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TITLE: Iloilo Bottlers v City of Iloilo 164 SCRA 607

Topic: Situs of Taxation and Double Taxation Part III of the outline

Digest by: Andrew Velasco Seat number: 31 Law 124 Section: A

FACTS: Iloilo Bottlers Inc., a company in the business of bottling and selling soft drinks, was
demanded by the City of Iloilo to pay an amount of 59,505 in the form of an license tax the city
claims were due to it under an ordinance which was enacted on January 11, 1960 known as
Ordinance No. 5, Series of 1960; which provides that manufacturers, bottlers, and distributers of
soft drinks in Iloilo are subject to a municipal license tax of 10 centavos per case of 24 bottles.
Iloilo Bottling Inc asserted however that since their plant base has moved to municipality of
Pavia shortly after the aforementioned ordinance was enacted, they are not liable for any taxes.
The city however, still demanded taxes and also demanded back taxes under the claim that Iloilo
Bottlers is still distributing in the city of Iloilo since its transfer. Iloilo Bottlers paid the
demanded license tax and back taxes under protest. After bringing the case to court, the courts
ruled in favor of Iloilo Bottlers and declared that Iloilo Bottlers is free from liability. The city of
Iloilo then appealed this ruling, hence this case.
ISSUE: Whether or not the courts were correct in their initial ruling that Iloilo Bottlers Inc. is
free from liability and directing the city of Iloilo to refund the tax money.
HELD: No, the courts were not correct. The ruling was reversed in favor of the City of Iloilo
and Iloilo Bottlers is deemed liable for the aforementioned taxes.

RATIO: Situs of taxation (place of taxation) depends on various factors including the nature of
the tax and subject matter thereof both of which must be scrutinized to reach a fair decision. The
tax ordinance enacted by the City of Iloilo imposes a tax on persons, firms, and corporations
engaged in the business of distribution of soft-drinks, manufacture of soft-drinks, and bottling of
soft drinks within the territorial jurisdiction of the City of Iloilo. There is no question that Iloilo
Bottlers has moved out of Iloilo City’s jurisdiction and into the municipality of Pavia where its
plant now stands therefore, the latter two conditions for taxation are no longer applicable. The
ruling now depends upon whether or not Iloilo Bottlers can be considered as distributing its
products within Iloilo city. Iloilo Bottlers disclaims liability, saying that it does not
independently distribute but rather actively sells directly to its consumers. Distribution is
therefore only incidental to its business. However, the courts find that Iloilo Bottlers is indeed
considered as distributing since while the manufacturing and bottling occurs outside of Iloilo
city, the drinks are sold in Iloilo city to consumers in a “moving store” fashion. The transactions
are considered to occur within the city. The tax imposed under Ordinance No. 5 is an excise tax.
By its nature, the power to levy an excise tax depends upon the place where the business is done,
or the occupation is engaged in, or where the transaction took place. In this case, it is a tax on the
privilege of distributing, manufacturing or bottling soft drinks. Even though the base of
operations is at Pavia, the areas of transactions where it conducts its business are within Iloilo
city limits. The Situs for excise tax is the area of transaction, not necessarily base of operation.
Since Iloilo Bottlers does distribute within city limits, it is therefore subject to the ordinance and
therefore should pay the pertinent amounts to the city of Iloilo.