Held
No, the assessment and collection of business tax under Section 21 of the new Makati Revenue Code is not valid because it constitutes double taxation on Platinum Grocery, Inc., which is already paying the 1% tax under Section 17 of the same Code, as held in Nursery Care Corporation; Shoemart v. Acevedo, G.R. No. 180651 and City Of Manila v. Cosmos Bottling Corporation, G.R. No. 196681.
Explanation
Section 143 of the Local Government Code (LGC) authorizes cities and municipalities to impose local business taxes on various categories of businesses, including manufacturers, wholesalers, dealers, and retailers, each under specific subsections (a), (b), and (d). Paragraph (h) of Section 143 allows the imposition of a tax on businesses "not otherwise specified in the preceding paragraphs," but only on those subject to excise, VAT, or percentage taxes under the National Internal Revenue Code (NIRC), and the tax rate must not exceed 2% of gross sales or receipts.
The new Makati Revenue Code's Section 21 imposes a tax on businesses subject to excise, VAT, or percentage taxes under the NIRC, but it exempts those already paying the tax under other sections of the same Code. This exemption aims to prevent double taxation.
The Supreme Court in Nursery Care Corporation; Shoemart v. Acevedo and City Of Manila v. Cosmos Bottling Corporation clarified that imposing two local business taxes on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction and taxing period, and of the same kind or character, constitutes double taxation, which is prohibited. The Court emphasized that if a business is already paying a local business tax under a specific subsection of Section 143 (such as (a) for manufacturers or (d) for retailers), it cannot be subjected again to a tax under subsection (h), which is meant for businesses not otherwise specified.
Therefore, a business like Platinum Grocery, Inc., which already paid the 1% tax as a retailer under Section 17 (based on Section 143(d) of the LGC), cannot be validly assessed again under Section 21 (based on Section 143(h)) of the new Makati Revenue Code. The exemption clause in Section 21 supports this interpretation to avoid double taxation.
Application to the facts
Platinum Grocery, Inc. paid the 1% tax under Section 17 of the new Makati Revenue Code as a retailer, which corresponds to the authority granted by Section 143(d) of the LGC to impose taxes on retailers. When the City of Makati imposed an additional business tax under Section 21 on Platinum, it effectively subjected the same business to two local business taxes for the same taxable period, on the same gross sales, and for the same purpose of generating city revenue.
Section 21 itself contains a proviso exempting registered businesses already paying the tax under other sections, but Platinum was still assessed and compelled to pay the additional tax under protest. This situation fits the Supreme Court's definition of double taxation as it involves taxing the same person twice by the same jurisdiction for the same thing.
The City of Makati, as the taxing authority, cannot impose a tax under Section 21 on Platinum, who is already paying the tax under Section 17, because Section 21 is based on Section 143(h) of the LGC, which applies only to businesses not otherwise specified in the preceding paragraphs. Since Platinum is specified under Section 143(d) as a retailer, the additional tax under Section 21 is invalid.
Hence, Platinum's payment under protest of the Section 21 tax can be protested or refunded pursuant to the Local Government Code provisions and the administrative remedies advised by the Business Permit and Licensing Office.
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"The municipality may impose taxes on the following businesses: (a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature, in accordance with the following schedule: (b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature in accordance with the following schedule: (c) On exporters, and on manufacturers , millers, producers, wholesalers, distributors, dealers or retailers of essential commodities enumerated hereund…
Section 143 of the Local Government Code of 1991 provides that municipalities may impose taxes on manufacturers, wholesalers, distributors, dealers, retailers, and on any business not otherwise specified in the preceding paragraphs, provided that for businesses subject to excise, value-added or percentage tax under the NIRC, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year.
"Section 21. Tax on Business Subject to the Excise, Value-Added or Percentage Taxes under the NIRC - On any of the following businesses and articles of commerce subject to the excise, value-added or percentage taxes under the National Internal Revenue Code, hereinafter referred to as NIRC, as amended, a tax of 50% of 1% per annum on the gross sales or receipts of the preceding calendar year is hereby imposed: A) On [a] person who sells goods and services in the course of trade or businesses; x x x PROVIDED, that all registered businesses in the City of Makati already paying the aforementioned tax shall be exempte…
Laws retrieved
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- Sec 117, The National Internal Revenue Code of 1997 as amended
- Section 143, Local Government Code of 1991 and the SK Reform Act of 2015
- Section 146, Local Government Code of 1991 and the SK Reform Act of 2015
- Section 152, Local Government Code of 1991 and the SK Reform Act of 2015
- Section 187, Local Government Code of 1991 and the SK Reform Act of 2015
- Section 133, Local Government Code of 1991 and the SK Reform Act of 2015
"The Treasurer of the City of Manila.38 In the latter, the Court has held: x x x [T]he issue of double taxation is not novel, as it has already been settled by this Court in The City of Manila v. Coca-Cola Bottlers Philippines, Inc.,in this wise: Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. 7794, to their own detriment.1âwphi1 Said exempting proviso was precisely included in said section so as to avoid double taxation. Double taxation means taxingthe same property twice when it should be taxed only once; that is, "taxing the same person twice by the same jurisdictionfor…
"Thus, what remains enforceable is the old Ordinance No. 7794. Accordingly, the business tax assessable against Cosmos should be based on the rates provided by this Ordinance. 2. The collection of taxes under both Sections 14 and 21 of the Revenue Code of Manila constitutes double taxation. While the City of Manila could impose against Cosmos a manufacturer's tax under Section 14 of Ordinance No. 7794, or the Revenue Code of Manila, it cannot at the same time impose the tax under Section 21 of the same code; otherwise, an obnoxious double taxation would set in. The petitioners erroneously argue that double taxati…
The Supreme Court explained that double taxation means taxing the same person twice by the same jurisdiction for the same thing, and it is considered objectionable when the taxpayer is taxed twice when it should be only once. (Nursery Care Corporation; Shoemart v. Acevedo, G.R. No. 180651)
Double taxation occurs when two taxes are imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period, and the taxes are of the same kind or character. (Nursery Care Corporation; Shoemart v. Acevedo, G.R. No. 180651)
The Court found that there is double taxation if a taxpayer is subjected to taxes under both Sections 14 and 21 of a local tax ordinance, since these are imposed on the same subject matter, for the same purpose, by the same authority, within the same jurisdiction and period, and are of the same kind. (Nursery Care Corporation; Shoemart v. Acevedo, G.R. No. 180651)
The Supreme Court stated that when a municipality or city has already imposed a business tax on manufacturers, etc., under Section 143(a) of the LGC, it may no longer subject the same businesses to a business tax under Section 143(h) of the same Code. (Nursery Care Corporation; Shoemart v. Acevedo, G.R. No. 180651)
Section 143(h) may be imposed only on businesses that are subject to excise tax, VAT, or percentage tax under the NIRC, and that are not otherwise specified in the preceding paragraphs. Businesses already subject to a local business tax under another subsection cannot be made liable for a tax under Section 143(h). (Nursery Care Corporation; Shoemart v. Acevedo, G.R. No. 180651)
The Court concluded that a taxpayer who has already paid local business tax under one section of a local ordinance is exempt from paying the same tax under another section based on Section 143(h), and any payment made under the latter must be refunded. (Nursery Care Corporation; Shoemart v. Acevedo, G.R. No. 180651)
The Supreme Court held that the collection of taxes under both Sections 14 and 21 of the Revenue Code of Manila constitutes double taxation. While the city could impose a manufacturer's tax under Section 14, it cannot at the same time impose the tax under Section 21; otherwise, double taxation would result. (City Of Manila v. Cosmos Bottling Corporation, G.R. No. 196681)
The Court reiterated that when a municipality or city has already imposed a business tax on manufacturers, etc., under Section 143(a) of the LGC, it may no longer subject the same businesses to a business tax under Section 143(h) of the same Code. (City Of Manila v. Cosmos Bottling Corporation, G.R. No. 196681)
Section 143(h) applies only to businesses subject to excise tax, VAT, or percentage tax under the NIRC, and not otherwise specified in the preceding paragraphs. Businesses already subject to a local business tax under another subsection cannot be made liable for a tax under Section 143(h). (City Of Manila v. Cosmos Bottling Corporation, G.R. No. 196681)
Because Cosmos was already paying taxes under Section 14, the additional imposition of a tax under Section 21 constituted double taxation and warranted a refund. (City Of Manila v. Cosmos Bottling Corporation, G.R. No. 196681)
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