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June 10, 2014

BUREAU OF LOCAL GOVERNMENT FINANCE OPINION


Ms. Elizabeth Olivan
Director
Uni-Delta Development Corporation
732 Biaknabato St.
Tabuco, Naga City
Madam :
This refers to your letter dated June 4, 2014 requesting clari cation and
guidance on local business tax payment of Uni-Delta Development Corporation (UDDC)
with main office located in Naga City.
Representations are made that UDDC recently acquired a property in Quezon City
with the intention to lease out the same. Likewise, UDDC is planning to acquire another
property in Bocaue, Bulacan for the same purpose. UDDC does not maintain of ces in
Quezon City and Bocaue, Bulacan.
On the basis of the above representations, UDDC poses the following queries:
1. "Should we apply for a business permit at Quezon City and Bocaue, Bulacan?
2. "With reference to the Local Government Code Art 243 'Situs of the Tax'
"(a) should we pay Business Tax in Quezon City and Bocaue Bulacan, or
"(b) Just in Naga City, or
"(c) Pay Business Tax in both localities?"
For purposes of discussing the issues raised above, the following provisions of
the Local Government Code (LGC) of 1991 and its Implementing Rules and Regulations
(IRR) are quoted as follows:
"Section 147. Fees and Charges. The municipality may impose and
collect such reasonable fees and charges on business and occupation and,
except as reserved to the province in Section 139 of this Code, on the practice of
any profession or calling, commensurate with the cost of regulation, inspection
and licensing before any person may engage in such business or occupation, or
practice such profession or calling."
"Section 150. Situs of the Tax . (a) For purposes of collection of the
taxes under Section 143 of this Code, manufacturers, assemblers, repackers,
brewers, distillers, recti ers and compounders of liquor, distilled spirits and
wines, millers, producers, exporters, wholesalers, distributors, dealers,
contractors, bank and other nancial institutions, and other businesses,
maintaining or operating branch or sales outlets elsewhere shall record the sale
in the branch or sales outlets making the sale or transaction, and the tax thereon
shall accrue and shall be paid to the municipality where such branch or sales
outlet is located. In cases where there is no such branch or sales outlet in the
city or municipality where the sale or transaction is made, the sale shall be duly
recorded in the principal of ce and the taxes due shall accrue and shall be paid
to such city or municipality.
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"Article 243. Situs of the Tax . (a) . . .


"(b) Sales Allocation (1) All sales made in a locality where there is a
branch or sales of ce or warehouse shall be recorded in said branch or sales
of ce or warehouse and the tax shall be payable to the city or municipality
where the same is located.
"(2) In cases where there is no such branch, sales of ce or
warehouse in the locality where the sale is made, the sale shall be
recorded in the principal of ce along with the sales made by said
principal of ce and the tax shall accrue to the city or municipality
where the said principal office is located.
"Article 243. Situs of the Tax . (a) Definitions of Terms
"(1) . . . .
"(2) Branch or sales of ce a xed place in a locality which
conducts operations of the business as an extension of the principal
office . Of ces used only as display areas of the products where no stocks or
items are stored for sale, although orders for the products may be received
thereat, are not branch or sales of ces as herein contemplated. A warehouse
which accepts orders and/or issues sales invoices independent of a branch with
sales office shall be considered as a sales office." (Underscoring for emphasis)

On the basis of the aforequoted provisions of law, this Bureau expresses the
following views:

Query No. 1
The answer is in the negative. Considering the representation made that UDDC
does not maintain any branch of ce either in Quezon City or Bocaue, Bulacan, the
company is therefore not oblige to secure business permit provided under Section 147,
supra.
The real property of UDDC in Quezon City as well as the soon-to-be-acquired
property in Bocaue, Bulacan can never be considered as "branches or sales of ces" to
satisfy Section 150 (b) (2) (1) of the LGC. The short of it is that the property in Quezon
City, if leased to another party, will be the very subject of the business of UDDC as a
Real Estate Lessor. To make a point, the situation by analogy, can be compared to the
business of retailing and/or wholesaling where the subject of its business are the
merchandise they offer for sale to customers. In the herein case of UDDC, the real
property is the subject of its business as a Real Estate Lessor which it may offers to
interested party. Presented in another wise, say, in the case of a " retailer" or a
"wholesaler", the real property owned by UDDC in Quezon City can be likened to a
"merchandise" of a "retailer" or a "wholesaler" that UDDC offers or advertises for lease.
Therefore, the subject property(ies) will not qualify as "branches" or "sales of ces " as
the terms were de ned [Article 243 (1) (b)] above for property(ies) will be the subject
of the business once UDDC is engaged in leasing venture.

Query No. 2
It may be stated that the basic rule in determining the situs of the local business
tax is where the transactions are made and recorded.
In order for the sale to be recorded and be subject to local business tax in the
city or municipality other than where the principal of ce is located, the taxpayer must
have a branch or sales outlet in such city or municipality where a sale or transaction is
made, other than where its principal of ce is located. Consequently, all sales made and
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recorded in such branch or sales of ce shall be 100% taxable by the city or municipality
there where such branch or sales office is located.
However, in cases where there is no such branch or sales of ce in the city or
municipality where the sale or transaction is made, the sale shall be duly recorded in the
principal of ce and the taxes due shall accrue and shall be paid to such city or
municipality.
Accordingly, it may be stated that business entity, like UDDC, which does not
maintain any branch or sales office where the real property subject of lease are situated
shall record the rental fees in the main or head of ce and that the taxes due thereon
shall accrue and shall be paid 100% to Naga City where the main or head of ce is
located, to the exclusion of Quezon City and Bocaue, Bulacan, where UDDC's real
properties are situated.
All previous rulings or opinions issued by the Bureau on cases similarly situated
that are inconsistent herein are hereby modified accordingly.
We hope that we have clarified your concerns.
Very truly yours,
(SGD.) SALVADOR M. DEL CASTILLO
OIC-Executive Director

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