Bureau of Local Government Finance Opinion

July 20, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the ICO-Regional Director for Local Government Finance, Region VII, Cebu City, the herein preceding indorsement relative to the letter dated January 21, 2015 of the Municipal Treasurer of Manjuyod, Negros Oriental, requesting for guidance and recommendation on the business tax payment of Universal Robina Corporation (URC) due to said Municipality. Representations are made that Universal Robina Sugar Milling Corporation (URSUMCO) and Universal Robina Corporation (URC) parent company, integrated its operation in the year 2007. As an additional information, under a letter dated July 16, 2007, Mr. Josefino C. Aquino, first AVP Controller of URC represented that most of 2006 refined sugar were delivered to URC for use as ingredient to its main products and considered such transaction as an inventory transfer and not sale. As a result business tax payment due to Manjuyod greatly decreased, hence the above request. cHaCAS That Office cited the provision of Section 150 of the Local Government Code (LGC) quoted as follows: "Section 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, bank and other financial institutions, and other businesses, maintaining or operating branch or sales outlets elsewhere shall record the sale in the branch or sales outlets making the sale or transaction, and the tax thereon 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 or transaction is made, the sale shall be duly recorded in the principal office and the taxes due shall accrue and shall be paid to such city or municipality. "(b) The following sales allocation shall apply to manufacturers, assemblers, contractors, producers, and exporters with factories, project offices, plants, and plantations in the pursuit of their business: "(1) Thirty percent (30%) of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located; and "(2) Seventy percent (70%) of all sales recorded in the principal office shall be taxable by the city or municipality where the factory, project office, plant, or plantation is located. DACcIH "(c) In case of a plantation located at a place other than the place where the factory is located, said seventy percent (70%) mentioned in subparagraph (b) of subsection (2) above shall be divided as follows: "(1) Sixty percent (60%) to the city or municipality where the factory is located; and "(2) Forty percent (40%) to the city or municipality where the plantation is located. "(d) In cases where a manufacturer, assembler, producer, exporter or contractor has two (2) or more factories, project offices, plants, or plantations located in different localities, the seventy percent (70%) sales allocation mentioned in subparagraph (b) of subsection (2) above shall be prorated among the localities where the factories, project offices, plants, and plantations are located in proportion to their respective volumes of production during the period for which the tax is due. "(e) The foregoing sales allocation shall be applied irrespective of whether or not sales are made in the locality where the factory, project office, plant, or plantation is located." In connection with the abovequoted provisions, it may be stated that the LGC specifically provides that a local government unit may impose a business tax based on the gross sales and/or receipts of a business entity for the preceding year. However, as represented by URC that the refined sugar were delivered to URC for use as ingredients to its main products, it appears that there are no sales made thus, URC shall not be subject to, or liable to pay any business tax to the Municipality of Manjuyod on the basis of the refined sugar delivered from URC-SUGAR DIVISION URSUMCO to URC. Consequently, in order that the Municipality of Manjuyod could validly impose a business tax on URC a sale or transaction should be made and recorded in the Office of URC-SUGAR DIVISION URSUMCO thereat pursuant to the aforequoted Section 150. Be guided accordingly. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director