Bureau of Local Government Finance Opinion

July 13, 1993 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1ST INDORSEMENT Respectfully returned thru the Provincial Treasurer, Balanga, Bataan, to the Municipal Treasurer of Limay, same province, the within letter dated March 3, 1993 of that Office posing the following queries: 1. Can the municipality collect Mayor's Permit Fees from contractors having project offices within its jurisdiction but with main offices either in Manila, Makati or elsewhere? 2. Are main contractors and sub-contractors as well (are) subject to the same tax? Are we not liable for double taxation if we collect from both? cdtai 3. Aside from mayor's permit fees, are contractors subject to tax on business under Sec. 143(e)of RA 7160, if so, under what schedule shall they be covered, Sec. 143(e) or Sec. 150? Regarding query no. 1, attention is invited to the provisions of Sec. 147 of RA No. 7160, as implemented under Art. 233 of the Implementing Rules and Regulations (IRR), which states: "Art. 233. Fees and Charges . The municipality may impose and collect such reasonable fees and charges on businesses, and occupations . . . before any person may engage in such business or occupation . . . provided that such fees and charges shall be only commensurate to the cost of issuing the license or permit and the expenses incurred in the conduct of the necessary inspection or surveillance." From the abovequoted provisions, it is clear that contractors, although with main or principal offices elsewhere, are subject to pay the Mayor's Permit fee in the municipality where they maintain project offices and engage in business. They shall also be subject to other regulatory fees imposed in existing tax ordinances of the municipality. acd As regards query 2, please be informed that the tax on business shall be payable only by the contractors and not by sub-contractors if the total contract price for the project is embodied in the contract between the contractor and the client. Otherwise, or if the cost of the portion of the project sub-contracted is paid direct by the client to the sub-contractor, he becomes an independent contractor subject to the same tax as imposed under Tax Ordinance No. 1 of that municipality, Sec. 2B-01 (e), Art. B, Chapter II of which states: Section 2B-02. Imposition of Tax "Every person who establishes, operates, conducts or maintains within the municipality of Limay, Bataan any of the business mentioned in this Article shall pay an Annual Tax in the amount prescribed therefor. xxx xxx xxx "(e) On contractors and other independent contractors, in accordance with the following schedule: xxx xxx xxx As to query No. 3, the answer is yes, contractors are subject to the tax on business provided for in Sec. 143(e) of RA 7160, as discussed in the preceding paragraph. However, it should be determined if the project contract or sales was recorded in the principal office in which case, the tax should be allocated pursuant to Section 150 of the Code, as implemented under Article 243(b-3) of the IRR as follows: To the LGU where the principal office is located 30% To the LGU where the project office is located 70% On the other hand, if the project contract or sales was recorded only in the project office, the whole amount of the tax shall accrue to the LGU where the project office is located. (SGD.) LORINDA M. CARLOS Executive Director