Re: Issuance of a Certificate of Exemption for a Gasoline Retailing Station

September 19, 2016 BLGF OPINION NO. 025-2016 CO-LFPS-PPPSD Ms. Delia D. Hernaez Proprietor DDH Energy Gas Filling Station Ph7-C Pk 7 B32 L17, Brgy. 176 Bagong Silang, Caloocan City SUBJECT : Re: Issuance of a Certificate of Exemption for a Gasoline Retailing Station Dear Ms. Hernaez : This has reference to your letter dated 15 June 2016 requesting for the issuance of a Certificate of Exemption ("Certificate") for DDH Gas Filling Station, located at Ph7-C, Pk7, B32, L17, Brgy. 176, Bagong Silang, Caloocan City. It is submitted that the requested Certificate is to support your claim for exemption from local business tax payment from Caloocan City government. In support, you cited Local Finance Circular No. 1-05 dated 08 December 2005 of the Department of Finance (DOF) prescribing the guidelines governing the powers of local government units (LGUs) to impose taxes, fees and charges on petroleum products pursuant to the pertinent provisions of the Local Government Code (LGC) of 1991. At the outset, it is informed that the requested Certificate is not within the mandated functions or authority of this Bureau. However, for purposes of guidance and information of all concerned, this Bureau issues the following clarifications: Section 3 of LFC No. 1-05 provides: " Section 3. Exemption from Local Taxation. (a) Pursuant to Section 133 (h) of the Local Government Code and Article 221 (h) of the IRR, local government units are prohibited from imposing taxes, fees, and charges on petroleum products, which include the sale of petroleum products by gasoline stations, dealers, resellers, or retailers . However, the sale of tires, batteries and other accessories (TBA) as well as services rendered by them are subject to business taxes. "(b) . . . "(c) Taxes, fees, charges and other impositions shall not be levied on petroleum products carried into or out of or passing through the territorial n Further, Section 133 (e), (h) and (j) of the Local Government Code (LGC) of 1991 provide as follows: ETHIDa " Section 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: (a) . . . (e) Taxes, fees, charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or merchandise; xxx xxx xxx. (h) Excise tax on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; (emphasis supplied) xxx xxx xxx Furthermore, Article 221 (e), (h) and (j) of the Implementing Rules and Regulations (IRR) implementing the above-mentioned Section 133 (e), (h) and (j) provide as follows: " Article 221. Common Limitations on the Taxing and Other Revenue-Raising Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing and revenue-raising powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: (a) . . . (h) Excise tax on articles enumerated under the National Internal Revenue Code (NIRC), as amended, and taxes, fees or charges on petroleum products; xxx xxx xxx." Moreover, Section 133 (h) of the LGC should be read in relation to Section 143 (h) thereof as implemented under Article 232 (h) of the IRR, quoted hereunder: " Article 232. Tax on Business. The municipality may impose taxes on the following businesses: (a) . . . (h) On any business, not otherwise specified in the preceding paragraphs which the sanggunian concerned may deem proper to tax provided that on any business subject to excise, value added or percentage tax under the National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year, and provided further that in line with the existing national policy, any business engaged in the production, manufacture, refining, distribution or sale of oil, gasoline and other petroleum products shall not be subject to any local tax imposed under this provision. (emphasis ours) xxx xxx xxx." Clearly, pursuant to the above-quoted provisions of the LGC and its IRR, local government units are prohibited from imposing taxes on any business engaged in the production, manufacture, refining, distribution or sale of petroleum products. Relatively, it may be stated that the issuance of Local Finance Circular No. 1-05 by the DOF pursuant to Article 287 of the IRR is intended to guide the local treasury offices in collecting taxes and other impositions as well as in determining the exemptions relative to petroleum products and make clear to the concerned taxpayers as to the proper interpretation and application of the law and rules governing local taxation. We hope we have provided clarity on the matter. Very truly yours, (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director n Note from the Publisher: Copied verbatim from the official copy.