TAX 2 | LUCINARIO

Digester: Cruz (6)

CASE TITLE: PEPSI v CITY OF BUTUAN
Date 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: Pepsi
Respondent: 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.

PETITIONERS 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.



RESPONDENTS CONTENTION: No discussion / opposite of petitioners arguments
ISSUE/S: Whether or not the municipal tax ordinance is void for being outside the Citys 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 Intl Airport Authority v CA and Paranaque City
Date 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 Intl Airport Authority
Respondent: Paranaque City

FACTS:
1. Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport
(NAIA) Complex in Paraaque 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 Paraaque 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.


PETITIONERS 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.

RESPONDENTS 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 cant 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 Makati
Date of Case: November 11, 2008

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

Petitioner: Lindberg
Respondent: 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.

PETITIONERS 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.

RESPONDENTS 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.