Re: Situs of Community Tax and Authority of BPLO to Impose Penalty for Late Payment of Business License Fee

October 11, 2016 BLGF OPINION NO. 039-2016-PPSD CO-LFPS-PPPSD Ms. Trinidad Villavicencio Tax Manager Goldilocks Bakeshop, Inc. 498 Shaw Boulevard 1550 Mandaluyong City SUBJECT : Re: Situs of Community Tax and Authority of BPLO to Impose Penalty for Late Payment of Business License Fee Dear Ms. Villavicencio : This has reference to your request, on behalf of Goldilocks Bakeshop, Inc. ("Goldilocks," for brevity), for clarification on (i) the situs of community tax, and (ii) the authority of Business Permit and Licensing Office (BPLO) to impose penalties for delayed payment of business license fee. aDSIHc Representations were made that Taguig City imposes an additional community tax for the branches of Goldilocks located within the territorial jurisdiction of the said city, amounting to more than Php18,000.00, despite the fact that corresponding community tax has already been paid by its main office in Mandaluyong City. With regard to the assessment of penalty for late payment of business license, it was represented that Goldilocks was made to pay the penalty imposed by Marikina City for late payment of business license fee, even if it has reportedly been paid within the prescribed period. Such penalty was purportedly for the delayed payment of license fee which should have been paid within seven (7) days from the date of filing of application and assessment for renewal of business permit. Situs of Community Tax Section 160 1 of Republic Act No. 7160, otherwise known as the Local Government Code (LGC) of 1991, is clear that the community tax of a juridical entity shall be paid in the place where the principal office of the juridical entity is located. Although the Implementing Rules and Regulations (IRR) of the LGC, as provided for in Administrative Order (AO) No. 270, dated 21 February 1992, authorized the collection of the corresponding community tax to the local government unit (LGU), in case a juridical entity has branch, sales office or warehouse where sales are made and recorded, this was effectively and immediately modified in Memorandum Circular (MC) No. 153 dated 04 June 1992 of the Office of the President, copy herein enclosed, prescribing the guidelines for the implementation of tax exemption privileges under the LGC. Under the Sec. 2 2 of the said MC and consistent with the basic provisions of the LGC, it was clarified that the community tax shall be paid " in the place of residence of the individual, or in the place where the principal office of the juridical entity is located and upon payment thereof, the corresponding community tax certificate shall accordingly be issued." Further, Sec. 3 of the same MC provided that "Existing tax ordinances or revenue measures of local government units which are inconsistent with, or in violation of, the provisions of the Local Government Code of 1991 shall cease to have force and effect." Bearing in mind that the abovementioned AO and MC are both acts of the President, and applying the basic rule of statutory construction, the latter must be complied with having brought to the attention of all concerned such guidelines on community tax as prescribed by the Office of the President. To emphasize, the Constitution vests the President with the power to exercise general supervision over LGUs to enable him/her to see to it that LGUs and their officials perform and execute their tasks in accordance with law. Noting that the said MC has neither been amended nor modified to date, it still remains to be in force and effect. In view of the forgoing, it is the considered view of this Bureau that the imposition of additional community tax by an LGU to a juridical entity's branch, sales office or warehouse where sales are made and recorded, with proof that said community tax has been paid already by its principal office which is located in another LGU jurisdiction, is bereft of legal basis and not compliant with the directives set forth by the MC No. 153. Imposition of Penalties for Delayed Payment of Business License Fee Upon perusal of the documents submitted, particularly the copy of Official Receipt No. 6125581 dated 20 January 2016, it is our appreciation that the payment of the required taxes, fees and charges of Goldilocks was made within the prescribed period, as provided for under Section 167 3 of the LGC. Perusing Ordinance No. 27, series of 2013, of Marikina City, we find Sec. 28 thereof, which states that "all taxes, fees and charges on business shall be paid within the first twenty (20) days of January and each subsequent quarter," to be consistent with and reflective of the provisions of the LGC. ETHIDa Likewise, Sec. 65 and Sec. 66 of the same City Ordinance have no specific conditions on the manner or time of payment of permit fees so as to impose a penalty on those who fail to pay within seven (7) days from the date of filing and assessment of renewal, per your representation as informed by the City Treasurer's Office of Marikina City. Logically, such penalty should only be imposed after the prescribed period of "within the first 20 days of January," or after to the extended period of not more than six months, as may be authorized by the Sanggunian concerned. As such is not clearly provided for in the LGC nor in the said City Ordinance, we deem it to be not legally enforceable. Granting arguendo that such rule is provided for in an existing City Ordinance, we still deem it untenable. While this Bureau believes that the implementing guidelines for securing and granting of business permit are provided for by the local ordinances passed by the respective LGUs, thereby authorizing them to formulate their own rules and regulations in the grant of a business license, such should not be interpreted, however, to supersede the provisions of the LGC. Needless to say, local tax ordinances or revenue measures should conform to the provisions of the LGC, from which the authority of LGUs to tax and regulate certain business activities emanates. Jurisprudence is replete with cases on the test of a valid local ordinance, including local tax measures, whereby one of the substantive and well-established requirements for its validity is that it must not contravene the Constitution or any statute. This Opinion is issued based on the information provided. If upon subsequent verification or submission of information proves the contrary, this Opinion will be deemed null and void, and without effect. We hope that this will help clarify matters. Very truly yours, (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director Footnotes 1. Section 160. Place of Payment . The community tax shall be paid in the place of residence of the individual, or in the place where the principal office of the juridical entity is located. 2. SEC. 2. The community tax shall be paid in the place of residence of the individual, or in the place where the principal office of the juridical entity is located and, upon payment thereof, the corresponding community tax certificate shall accordingly be issued. Exemption from the payment of the community tax may also be granted by the sangguniang bayan or sangguniang panglungsod thru a duly approved municipal or city ordinance, subject to the guidelines prescribed in the immediately preceding section. 3. Sec. 167. Time and Payment . Unless otherwise provided in this Code, all local taxes, fees, and charges shall be paid within the first twenty (20) days of January or of each subsequent quarter, as the case may be. The sanggunian concerned may, for a justifiable reason or cause, extend the time for payment of such taxes, fees, or charges without surcharges or penalties, but only for a period not exceeding six (6) months.