percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt,

or realized, within its territorial jurisdiction. In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided herein. CASE: Smart Communications vs. City of Davao GR No. 155491, September 16, 2008 (Also read decision on Motion for Reconsideration dated July 21, 2009) Tax exemptions in franchises are always subject to withdrawal. Moreover, Smarts franchise was granted with the express condition that it is subject to amendment, alteration, or repeal. (1987 CONSTITUTION, Art. XII, Sec. 11) It is enough to say that the parties to a contract cannot, through the exercise of prophetic discernment, fetter the exercise of the taxing power of the State. For not only are existing laws read into contracts in order to fix obligations as between parties, but the reservation of essential attributes of sovereign power is also read into contracts as a basic postulate of the legal order. The policy of protecting contracts against impairment presupposes the maintenance of a government which retains adequate authority to secure the peace and good order of society. In truth, the Contract Clause has never been thought as a limitation on the exercise of the States power of taxation save only where a tax exemption has been granted for a valid consideration. Smart Communications, Inc. v. The City of Davao, etc., et al., G. R. No. 155491, September 16, 2008 citing Tolentino v. Secretary of Finance, G. R. No. 115455, August 25, 1994, 235 SCRA 630, 685. The author opines that since practically all franchises granted to telecommunications companies are similarly worded that the above doctrine finds application to the others) iv. Tax on Sand, Gravel and Quarry Resources (Sec. 138) EC. 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and collect not more than ten percent (10%) of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other quarry resources, as defined under the National Internal Revenue Code, as amended, extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction. The permit to extract sand, gravel and other quarry resources shall be issued exclusively by the provincial governor, pursuant to the ordinance of the sangguniang panlalawigan. The proceeds of the tax on sand, gravel and other quarry resources shall be distributed as follows: (1) Province - Thirty percent (30%); (2) Component city or municipality where the sand, gravel, and other quarry resources are extracted - Thirty percent (30%); and (3) barangay where the sand, gravel, and other quarry resources are extracted - Forty percent (40%). CASE: Municipality of San Fernando vs. Sta. Romana L-GR No. 30159, Mar. 31, 1987 Whether or not the Municipality of Luna has the authority to pass an ordinance and impose the license fees in question.. Held: Section 10 of the Local Tax Code, as amended by PD no. 426, reads: Sec. 10. Sand and gravel tax. The PROVINCE may levy and collect a tax of not exceeding seventy-five centavos per cubic meter of ordinary stones, sand, gravel, earth and other materials extracted from public and private lands of the government or from the beds of seas, lakes, rivers, streams, creeks and other public water within the jurisdiction of the province. The municipality where the materials are extracted shall share in the proceeds of

the tax herein authorized at a rate of not less than thirty per cent thereof as may be determined by the Provincial Board. Under the above-quoted provisions of the Local Tax Code, there is no question that the authority to impose the license fees in dispute, properly belongs to the province concerned and not the Municipality of Luna which is specifically prohibited under Section 22 of the same Code from levying taxes, fees and charges that the province or city is authorized to levy in this Code. On the other hand, the Municipality of San Fernando cannot extract sand and gravel from the Municipality of Luna without paying the corresponding taxes and fees that may be imposed by the province of La Union. Province of Bulacan vs. CA GR No. 126232, November 27, 1998 It is clearly apparent from the above provision that the National Internal Revenue Code levies a tax on all quarry resources, regardless of origin, whether extracted from public or private land. Thus, a province may not ordinarily impose taxes on stones, sand, gravel, earth and other quarry resources, as the same are already taxed under the National Internal Revenue Code. The province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because REVIEWER TAX2- YUMI 16