Bureau of Local Government Finance Opinion

May 3, 2010 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Leonardo A. Aurelio Law Office of A.M. Sison, Jr. & Associates Suite 2002-A Security Bank Centre 6776 Ayala Avenue 1226 Makati City Sir : This refers to your letter dated April 19, 2010 in behalf of your client, Coca-Cola Bottlers Philippines, Inc. (CCBPI) requesting a ruling as to the situs of the tax being imposed under Section 143 of the Local Government Code (LGC) of 1991. Representations are made that CCBPI has a plant situated in Brgy. Ilijan, Bago City (Negros Occidental) which produces Viva Spring Water in 330 ml, 500 ml and 5 gallon bottles. No sales are being made in Bago City. Instead, all the productions in the said plant are being shipped and delivered to CCBPI sales offices in the Visayas and Mindanao, which are all outside the territorial jurisdiction of Bago City. Sales made by these sales offices are recorded in the place where they are located. Hence, the query as to which city/municipality shall the tax being imposed under Section 143 of the LGC on the sales of Viva Spring Water produced in Bago City but sold outside its territorial jurisdiction accrue? In this connection reference is made to the provision of Article 243 of the Implementing Rules and Regulations (IRR) quoted hereunder, implementing Section 150 of the LGC: HCacTI "Article 243. Situs of the Tax . (a) . . . "(b) Sales Allocation (1) All sales made in a locality where there is a branch or sales office or warehouse shall be recorded in said branch or sales office or warehouse and the tax shall be payable to the city or municipality where the same is located. "(2) In cases where there is no such branch, sales office or warehouse in the locality where the sale is made, the sale shall be recorded in the principal office along with the sales made by said principal office and the tax shall accrue to the city or municipality where the said principal office is located." "(3) In cases where there is a factory, project office, plant or plantation in pursuit of business, 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 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 and plantation is located. LGUs where only experimental farms are located shall not be entitled to the sales allocation herein provided for. "xxx xxx xxx." It is clear from the aforequoted provision of law that all sales made in the sales/branch office shall be 100% taxable by the city/municipality where the sales/branch office is located. Thus, in the case above, all sales of Spring Viva Water produced in Bago City and shipped and delivered to CCBPI sales offices shall be taxable by the local government units in Visayas and Mindanao where said sales offices are located. Considering that there is no branch office in Bago City, there are no sales transactions that may be taxed by said City. On the other hand, the 30-70 sales allocation shall not apply inasmuch as no sales are recorded in the principal office. CSaIAc Accordingly, Bago City may only collect Mayor's permit fee and other regulatory fees provided for under existing local tax ordinances of said city. We hope that this will help clarify matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director