Bureau of Local Government Finance Opinion

March 28, 2016 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the City Treasurer of Taguig for comment, the herein attached letter dated March 4, 2016 of Atty. Leonardo A. Aurelio of A. M. Sison, Jr. & Partners Law Office, in behalf of Coca-Cola FEMSA Phils., Inc. (Coca-Cola) requesting for review and appropriate action on the non-taxability, for local business tax purposes, of its administrative office located in Taguig City, as well as adjustments on environmental impact fee pursuant to Ordinance No. 111, series of 2007, and regulatory fee based on the Fire Code. Representations were made as follows: 1. Upon application for renewal of business permit for the year 2016 by Coca-Cola, the OIC-City Treasurer and OIC-BPLO of Taguig City issued a Billing Statement imposing local business tax as "contractor" on Coca-Cola computed based on its alleged 30% tolling revenue for 2014 plus permits and fees and corporate cedula (Community Tax Certificate) for the first quarter of 2016; 2. That in order to be issued the required business permit for 2016, Coca-Cola settled the amount reflected in the said Billing Statement with request for tax credit or refund for the alleged overpaid taxes and fees; 3. Coca-Cola claimed that it was erroneously assessed by the OIC-City Treasurer and OIC-BPLO of Taguig City with Environmental Impact Fee based on paragraph O of Section 115 of Ordinance 111, series of 2007; 4. That since there was an alleged error in charging the Environmental Impact Fee, the total fees and permit to be paid by Coca-Cola should therefore be adjusted in determining the correct regulatory fee based on the Fire Code. Coca-Cola contended that the tolling or manufacturing activities for Cosmos Bottling Corporation (Cosmos) were done, invoiced, receipted and thus duly recorded in the accounting records of the plants or factories of Coca-Cola located outside Taguig City and under Section 150 of the Tax Code, for purposes of collection of taxes under Section 143 of the said Code, manufacturers, assemblers, repackers, brewers, distillers, rectifiers, and compounders of liquor, distilled spirits and wines, millers, producers, exporters, wholesalers, distributors, dealers, contractors , banks and other financial institutions, and other businesses maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet making the sale or transaction, and the tax thereon shall accrue and be paid to the municipality where such branch or sales outlet is located , thus Coca-Cola is therefore not liable for local business tax either as manufacturer or contractor in the City of Taguig. Further, Coca-Cola cited the BLGF Ruling on May 3, 2010 interpreting Section 150 of the LGC as implemented by Article 243 of its Implementing Rules and Regulations to support its claim of non-liability to pay local business tax in the city of Taguig. Apropos the alleged erroneous assessment on Environmental Impact Fee by the OIC City Treasurer and OIC-BPLO of Taguig, Coca-Cola claimed that the latter should have been charged Php6,500.00 instead as it is allegedly covered by paragraph R subparagraph 1 (a) of Section 115 of Ordinance 111, which provides that in case that the ''Factory is Outside the Locality," the annual fee is Php6,500.00. Lastly, Coca-Cola asseverated that the regulatory fee based on the Fire Code and its Implementing Rules and Regulations, is 10% of the total fees and permits charged by the local government unit concerned, and so therefore adjustment must be made to the above-mentioned assessed regulatory fee considering that there was an assignment of error in the categorization of Coca-Cola in assessing the Environmental Impact Fee. It is worth mentioning at this point, that the collection of Fire Safety Inspection Fee provided under Section 13 and 13-A of R.A. No. 9514, the law repealing P.D. No. 1185 (Fire Code of the Philippines) is vested upon the Bureau of Fire Protection (BFP), thus: " Section 13. Collection of Taxes, Fees and Fines. All taxes, fees and fines provided in this Code, shall be collected by the BFP. Provided , That twenty percent (20%) of such collection shall be set aside and retained for use by the city or municipal government concerned, which shall appropriate the same exclusive for the use of the operation and maintenance of its local fire station, including the construction and repair of fire station: Provided, further , That the remaining eighty (80%) shall be remitted to the National Treasury under a trust fund assigned for the modernization of the BFP." " Sec. 13-A. Assessment of Fire Code Taxes, Fees and Fines. The assessment of fire code taxes, fees and fines is vested upon the BFP. The BFP shall, subject to the approval of the DILG, prescribe the procedural rules for such purpose." In this connection and in order that appropriate action can be taken on the issues at hand, that Office is requested to submit its comments and/or copy of appropriate action on the matter within five (5) days from receipt hereof, together with the copy of duly-enacted ordinance in question or excerpts thereof, including copy of Memorandum of Agreement between the City Government of Taguig and the local BFP, if any, providing, among others, that the collection of fees provided under the aforecited provisions of R.A. No. 9514 are assigned to the Office of the City Treasurer or Business Permit and Licensing Office (BPLO) of Taguig City. Be guided accordingly. (SGD.) JOCELYN T. PENDON OIC-Executive Director