Bureau of Local Government Finance Opinion

March 29, 1993 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Lerna A. Luga Finance & Administrative Manager Megastrat, Inc. 3rd Floor, Rudgen II Bldg. No. 17 Shaw Boulevard Pasig, Metro Manila M a d a m : This refers to your letter dated February 11, 1993, requesting guidelines as to what kind of tax, if any, should Megastrat, Inc. be assessed by the municipalities of Pasig and Mandaluyong. It is represented that Megastrat, Inc. (MI) is a corporation engaged in the trading of books. It holds office in Pasig, where all transactions are made including the issuance of sales invoices. However, it including the issuance of sales invoices. However, it also maintains a warehouse in Mandaluyong which serves as its storage area and no transactions are made therein. cdt In this connection, it is formed that before any tax, fee or charge may be collected from a taxpayer like MI the same must first be levied under a duly-enacted tax ordinance. In the absence of such tax ordinance, there will be no basis for the collection of any tax, fee or charge from the Company. The law applicable on the issue is Section 143 (h) of the Local Government Code of 1991, in relation with Section 150 thereof, quoted hereunder: "Sec. 143. Tax on Business . The municipality may impose taxes on the following businesses: .... "(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 the 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. cd "The sanggunian, concerned may prescribe a schedule of graduated tax rates but in no case to exceed the rates prescribed herein. "Sec. 150. Situs of the Tax . (a) For purposes of collection of the taxes under Section 143 of this Code, manufacturers, assemblers, repackers, brewers, distillers, rectifiers and compounders of liquor, distilled spirits and wines, millers, producers, exporters, wholesalers distributors, dealers, contractors, banks and other financial institutions, and other businesses, maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet making the shall accrue and shall be paid to the municipality where such branch or sales outlet is located. In cases where there is no such branch or sales outlet in the city or municipality where the sale shall be duly recorded in the principal office and the taxes due shall be paid to such city or municipality ." (Underlining ours) Likewise, it is informed that for taxation purposes. Article 243 (a) (3) of the implementing Rules and Regulations of the Local Government Code of 1991, defines "warehouse" as a building utilized for the storage of products for sale and from which goods or merchandise are withdrawn for delivery to customers or dealers, or by persons acting in behalf of the business. A warehouse that does not accept orders and/or issue sales invoices as aforementioned, shall not be considered a branch or sales office .(Underlining supplied.) Based on the foregoing, and the representation made by that Office, it is the view of this Department that MI should be assessed under Section 143 (h) of the aforecited Code at the gross sales or receipts of the preceding year and payable to the municipality of Pasig. Likewise, said municipality may collect mayor's permit and other regulatory fees from the Company. On the other hand, Mandaluyong, where the warehouse is located but where no transactions are made, may only collect Mayor's permit fee and other regulatory fees provided for under existing local tax ordinances of the municipality. It is hoped that this will help clarify matters. Very truly yours, By Authority of the Secretary: LORINDA M. CARLOS Executive Director Bureau of Local Government Finance