TAX 2 | LUCINARIODigester: Cruz (6)

CASE TITLE: PEPSI v CITY OF BUTUANDate of Case: August 28, 1968

DOCTRINE: The requisites of a valid classification are: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally all those who belong to the same class.

Petitioner: PepsiRespondent: City of Butuan

FACTS: 1. City of Butuan enacted Mun. Ordinance 110 imposing P0.10 tax per 24 bottles of Pepsi. 2. Pepsi has a warehouse in Butuan which serves as storage for its products that are bottled in

Cebu and distributed in Butuan. 3. Sec. 1 of said ordinance states what products are "liquors", Sec. 2 provides for the payment by

"any agent and/or consignee" of any dealer "engaged in selling liquors, imported or local, in the City," of taxes at specified rates, and Sec. 3 prescribes a tax of P0.10 per case of 24 bottles of the soft drinks and carbonated beverages named, and "all other soft drinks or carbonated drinks." Sec. 3-A, defines the meaning of the term "consignee or agent" for purposes of the ordinance. Sec. 9 makes the ordinance applicable to soft drinks, liquors or carbonated drinks "received outside" but "sold within" the City.

4. Pepsi contends that the ordinance is void and is asking to recover the taxes it paid. 5. Lower court ruled in favor of the city.

PETITIONER’S CONTENTION:Pepsi Supreme Court(1) it partakes of the nature of an import tax; See below.(2) it amounts to double taxation; Independently of whether or not the tax in question,

when considered in relation to the sales tax prescribed by Acts of Congress, amounts to double taxation, on which we need not and do not express any opinion - double taxation, in general, is not forbidden by our fundamental law.

(3) it is excessive, oppressive and confiscatory; Untenable - the tax of "P0.10 per case of 24 bottles," of soft drinks or carbonated drinks — in the production and sale of which plaintiff is engaged — or less than P0.0042 per bottle, is manifestly too small to be excessive, oppressive, or confiscatory.

(4) it is highly unjust and discriminatory; and See below(5) section 2 of Republic Act No. 2264, upon the authority of which it was enacted, is an unconstitutional delegation of legislative powers.

Manifestly devoid of merit; the general principle against delegation of legislative powers, in consequence of the theory of separation of powers is subject to one well-established exception, namely: legislative powers may be delegated to local governments — to which said theory does not apply — in respect of matters of local concern.

RESPONDENT’S CONTENTION: No discussion / opposite of petitioner’s arguments

ISSUE/S: Whether or not the municipal tax ordinance is void for being outside the City’s authority to impose.

RATIO: 1. Yes, the tax is in the nature of an import duty which is not within its authority to impose.

a. The tax prescribed in section 3 of Ordinance No. 110, was imposed upon dealers "engaged in selling" soft drinks or carbonated drinks. Intent was to levy a tax upon the sale of said merchandise.

b. As amended by Ordinance No. 122, the tax is, however, imposed only upon "any agent and/or consignee of any person, association, partnership, company or corporation engaged in selling ... soft drinks or carbonated drinks. Section 3-A defines Consignee or Agent as “any person, association, partnership, company or corporation who acts in the place of another by authority from him or one entrusted with the business of another or to whom is consigned or shipped no less than 1,000 cases of hard liquors or soft drinks every month for resale, either retail or wholesale.

c. As a result, merchants engaged in the sale of soft drink or carbonated drinks, are not subject to the tax, unless they are agents and/or consignees of another dealer, who, in the very nature of things, must be one engaged in business outside the City.

d. The tax "is based and computed from the cargo manifest or bill of lading ... showing the number of cases" — not sold — but "received" by the taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated drinks brought into the City from outside.

2. Yes, the tax is discriminatory. It violates the Constitutional requirement of uniformity since only sales by "agents or consignees" of outside dealers would be subject to the tax.

a. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax.

b. The uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation.

c. To be valid, the requisites of a valid classification are: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally all those who belong to the same class.

d. This is not met by the ordinance whose purpose was to levy a burden upon the sale of soft drinks or carbonated beverages. There is no reason why sales by sellers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax.

CASE TITLE: Manila Int’l Airport Authority v CA and Paranaque CityDate of Case: July 20, 2006

DOCTRINE: The taxing power of LGUs does not extend to the National Government, its agencies and instrumentalities and local government units.

Petitioner: Manila Int’l Airport Authority Respondent: Paranaque City

FACTS: 1. Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport

(NAIA) Complex in Parañaque City under EO 903 (Revised Charter of the Manila International Airport Authority).

2. MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for 1992 to 2001. The City also issued notices of levy and warrants of levy on the Airport Lands and Buildings.

3. MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. CA dismissed the Petition.

PETITIONER’S CONTENTION:1. The real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA

Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to public use and public service, the ownership of these properties remains with the State. Thus, the properties are inalienable and are not subject to real estate tax by local governments.

2. Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government Code because the Airport Lands and Buildings are owned by the Republic.

RESPONDENT’S CONTENTION:1. Section 193 of the Local Government Code expressly withdrew the tax exemption privileges of

"government-owned and-controlled corporations" upon the effectivity of the Local Government Code.

2. It is a basic rule of statutory construction that express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code.

ISSUE/S: Whether or not MIAA is exempted from the payment of real property taxes after the effectivity of the LGC.

RATIO: Yes -- 1. MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. a. A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. It also has no members.b. MIAA is a government instrumentality vested with corporate powers to perform its governmental functions efficiently, but it does not follow that it is a corporate entity.c. A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states that the taxing power of LGUs does not extend to the National Government, its agencies and instrumentalities and local government units. The government cannot tax itself.d. Although a tax exemption is strictly construed against the taxpayer claiming the exemption, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality.2. The real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax.a. Airport Lands and Buildings are of Public Dominion accordig to Art. 20 of the CIvil Code.

ARTICLE 420. The following things are property of public dominion:(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges

constructed by the State, banks, shores, roadsteads, and others of similar character;b. Airport lands and buildings are outside the commerce of man being properties of public dominion. They cannot be subject of an auction sale.c. MIAA is a holding title of the properties as Trustee of the Republic. The transfer of title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications was merely to implement reorganization.3. As to the minority argument, Sec. 133 prevails over Sec. 193. LGUs do not have the power to tax the national government, etc. except as otherwise provided and one such exception is Sec. 234, i.e. real properties of the national government are taxable if the beneficial use is transferred to a taxable person.

that the common limitations provision under Sec. 133(o), i.e. that LGUs can’t tax the national government, its agencies, instrumentalities and LGUs, is trumped by the withdrawal of tax exemption under Sec. 193,

the SC resolves the issue by stating that

CASE TITLE: Lindberg Phil v City of MakatiDate of Case: November 11, 2008

DOCTRINE: Cities have the authority to tax entities doing business within their jurisdiction.

Petitioner: LindbergRespondent: City of Makati

FACTS: 1. Lindberg is engaged in the business of financing the construction and operation of power plants

primarily through "Build-Operate-Transfer" (BOT) agreements with its customers.2. Lindberg received Notice of Assessment for deficiency business taxes plus surcharges and

interests for 2000, 2001 and 2002 in the total amount of Php8.714 million as a result of being reclassified to a “contractor” “from a “holding/investment company”.

PETITIONER’S CONTENTION: Assessment for deficiency task is not proper.

1. Respondent Makati City does not have jurisdiction to tax petitioner because it is contrary to the situs rules under Section 150 of the Local Government Code and Article 243 of its Implementing Rules and Regulations (IRR) which provides that provide that if a sale made in a locality where the taxpayer maintains a branch or sales office, the tax thereon shall accrue and be paid to the city or municipality where such branch or sales office is located.

2. Petitioner is not a contractor because it does not perform services to its customers for a fee, as it merely finances the construction of the power plants for its customers through BOT arrangements.

RESPONDENT’S CONTENTION: Assessment for deficiency task is proper.1. Petitioner's principal office in Makati City, prima facie evidence that it is conducting business in

said territorial jurisdiction, and therefore, Makati City has jurisdiction to tax petitioner.2. Petitioner's nature of business falls squarely under the definition of a "contractor" under Sections

3A.01 (q) and 3A.02(f) of the Makati Revenue Code. Documents Lindberg presented also show that it is engaged in the sale of services and it serves as an independent contractor.

3. Lindberg was not in good faith when it applied for business permit and represented itself as a holding company. Thus, it is liable for surcharges for deficiencies.

ISSUE/S: Whether or not assessment is proper in light of

RATIO: 1. The City of Makati, where petitioner's principal office is found, has the power to tax its business, but as much as only thirty (30%) percent of petitioner's gross sales/receipts. a. Petitioner's principal office is in charge of reviewing and approving the correctness of the invoices issued by the branch offices. b. Lindberg is engaged in the business of financing the construction and operation of private power plants through a Built-Operate-Transfer (BOT) arrangements with its customers. This is considered as doing business, which is taxable in the principal office. 2. Section 150 on situs of taxations is applicable. Before the building and construction of any power plant at any locality, the usual negotiations thereon, until the full completion of the contract of BOT, is usually done in the principal office, which is taxable. Although the power plants subject of BOT are located at different localities, still the act of financing the construction and operation are considered as "doing business" which appears to have been performed at petitioner's principal office in Makati City. 3. Lindberg is a contractor, and not a financing or holding company. a. As defined in the Local Government Code, a contractor includes persons, natural or juridical, not subject to professional tax under Section 139 of this Code whose activity consists essentially of the sale

of all kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractor or his employees. b. Its AOI and others documents also show that it is a contractor. c. Makati Revenue Code also categorized petitioner as a contractor. 4. Under Sec 168 of the LGC, the City has the authority to impose surcharges for late payments of and interests on unpaid taxes, and penalties thereto, as provided in Sections 38.04, 38.05, and 38.06, respectively, of the Revised Makati Revenue Code.