BIR Ruling

June 30, 1966 The Provincial Treasurer XIII Martires City S i r : This refers to your letter dated May 11, 1966 requesting that the franchise tax collected by this Bureau from the Imus Electric Co., Inc. be remitted to that office in view of the condition imposed in Resolution No. 46 dated June 22, 1930 of the Municipal Council of Imus, Cavite, granting a franchise to said company to operate a light service in that town under Act No. 667, the pertinent portion of which is quoted as follows: "10.A: . . . El aqui concessionario en consideracion del privilegio que aqui se concede, abonara trimestralmente a la Tesoreria Provincial de Cavite el uno por ciento de los ingresos brutos que obtenga por dicho privilegio durante los primeros veinte anos y el dos por ciento de los mismos ingresos durante los quince anos restante de la vigencia de este mismo privilegio." The franchise tax is an internal revenue tax. In fact, in a case where one of the issues squarely raised was whether or not the franchise tax imposed by the character of the petitioner is an internal revenue tax, the Supreme Court held that since franchise tax is enumerated in Section 18 of the Tax Code as one of the national internal revenue taxes, there can be no question as to its nature as an internal revenue tax, whether it be imposed by the internal revenue tax, whether it be imposed by the National Internal Revenue Code itself or by special charter. (Panay Electric Co. v. Collector of Internal Revenue, G.R. No. L-10574, May 28, 1958). We may also add, the court went further to state in said case, that Section 359 of the Revenue Code provides for the disposition of franchise taxes as other national internal revenue taxes. Since the franchise tax is indubitably established as an internal revenue tax, and since the Supreme Court in effect had ruled that the disposition of the tax shall be made in accordance with Section 359 of the Tax Code, the contention that, because the charter of the taxpayer provides for the payment of the tax to the provincial treasury, the tax accrues entirely to the provincial treasury falls to the ground. Act No. 667 provided for the payment of the tax to the provincial treasury because at that time until the enactment of Republic Act No. 2655 on June 18, 1960, the treasurers were the collectors of national internal revenue taxes as deputies of the Collector (now Commissioner of Internal Revenue). As a matter of fact, after the assumption of the collection of internal revenue taxes by the collection agents of the Bureau of Internal Revenue, the Imus Electric Co., Inc. paid its franchise to said collection agents. In view of the foregoing, this Office believes and so holds that the franchise tax payable by the Imus Electric Co., Inc. is collectible by this Bureau. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue