Bureau of Local Government Finance Opinion

September 15, 2014 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Dione E. Angeles Brgy. Cabaniwan Laua-an, Antique Sir : This refers to your letter dated August 28, 2014 requesting the Department of Energy (DOE) and the Department of Finance (DOF) thru the Bureau of Local Government Finance (BLGF) for clarification on the issue regarding the issuance of Certificate of Compliance in relation to the issuance of a business permit by a local government unit (LGU). The request is being made in view of the situation wherein a Certificate of Compliance issued by the DOE is a prior requirement in securing local business permit while, the DOE requires submission first of a local business permit prior to the issuance of Certificate of Compliance. caITAC It is claimed that the tug-of-war of "what requirements to comply and submit first" is affecting your ability to conduct business after spending so much (capital outlay) to prepare the infra-structure to start a business. It is claimed further that the Municipal Treasurer of Laua-an, Antique is insisting that before it process/issue/review any business permit (to a gasoline station) the applicant must first present a Certificate of Compliance issued by the DOE pursuant to DOE Circular DC-2003-11-10 (Section 9) that states: "No retail outlet shall operate until a certificate of compliance from the Department of Energy is presented." On the other hand, the DOE requires that before processing application and issuing a Certificate of Compliance, a taxpayer must submit first the approved Business Permit issued by the LGU concerned. In this connection reference is made to the provision of Section 147 of the Local Government Code (LGC) of 1991 quoted as follows: "Section 147. Fees and Charges. The municipality may impose and collect such reasonable fees and charges on business and occupation and, except as reserved to the province in Section 139 of this Code, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing before any person may engage in such business or occupation, or practice such profession or calling." In relation to the afore-quoted provision, Section 234 of the Local Treasury Operations Manual (LTOM) provides as follows: "Section 234. Mayor's Permit. All businesses are required to obtain Mayor's Permit before they engage in any business within the city or municipality. This permit allows them the privilege of conducting their business within the jurisdiction of the city or municipality. ICHDca The following procedures shall be observed in securing Mayor's Permit for business: 1) Application for Mayor's Permit. An application for a Mayor's Permit shall be filed with the Office of the City/Municipal Mayor. The form for the purpose shall be issued by the Mayor's Office and shall set forth the requisite information, including the name and residence of the applicant, the description of business or undertaking that is to be conducted, and such other date or information as may be required. (Local Tax Regulation No. 1-77, Department of Finance; p. 138, Philippine Law on Local Government Taxation, Annotated, 2000 edition, Ursal) 2) Requirements. The following documents may be required, if applicable: A. For a newly started business: a) Location sketch of the new business b) Department of Trade and Industry (DTI) Registration Certificate with approved Application Form, in case of single proprietorship c) Securities and Exchange Commission (SEC) Registration and Articles of Incorporation and by-Laws, in case of partnership or corporation d) A certificate attesting to the tax exemption if the business is tax exempt e) Certification from the office in charge of the zoning that the location of the new business is in accordance with zoning regulations f) Tax Clearance showing that the operator has paid all tax obligations in the city/municipality g) Barangay Clearance/proof of filing (In case of non-issuance of barangay clearance within seven (7) working days from the date of filing, the City/Municipality may issue the permit to the applicant h) Three (3) passport size pictures of the owner or operator or in cases of a partnership or corporation the pictures of the senior or managing partners and that of the President or General Manager TCAScE i) Health Certificate for all food handlers, and those required under the provisions of a duly-enacted revenue code j) Community Tax Certificate k) Contract of Lease, if renting." On the other hand, Sections 7 and 9 of DOE Circular DC-2003-11-10, provide as follows: "Section 7. DOCUMENTARY REQUIREMENTS. In addition to the prior notice requirement of Section 6 of these Retail Rules, the following documents shall also be submitted to the OIMB: a. Before commencement of construction xxx xxx xxx b. Before commencement of Operation (i) . . . (ii) . . . (iii) Mayor's Permit (LGU concerned) (iv) . . . (v) . . . "Section 9. CERTIFICATE OF COMPLIANCE. The DOE, through the OIMB, shall issue a Certificate of Compliance upon the complete submission of and full compliance by the Retail Outlet owner and/or operator with the requirements provided in the foregoing Sections of this Rule. No Retail Outlet shall operate until a Certificate of Compliance is so secured from the DOE. (vi) The owner and/or operator shall be deemed to be engaged in the ILLEGAL TRADING of Liquid Petroleum Products if he/she operates without the Certificate of Compliance and/or violates any of the foregoing Sections, except for Section 8 hereof. ( Emphasis ours )" It is clear from the afore-quoted provisions of the Circular that the DOE shall issue a Certificate of Compliance upon the complete submission of and full compliance with the requirements. It is worth pointing out that one of the requirements mentioned above is a Mayor's Permit from the LGU concerned. cTDaEH Accordingly this Bureau expresses the view that an applicant (gasoline station) shall secure first a Mayor's Permit from the LGU concerned for the operation of the business before the DOE can issue a Certificate of Compliance. This view is gleaned from the afore-cited provisions of LTOM which do not require the submission of said Certificate of Compliance in the issuance of a Mayor's Permit by the LGU concerned. In summary, there is nothing in both Section 147 of the LGC and the provisions of LTOM that require the submission of the Certificate of Compliance in securing a Mayor's Permit. What is clear however in Circular DC-2003-11-10 is the submission of a Mayor's Permit as a documentary requirement (Section 7 thereof) before a "Certificate of Compliance" is issued by the DOE through the OIMB. Moreover, as part of its regulatory powers and in line with Section 16 of the LGC, the "General Welfare Clause", LGUs in this case, Laua-an, Antique, may conduct inspection upon the start of the operation of the gasoline station. It is during such inspection, that the municipality shall require said gasoline station to present the Certificate of Compliance issued by DOE and such other documentary requirements as may be necessary in connection with the operation of said business. Failure on the part of the gasoline station to do so may result to non-renewal of its business permit/license for non-compliance of such administrative regulation issued by the DOE. We hope that this will help clarify matters. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director