BIR Ruling [DA-306-00]

August 15, 2000 BIR RULING [DA-306-00] Atty . Moises G . Dalisay, Jr . Rm. 303, 3/F Eltanal Bldg. Roxas Avenue, Iligan City S i r : You stated in your letter dated September 6, 1999 that your client, Marso Group of Swimming Pool Operators of Timoga, Buru-un, City of Iligan, used to collect entrance fee from each customer who enters the swimming pool facility and for which 30% of the proceeds is remitted to the City Government of Iligan as amusement tax; that a few months ago, your client ceased from collecting entrance fees from its customers; that, instead of the usual entrance fee, your customer can now enter and use the swimming pool facility by a mere purchase of a consumable (i.e., softdrink) worth P25.00; that presently, your client pays the VAT on the gross receipts of sales to the city government; and that the city government intends to impose the amusement tax of 30% for every customer who pays P25.00 for the softdrink to gain entrance and the use of the facility and require the swimming pool operators to issue entrance tickets even if no entrance fee is collected from the customers. In view of the foregoing, you now want clarification on the following: 1. Whether the action of the local government imposing amusement tax on the operators of swimming pool facilities even if no entrance fee is collected, is proper; and 2. Whether said action of the local government ordering your client to impose amusement tax on top of the value-added tax constitute double taxation. In reply, please be informed as follows: 1) The Bureau of Internal Revenue (BIR) does not administer amusement taxes on operators of swimming pools. Hence, this Office is not the proper forum to address question #1 of your letter, the same being outside its province. You may, however, direct your inquiry on this issue to the Department of the Interior and Local Government (DILG)-Finance which has jurisdiction on the matter. 2. In its strict sense, "double taxation" means taxing twice, by the same public authority, within the same taxing district, for the same purpose, in the same year or taxing period, the same subject matter. It is also defined as the requirement that one person or any one subject of taxation shall directly contribute twice to the same burden, while other subjects of taxation belonging to the same class are required to contribute but once. ( Cooley, Tax. 394, citing McNeil vs. Hagenty, 51 Ohio St . , 244, 37 N . E . , 526, 23 L . R . A . 268) In Punzalan vs. Municipal Board of Manila , L-4817, May 26, 1954 , the issue is whether or not double taxation arises when one tax is imposed by the State and the other is imposed by the City. The Supreme Court, in deciding the case, observed that the argument against double taxation may not be invoked where one tax is imposed by the State and the other by the City, it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the State and the political subdivision thereof. In view of the foregoing, this Office is of the opinion and hereby holds that the action of the local government ordering your client impose of amusement tax on top of the value-added tax collected by the national government does not constitute double taxation. Very truly yours, Commissioner of Internal Revenue (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group