Bureau of Local Government Finance Opinion

June 26, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Teresita S. Atuel ICO-Regional Director Bureau of Local Government Finance Region VIII 3F Rm. A-305-A-309 F. Mendoza Commercial Complex 141 Sto. Nio Street Tacloban City Madam : This refers to your letter dated May 11, 2015 relative to the letter dated March 5, 2015 of Mr. MAXIMO C. LUMACTOD, Assistant Municipal Treasurer and designated (sic) at the Business Permits and Licensing Office (BPLO), Guiuan, Eastern Samar, seeking opinion and/or ruling on the following issues: cDHAES 1. Whether Metro Ormoc Community Multi-Purpose Cooperative (OCCCI) is liable to pay business tax on the basis of the clarification in BLGF Memorandum Circular No. 08-2012 on Article 60 of R.A. No. 9520 (The Philippine Cooperative Code of 2008); and 2. Whether fuels are exempted from business tax. The said letter is relative to the letter dated March 3, 2015 of Atty. ADELITO M. SALIBAGA, JR., Legal Officer of OCCCI wherein it was claimed that OCCCI is exempted from payment of business tax pursuant to Articles 60 and 61 of the Cooperative Code of 2008 quoted hereunder: "Article 60. Tax Treatment of Cooperatives . Duly registered cooperatives under this Code which do not transact any business with non-members or the general public shall not be subject to any taxes and fees imposed under the internal revenue laws and other tax laws. Cooperatives not falling under this article shall be governed by the succeeding section. "Article 61. Tax and Other Exemptions . Cooperatives transacting business with both members and non-members shall not be subject to tax on their transactions with members. In relation to this, the transactions of members with the cooperative shall not be subject to any taxes and fees, including but not limited to final taxes on members' deposits and documentary tax. Notwithstanding the provisions of any law or regulations to the contrary, such cooperatives dealing with non-members shall enjoy the following exemptions: "(1) Cooperatives with accumulated reserves and undivided net savings of not more than Ten Million Pesos (P10,000,000.00) shall be exempt from all national, city, provincial, municipal or barangay taxes of whatever name and nature . . . . . "(2) . . . "(3) All cooperatives, regardless of the amount of accumulated reserves and undivided net savings shall be exempt from payment of local taxes and taxes on transactions with banks and insurance companies; Provided, that all sales or services rendered for non-members shall be subject to the applicable percentages taxes sales made by producers, marketing or service cooperatives: . . ." OCCCI alleged that it falls within the ambit of the abovequoted Articles as it transacts business both to its members and non-members. It offers services to the public particularly its Hostel and Training Center located in the main office in Ormoc City. The Hostels offers accommodation to the general public while the Training Center caters the need of the public for venue of any activities. Further, it cited BLGF Memorandum Circular No. 08-2012, which clarified the exemption of Cooperatives from the payment of local taxes, fees and charges embodied in BLGF Memorandum Circular No. 31-2009 dated October 7, 2009, the pertinent portions of which are quoted as follows: ASEcHI "The foregoing premises considered, the portion of BLGF MC No. 31-2009 dated October 7, 2009 is hereby repealed, amended and/or modified accordingly, to read as follows: "However, cooperatives transacting business with both members and non-members are required to obtain or secure a Mayor's permit and other regulatory permits, which is implemented under the police powers of a local government unit to protect public interest and in furtherance of the general welfare clause enshrined both in the Constitution and the Local Government Code [Section 16 (General Welfare Clause)], and pay the corresponding amounts of fees and charges for such permits that a local government unit may have imposed under its duly-enacted tax ordinance, which shall commensurate to the cost of regulation, inspection and surveillance of the operations of their businesses." By virtue of Articles 60 and 61 of R.A. No. 9520 and BLGF Memorandum Circular No. 31-2009, OCCCI claimed that it is exempted from local taxes and only liable to pay the corresponding amounts of fees and charges for the Mayor's Permit that is has to secure from the Municipality of Guiuan, Eastern Samar. However, Mr. Lumactod assessed OCCCI of business tax amounting to Php37,733.83 for its non-essential commodities. Hence, the above request. In view of the above representations and pursuant to Articles 60 and 61 of R.A. No. 9520, it is the view of this Bureau that OCCCI which is transacting business with both members and non-members and assumed to have an accumulated reserves and undivided net savings of not more than Ten Million Pesos (P10,000,000.00) is exempted from local taxes. However, it also clarified that in case of Cooperative duly registered under R.A. No. 6938, as amended by R.A. No. 9520, transacting business with both members and non-members and with accumulated reserves and undivided net savings of more than Ten Million Pesos (P10,000,000.00), the operation of such cooperative shall be governed by Article 61, Par. (2), Sub-par. (c) of the same Law, which provides: " Article 61. Tax and Other Exemptions. Cooperatives transacting business with both members and non-members shall not be subjected to tax on their transactions with members . In relation to this, the transactions of members with the cooperative shall not be subject to any taxes and fees, including but not limited to final taxes on members' deposits and documentary tax. Notwithstanding the provisions of any law or regulation to the contrary, such cooperatives dealing with non-members shall enjoy the following tax exemptions: (1) . . . . ITAaHc (2) Cooperatives with accumulated reserves and undivided net savings of more than Ten Million Pesos (P10,000,000.00) shall pay the following taxes at the full rate: (a) . . . (c) All other taxes unless otherwise provided herein; . . . ." (Underscoring for emphasis) It may be clarified further that BLGF MC No. 58-2012, which reinstated BLGF MC No. 31-2009 pursuant to the Joint Congressional Oversight Committee on Cooperative (JCOCC) RESOLUTION NO. 01-2012, adopted on June 6, 2012 speaks only of regulatory fees and Community Tax Certificate, thus: "However, cooperatives transacting business with both members and non-members are required to obtain or secure a Mayor's permit , which is implemented under the police power of the local government unit to protect public interest and in furtherance of the general welfare clause enshrined both in the Constitution and the Local Government Code (Section 16 General Welfare Clause), and pay the commensurate cost of regulation, inspection and surveillance of the operation of its business but not exceeding One Thousand Pesos (P1,000.00) . Likewise, said cooperatives shall secure a Community Tax Certificate (CTC) and pay the basic tax of Five Hundred Pesos (P500.00) as a juridical entity." ( Underlining supplied ) It may be stated further that the said BLGF MC No. 58-2012 is issued adopting JCOCC Resolution No. 01-2012, which in turn enjoined this Bureau to reinstate BLGF MC No. 31-2009, thus making no modification or amendment to any of the provisions of R.A. No. 9520. CHTAIc As regards the issue on the taxability of gasoline stations, attention is invited to the provisions of Article 232 (h) of the Implementing Rules and Regulations (IRR) implementing Section (h) of the LGC, which provides as follows: "Article 232. Tax on Business . . . . . "(a) . . . "(h) . . . any business engaged in the production, manufacture, refining, distribution or sales of oil, gasoline and other petroleum products shall not be subject to any local tax . . . ." It is clear from the abovequoted provisions that any business engaged in, the production, manufacture, refining, distribution or sale of oil, gasoline and other petroleum products shall not be subject to any local tax . However, the business tax on sale of tires, batteries, and accessories (TBA) as well as for other services that gasoline dealers or stations are rendering to their customers or clientele may be collected. Nevertheless, it bears emphasis that gasoline stations shall still be liable to pay the Mayor's permit and other regulatory fees or service charges that the local government unit may have impose under its duly-enacted revenue code or tax ordinance, the exemption being applicable to local taxes only. We hope that this will help clarify matters. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director