Bureau of Local Government Finance Opinion

April 27, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. John Carlyle D. Quimbo Finance Manager Philippine Dairy Products Corp. SMFG Compound Legaspi corner Eagle Sts. Bo. Ugong, Pasig, City Sir : This refers to your letter dated February 23, 2000, requesting proper interpretation of Section 150 of the Local Government Code (LGC) of 1991 also known as Situs of the Tax. Representations are made as follows: GMA and Luzon Sales: 1. All sales generated by Philippine Dairy Products Corp. (PDPC) from GMA or National Capital Region, North and South Luzon are processed in the Cavite Plant located at General Trias. 2. The Cavite Plant maintains a warehouse that directly ships its products to various customers and distributors in the above areas through contracted haulers. 3. Processing of the Delivery Receipts (DR) and subsequently, the issuance of Sales Invoices (SI) for said customers and distributors also take place in the Cavite Plant. 4. Said Cavite Plant functions not only as a manufacturing plant but also as an area sales office for North and South Luzon. Thus, all sales that emanate from Luzon are recorded as sales of Luzon Area Sales Office. TaEIcS 5. In the case of GMA, since there is no sales office maintained for it, all of its sales are recorded in the principal office located in Pasig City. Thus, PDPC applied the 70/30 sharing only on the GMA sales and the entire Luzon sales are reported in Cavite together with their share of GMA sales. Vizmin Sales: 1. Area Sales Office is being maintained in Cebu City where all sales made in the VIZMIN area are recorded. Products are shipped from Cavite Plant to Cebu warehouse which serves the needs of customers and distributors in Cebu and Bohol. 2. For the requirements of Tacloban, Ormoc, Dumaguete, Bacolod, Iloilo and the rest of Mindanao, products are shipped straight from Cavite Plant to the respective distributors in the said areas. 3. Processing of the DRs and the issuance of SIs for said customers and distributors take place in Cavite Plant but since PDPC has VIZMIN Area Sales Office, all sales generated in VIZMIN are recorded thereat. Thus, the entire gross receipts of VIZMIN area was used as the basis in computing for the business tax to be paid in the City of Cebu. However, the City Treasurer of Pasig supports a contrary view. The 70/30 sharing between plant and principal office respectively applies to the national sales of PDPC except for Cebu. Such that, the sales emanating from Luzon (including GMA), Tacloban, Ormoc, Dumaguete, Bacolod, Iloilo and the whole of Mindanao are subject to the 70/30 sharing. In order to avoid delays in the processing of business permit, PDPC for the meantime applies the 70/30 sharing to GMA and Luzon sales. In the situation laid-out above, the provisions of Article 243 (b) (1), (2) & (3) of the Implementing Rules and Regulations (IRR) implementing Section 150 of the LGC, quoted as follows shall apply: cIEHAC "Art. 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 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 or plantation is located. LGUs where only experimental farms are located shall not be entitled to the sales allocation herein provided for. "xxx xxx xxx". Accordingly, and considering the representations made by that company, it is the view of this Bureau that PDPC is subject to the payment of business taxes and fees, as follows: 1. All sales made in its Luzon Area Sales Office in General Trias, Cavite shall be recorded thereat where such sales office is located and shall be 100% taxable by General Trias, Cavite. 2. All sales made and recorded in its principal office, i.e. , the GMA sales shall be 30% taxable by Pasig City where the principal office is located and 70% taxable by General Trias, Cavite where the Plant is located. 3. All sales made in Cebu and Bohol shall be recorded in the Area Sales Office in Cebu City and shall be 100% taxable by said City. AcISTE 4. All sales made in Tacloban, Ormoc, Dumaguete, Bacolod, Iloilo and the rest of Mindanao should be recorded in the principal office and shall be 30% taxable by Pasig City and 70% taxable by General Trias, Cavite. 5. The cities of Pasig and Cebu, and the municipality of General Trias, Cavite may collect Mayor's permit and other regulatory fees which may be imposed under their respective duly enacted tax ordinances. The City Treasurers of Pasig and Cebu and the Municipal Treasurer of General Trias, Cavite, are being furnished with a copy each hereof, for their information and guidance. Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge <http://www.blgf.gov.ph/downloads/opinion/localtax/2000/a2000-0305.pdf> last visited on October 2, 2013.