Bureau of Local Government Finance Opinion

March 28, 2003 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Michael Angelo A. Abaya Partner Abaya Elias Attorneys-at-Law Unit 409 Prestige Tower Emerald Avenue, Ortigas Business Center Pasig City Sir : This refers to your letter dated October 25, 2002 requesting in behalf of your client Robust Rocks Resources Corporation (Robust Rocks for brevity) confirmation of your opinion that the Provincial Treasurer of Bataan has no authority to levy sand and gravel tax upon the said corporation for quarry operations performed on private lands. HCDAcE Representations are made that Robust Rocks has, under a subsisting quarry permit, been engaged in the extraction of quarry resources in private lands situated in Bataan. It is claimed that the Provincial Treasurer of Bataan, seeks to levy sand and gravel tax upon Robust Rocks pursuant to Section 32 of the Bataan Revenue Code of 1997, quoted as follows: "Section 32. Sand and Gravel Tax. There is hereby levied and collected a tax of 10% of fair market value per cubic meter of ordinary stones, sand, gravel, earth and other quarry resources, such as but not limited to marble, granite, volcanic cinders, basalt, tuff and rock phosphate, extracted from lands or from the beds of seas, lakes, rivers, streams, creeks, and public waters within the territorial jurisdiction of the Province of Bataan." (Emphasis supplied) That Office cites the case of Province of Bulacan v. Court of Appeals (293 SCRA 442 [1998]) where the Supreme Court ruled that a province may levy and collect tax on sand, gravel, etc., only from public lands, and that the assessment of taxes on quarry resources extracted from private land is therefore an ultra vires act traversing as it does the limitations set by the Local Government Code. However, the Provincial Treasurer of Bataan in a written communication dismisses the applicability of the judicial precedent because "the reason why the Supreme Court said that the Province of Bulacan may not invoke the Regalian doctrine to extend the coverage of their ordinance to quarry resources extracted from private lands (is) because Sec. 21 of the Provincial Ordinance No. 3 clearly applies only to quarry resources extracted from public lands." In view of the foregoing, the Provincial Treasurer not the Provincial Assessor contends that it is within the entire power of the Province of Bulacan to moot the decision of the Supreme Court by the sheer expedience of amending Ordinance No. 3 by deleting the word public from Section 21, thus, ". . . [t]he Bataan Revenue Code of 1997, is worded to include private land as 'lands' without any distinction, include (sic) public and private lands. . . . ." On the other hand, that Office contends that the ratio decidendi of the case rests not on any particular wording of a provincial ordinance concerned but its lack of authority to legislate in the first instance of tax measure contrary to law. That Office likewise cited a letter-opinion dated August 21, 1993 addressed to Mr. Felix Q. Flores wherein this Bureau expressed the view that only quarry resources extracted from public lands are subject to local taxes, thus quarry resources extracted from private lands are not within the taxing power of the local government unit the land being private property. ITDHSE In this connection, this Bureau believes that the Supreme Court decision is very clear and it finds no merit in disturbing the judicial interpretation made by competent authority. It ruled that the tax imposed by the Province of Bulacan is an excise tax, being a tax upon the performance, carrying on, or exercise of an activity which is prohibited pursuant to Section 133 (h) of the Local Government Code (LGC) of 1991, quoted as follows: "Sec. 133. Common Limitations on the Taxing Powers of Local Government Units . Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: "(a) . . . "(h) Excise tax on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; "xxx xxx xxx." In view of the above, the Supreme Court ruled further as follows: "A province may not, therefore, levy excise taxes on articles already taxed by the National Internal Revenue Code. Unfortunately for petitioners, the National Internal Revenue Code provides: "Section 151. Mineral Products . (A) Rates of Tax . There shall be levied, assessed and collected on minerals, mineral products and quarry resources, excise tax as follows: xxx xxx xxx (2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%) based on the actual market value of the gross output thereof at the time of removal, in case of those locally extracted or produced; or the values used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax, in the case of importation. HAEDIS xxx xxx xxx (B) [Definition of Terms] . For purposes of this Section, the term xxx xxx xxx (4) Quarry resources shall mean any common stone or other common mineral substances as the Director of Mines and Geo-Sciences may declare to be quarry resources such as, but not restricted to, marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate; Provided, That they contain no metal or metals or other valuable minerals in economically workable quantities. "It is clearly apparent from the above provision that the National Internal Revenue Code levies a tax on all quarry resources, regardless of origin, whether extracted from public or private land. Thus, a province may not ordinarily impose taxes on stones, sand, gravel, earth and other quarry resources, as the same are already taxed under the National Internal Revenue Code. The province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because it is expressly empowered to do so under the Local Government Code. As to stones, sand, gravel, earth and other quarry resources extracted from private land, however, it may not do so, because of the limitation provided by Section 133 of the Code in relation to Section 151 of the National Internal Revenue Code." In view of the foregoing, this Bureau concurs in your opinion that the Provincial Treasurer of Bataan has no authority to levy sand and gravel tax upon Robust Rocks Corporation, for quarry operations performed on private lands. We trust that this clarifies matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director