Bureau of Local Government Finance Opinion

October 18, 1993 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Hon. Ignacio R. Bunye Municipal Mayor Muntinlupa, Metro Manila S i r : This refers to the joint letter dated June 23, 1993 of NESTLE (Philippines), Inc. and that municipality requesting the views of this Department relative to the exercise of the taxing powers of said municipality, pursuant to the provisions of Article 287 (not. Art. 228) of the Implementing Rules and Regulations (IRR) of the Local Government Code (LGC) of 1991, (RA 7160) quoted in the communication. It appears that the request was prompted by the following claims of NESTLE: 1. Coffee is an essential commodity and subject only to a tax 50% lower than the tax on ordinary commodities; and 2. Taxes under the Muntinlupa Revenue Code should accrue only beginning April 1, 1993, the quarter next following the effectivity of the ordinance. In this connection, attention is invited to the provisions of Section 143(C)(2) of the LGC as implemented by Art. 232(c)(2) of the IRR, quoted hereunder: "Art. 232. Tax on Business . The municipality may impose taxes on the following businesses: (a) . . . "(c) On exporters, and or manufacturers, millers, producers, wholesalers, distributors, dealers or retailers of essential commodities enumerated hereunder at a rate not exceeding one-half(1/2) of rates prescribed under subsections (a), (b) and (d) of this Section: xxx xxx xxx "(2) Wheat or cassava flour, meat dairy products, locally manufactured, processed or preserved food, sugar, salt and other agricultural, marine, and fresh water products, whether in their original state or not;" (Underlining supplied) cd 'Sec. (3) of the LGC as implemented by Art. 220 of the IRR defines "agricultural products" as follows: "Agricultural products include the yield of the soil, such as corn, rice, wheat, rye, hay, coconut, sugar cane, tobacco, root, crops . . . whether in their original form or not." (Underlining supplied). Thus, where coffee is "a drink made from the seeds of a tropical shrub" (Webster Handy Dictionary), it is clear that being a yield of the soil, it is an agricultural product and, therefore, should be considered as an "essential commodity" subject to pay only 50% of the tax imposed on ordinary commodities pursuant to Sec. 143(c)(2) of the Code. In resolving the second issue, Section 166 of the Code is quoted hereunder: "Sec. 166. Accrual of Tax . Unless otherwise provided in this Code, all local taxes, fees, and charges shall accrue on the first (1st) day of January each year. However, new taxes, fees or charges, or changes in the rates thereof, shall accrue on the first (1st) day of the quarter next following the effectivity of the ordinance imposing such new levies or rates." Accordingly, if the municipal tax ordinance imposing the tax on essential commodities was enacted and took effect prior to January 1, 1992, said tax shall accrue effective January 1, 1992, otherwise, the same shall become due and payable only at the beginning of the quarter next following the date of the effectivity of the ordinance. These views are expressed in line with the provisions of Art. 287 of the IRR to assist the municipality of Muntinlupa in clarifying matters. Very truly yours, By Authority of the Secretary: JUANITA D. AMATONG Undersecretary