Wholesaler of Electricity

December 11, 1970 BIR RULING NO. 049-70 Wholesaler of electricity . FACTS: Your client, Apex Power Corporation is a corporation organized under the laws of the Philippines and registered under the Securities Act with primary purpose of producing and selling electricity at wholesale to the Zamboanga Electric Light System, which, in turn, being a grantee of a municipal franchise awarded by the City of Zamboanga, resells same to the public; that your client cannot sell electricity directly to the public and therefore has only one customer, the Zamboanga Electric Light System; and that the contract entered into by your client with the City of Zamboanga (owner of the Zamboanga Electric Light System) provides that the former supplies the latter with a minimum kilowatt hours of electricity yearly at a specified rate per kilowatt hour. Under the foregoing facts and circumstances, you would like to be informed on the following: casia QUERY: "1) Is this corporation subject to the 7% tax under Section 186 as a producer of electricity, or is it subject to the 3% tax under Section 191, being "persons selling water, light, heat or power except those paying a franchise tax? "2) On the other hand, would it subject the corporation to the 5% franchise tax for having secured 'certificate of public convenience' which was required of them under its agreement with the City of Zamboanga? "3) Outside of the above and the income tax, what other taxes would it be liable?" REPLY : Under the foregoing facts and circumstances, and on the assumption that the Apex Power Corporation is not a franchise grantee, it is subject to the 3% tax imposed in Section 191(5) of the Tax Code, as amended. Aside from the 3% tax, the corporation is also subject to the annual fixed tax of P50.00 imposed in Section 182(A) (1) of the Tax Code, as amended. It appearing from your statement of facts that the aforenamed corporation is a mere holder of a certificate of public convenience and not a franchise grantee, said corporation is not subject to the 5% franchise tax imposed by Section 259 of the Tax Code. Neither is it subject to the annual fixed tax of P500.00 imposed on franchise grantees by Section 182(A) (3) (gg) of the Tax Code.