase
the merchandise. The stores and warehouses serve as selling centers.

Entities operating under the first system are NOT considered engaged in the separate business of selling or dealing
in their products, independent of their manufacturing business. Entities operating under the second system are
considered engaged in the separate business of selling.

In the case at bar, the company distributed its softdrinks by means of a fleet of delivery trucks which went directly to
customers in the different places in Iloilo province. Sales transactions with customers were entered into and sales
were perfected and consummated by route salesmen. Truck sales were made independently of transactions in the
main office. The delivery trucks were not used solely for the purpose of delivering softdrinks previously sold at Pavia.
They served as selling units. They were what were called, until recently, "rolling stores". The delivery trucks were
therefore much the same as the stores and warehouses under the second marketing system. Iloilo Bottlers, Inc. thus
falls under the second category above. That is, the corporation was engaged in the separate business of selling or
distributing softdrinks, independently of its business of bottling them.

The tax imposed under Ordinance No. 5 is an excise tax. It is a tax on the privilege of distributing, manufacturing or
bottling softdrinks. Being an excise tax, it can be levied by the taxing authority only when the acts, privileges or
businesses are done or performed within the jurisdiction of said authority [Commissioner of Internal Revenue v.
British Overseas Airways Corp. and Court of Tax Appeals, G.R. Nos. 65773-74, April 30, 1987, 149 SCRA 395, 410.]
Specifically, the situs of the act of distributing, bottling or manufacturing softdrinks must be within city limits, before an
entity engaged in any of the activities may be taxed in Iloilo City.

As stated above, sales were made by Iloilo Bottlers, Inc. in Iloilo City. Thus, We have no option but to declare the
company liable under the tax ordinance.

With the foregoing discussion, it becomes unnecessary to discuss the other issues raised by the parties.

WHEREFORE, the appealed decision is hereby REVERSED. The complaint in Civil Case No. 9046 is ordered
DISMISSED. No costs.

SO ORDERED.

Philippine Match Co v. Cebu City and Jesus Zabate | GR No L-30745 | Jan. 18, 1978

Facts:

- This case is about the legality of the tax collected by Cebu City on the sales of matches stored by petitioner in Cebu,
but delivered to customers outside the city.
- Ordinance No. 279 of Cebu City is an ordinance which imposes quarterly tax on gross sales or receipts of
merchants, dealers, importers and manufacturers of any commodity doing business in Cebu. It also imposes a sales
tax of 1% on the gross sales, receipts or value of commodities sold, bartered, exchanged on manufactured in the city
in excess of P2,000 a quarter.

- Sec. 9 of the Ordinance provides that all deliveries of goods or commodities stored in Cebu City, or if not stored,
are sold in the city, shall be considered as sales in the city and thus taxable.

- It would seem that under the tax ordinance sales of matches consummated outside of the city are taxable as long as
the matches sold are taken from the company's stock stored in Cebu City.

- Petitioner, whose principal office is in Manila, ships cases or cartons of matches to its branch office in Cebu for
storage, sale and distribution within territories under its Cebu branch.

- Petitioner paid under protest to the city. However, it sent a letter to the city treasurer seeking the refund of the sales
tax paid for out-of-town deliveries of matches. o It invoked Shell Company of the Philippines, Ltd. vs. Municipality of
Sipocot, Camarines Sur, 105 Phil. 1263. In that case sales of oil and petroleum products effected outside the
territorial limits of Sipocot, were held not to be subject to the tax imposed by an ordinance of that municipality.

- The city treasurer denied the request. His stand is that under section 9 of the ordinance all out-of-town deliveries of
latches stored in the city are subject to the sales tax imposed by the ordinance.

- The petitioner filed the complaint, praying that the ordinance be declared void insofar as it taxed the deliveries of
matches outside Cebu City, and that the city be ordered to refund the company the sum of the excess sales tax paid,
and that the city treasurer be ordered to pay damages.

- The Trial Court sustained the tax on the sales of matches booked and paid for in Cebu City, stating that the sales
were consummated in Cebu City because delivery to the carrier in the city is deemed to be a delivery to the
customers outside of the city; but, the trial court invalidated the tax on transfers of matches to salesmen assigned to
different agencies outside of the city and on shipments of matches to provincial customers pursuant to the
instructions of the newsmen The trial court characterized the tax on the other two transactions as a "storage tax" and
not a sales tax. It assumed that the sales were consummated outside of the city and, hence, beyond the city's taxing
power.

- The city did not appeal from that decision. The company appealed from that portion of the decision upholding the
tax on sales of matches to customers outside of the city but which sales were booked and paid for in Cebu City, and
also from the dismissal of its claim for damages against the city treasurer.

Issue (pertinent to the topic): Whether or not the trial court erred in not ordering defendant acting City Treasurer to
pay exemplary damages of P20,000 and attorneys fees

Held:

No, it did not err. The claim for damages is predicated on articles 19, 20, 21, 27 and 2229 of the Civil Code.
Defendant city treasurer argued that in enforcing the tax ordinance in question he was simply complying with his duty
as collector of taxes. He had no choice but to enforce the ordinance because according to section 357 of the Revised
Manual of Instruction to Treasurer's "a tax ordinance win be enforced in accordance with its provisions" until declared
illegal or void by a competent court, or otherwise revoked by the council or board from which it originated. Article 27
of the Civil Code provides that "any person suffering material or moral lose because a public servant or employee
refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief
against the latter, without prejudice to any disciplinary administrative action that may be taken." It presupposes that
the refuse or omission of a public official is attributable to malice or inexcusable negligence. In this case, it cannot be
said that the city treasurer acted willfully or was grossly in not refunding to the plaintiff the taxes which it paid under
protest on out-of-town sales of matches. The record clearly reveals that the city treasurer honestly believed that he
was justified under section 9 of the tax ordinance in collecting the sales tax on out-of-town deliveries, considering that
the company's branch office was located in Cebu City and that all out-of-town purchase order for matches were filled
up by the branch office and the sales were duly reported to it. The city treasurer acted within the scope of his
authority and in consonance with his bona fide interpretation of the tax ordinance. As a rule, a public officer, whether
judicial, quasi-judicial or executive, is not liable to one injured in consequence of an act performed within the scope of
his official authority, and in the line of his official duty. Where an officer is invested with discretion and is empowered
to exercise his judgment in matters brought before him. He is sometimes called a quasi-judicial officer, and when so
acting he is usually given immunity from liability to persons who may be injured as the result or an erroneous or
mistaken decision, however erroneous his judgment may be. provided the acts complained of are done within the
scope of the officer's authority and without malice

G.R. No. L-40296 November 21, 1984

ALLIED THREAD CO., INC., and KER & COMPANY, LTD., petitioners,
vs.
HON. CITY MAYOR OF MANILA, HON. CITY TREASURER OF MANILA, HON. LORENZO RELOVA, in his
capacity as Presiding Judge, Branch II, CFI of Manila, respondents.

ABAD SANTOS, J.:

This is a Petition for Review challenging the decision of the then Court of First Instance of Manila presided by then
Judge, now Justice Lorenzo Relova, which upheld the validity of Manila Ordinance No. 7516, as amended by
Ordinance Nos. 7544, 7545 and 7556, and adjudging petitioner Allied Thread Co., Inc. taxable thereunder
considering that its products are sold in Manila.

On June 12, 1974, the Municipal Board of the City of Manila enacted Ordinance No. 7516 imposing on
manufacturers, importer porters or producers, doing business in the City of Manila, business taxes based on gross
sales on a graduated basis. The Mayor approved the said Ordinance on June 15, 1974. In due time, the same
ordinance underwent a series of amendments, to wit: on June 19, 1974, by Ordinance No. 7544 approved by the
Mayor on the same date; Ordinance No. 7545 enacted by the Municipal Board on June 20, 1974 and approved by the
Mayor on June 27, 1974; and Ordinance No. 7556, enacted by the Municipal Board on July 20, 1974 and approved
by the Mayor on July 29,1974. Ordinance No. 7516 as amended, reads as follows:

Sec. 1. Business Tax. — There is hereby imposed on the following business in the City of Manila
an annual tax collectible quarterly except on those for which fixed taxes are already provided for as
follows:

A. On manufacturers, importers, or producers of any article of commerce of whatever kind or

nature, including brewers, distilled spirits and/or wines in accordance with the following schedule:

xxx xxx xxx

PROVIDED HOWEVER, that for purposes of collection of this tax, manufacturers and producers
maintaining or operating branch or sales offices elsewhere shall record the sale in the branch or
sales office making the sale and the tax thereon shall accrue to the City of Manila if the branch of
sales office is in Manila. In cases where there is no such branch or sales office in the city, the sale
shag be duly recorded in the principal office along with the sales made in the principal office. Sixty
percent of all sales recorded in the principal office shall be taxable by the City of Manila if the
principal office is in Manila, while the remaining forty percent shall be deemed as sales made in the
factory and shall he taxable by the local government where the factory is located.

In cases where a manufacturer or producer has factories in Manila and in different localities, the
forty per cent sales allocation mentioned in the preceding paragraph shall be appropriated among
the City of Manila and the localities where the factories are situated in proportion to their respective
volumes of production during the period for which the tax is due.

The records show that petitioner Allied Id Co., inc. is engaged in the business of manufacturing sewing thread and
yarn under duly registered marks and labels. It operates its factory and maintains an office in Pasig, Rizal. In order to
sell its products in Manila and in other parts of the Philippines, petitioner Allied Thread Co., Inc. engaged the services
of a sales broker, Ker & Company, Ltd. (co-petitioner herein), the latter deriving commissions from every sale made
for its principal.

Having been affected by the aforementioned Ordinance, being manufacturers and sales brokers, on July 22, 1974,
Allied Thread Co., Inc. and Ker & Co., Ltd. filed with the defunct Court of First Instance of Manila, a petition for
Declaratory Relief, contending that Ordinance No. 7516, as amended, is not valid nor enforceable as the same is
contrary to Section 54 of Presidential Decree No. 426, as clarified by Local Tax Regulation No. 1-74 dated April 8,
1974 of the Department of Finance, reading as follows:

J. GENERAL PROVISIONS

1. All existing tax ordinance of provinces, cities, municipalities and barrios shall be deemed ipso
facto nullified on June 30, 1974.

2. The local boards or councils should enact their respective tax ordinances pursuant to the
provisions of the Local Tax Code, as amended by P.D. 426, to take effect not earlier than July 1,
1974.

3. Pursuant to the provisions of Section 42 of the Code, as amended by Section 18 of the said
Decree, a local tax ordinance shall go into effect on the 15th day after approved by the local chief
executives in accordance with Section 41 of the Code. 4. In view hereof, and considering the
provisions of Section 54 of the Code, regarding the accrual of taxes a local tax ordinance intended
to take effect on July 1, 1974 should be enacted by the Local Chief Executive not later than June
15, 1974. (Emphasis supplied)

Otherwise stated, petitioners assert that due to the series of amendments to Ordinance No. 7516, the same
Ordinance fell short of the deadline set by Sec. 54 of P.D. No. 426 that "for an ordinance intended to take effect on
July 1, 1974, it must be enacted on or before June 15, 1974." Necessarily, so it is asserted, the said Ordinance No.
7516 as amended, is not valid nor enforceable.

Petitioners further contend that the questioned Ordinance did not comply with the necessary publication requirement
in a newspaper of general circulation as mandated by Sec. 43 of the Local Tax Code. Petitioner Allied Thread Co.,
Inc. also claims that it should not be subjected to the said Ordinance No. 7516 as amended, because it does not
operate or maintain a branch office in Manila and that its principal office and factory are located in Pasig, Rizal.

We agree with the decision of the then Court of First Instance of Manila, upholding the validity of Ordinance No. 7516
as amended, and finding petitioner Allied Thread Co., Inc. the proper subject thereto.

There is no dispute that Ordinance No. 7516 was enacted by the Municipal Board of Manila on June 12, 1974 and
approved by the City Mayor on June 15, 1974. Fifteen (15) days thereafter, or on July 1, 1974, the said ordinance
became effective pursuant to Sec. 42 of the Local Tax Code. It is clear therefore that Ordinance No. 7516 has fully
conformed with P.D. No. 426 and Local Tax Regulation No. 1-74 which require that "a local tax ordinance intended to
take effect on July 1, 1974 should be enacted by the Local Chief Executive not later than June 15, 1974 ". The
subsequent amendments to the basic ordinance did not in any way invalidate it nor move the date of its effectivity. To
hold otherwise would limit the power of the defunct Municipal Board of Manila to amend an existing ordinance as
exigencies require.

Petitioners complain that they were not fully apprised of the enactment of Ordinance No. 7516 for the same was not
duly published in a newspaper of general circulation. Respondents argue however, that copies of Ordinance No.
7516 and its amendments were posted in public buildings, government offices, and public places in lieu of publication
in newspaper of general circulation.

We are persuaded that there was substantial compliance of the law on publication. Section 43 of the Local Tax Code
provides two modes of apprising the public of a new ordinance, either, (a) by means of publication in a newspaper of
general circulation or, (b) by means of posting of copies thereof in the local legislative hall or premises and two other
conspicuous places within the territorial jurisdiction of the local government. Respondents, having complied with the
second mode of notice, We are of the opinion that there is no legal infirmity to the validity of Ordinance No. 7516 as
amended.

Finally, petitioner Allied Thread Co., Inc. claims exclusion from Ordinance No. 7515 as amended on the ground that it
does not maintain an office or branch office in the City of Manila, where the subject Ordinance only applies. This
contention is devoid of merit. Allied Thread Co., Inc. admits that it does business in the City of Manila through a
broker or agent, Ker & Company, Ltd. Doing business in the City of Manila is all that is required to fall within the
coverage of the Ordinance.
It should be noted that Ordinance No. 7516 as amended imposes a business tax on manufacturers, importers or
producers doing business in the City of Manila. The tax imposition here is upon the performance of an act, enjoyment
of a privilege, or the engaging in an occupation, and hence is in the nature of an excise tax.

The power to levy an excise upon the performance of an act or the engaging in an occupation does not depend upon
the domicile of the person subject to the excise nor upon the physical location of the property and in connection with
the act or occupation taxed, but depends upon the place in which the act is performed or occupation engaged in.

Thus, the gauge for taxability under the said Ordinance No. 7516 as amended does not depend on the location of the
office, but attaches upon the place where the respective sale transaction(s) is perfected and consummated. (See
Koppel (Phil.) vs. Yatco, 77 Phil. 496 [1946]) Since Allied Thread Co., Inc. sells its products in the City of Manila
through its broker, Ker & Company, Ltd., it cannot escape the tax liability imposed by Ordinance No. 7516 as
amended.

WHEREFORE, the petition is hereby dismissed for lack of merit. Costs against the petitioners.

SO ORDERED.