Bureau of Local Government Finance Opinion

August 5, 2004 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned to the Municipal Assessor, Boac, Marinduque, his within letter dated June 15, 2004, in effect inquiring as to whether the printing and developing machine owned by Marinduque Photo Center; and the equipment being utilized by water refilling stations in purification process are exempt from the payment of real property tax. With regard to the equipment being utilized by water Refilling Station, it may be recalled that this Bureau, under its letter dated January 5, 2004, copy attached, treating on a similar subject matter, rendered the following opinion: "Section 199(o) of the Local Government Code of 1991 (R.A. No. 7160), as implemented under Article 290(o) of its implementing Rules and Regulations (IRR), provide as follows: "xxx xxx xxx. "Article 290. Definitions . When used in this Title, the term: "xxx xxx xxx "(o) Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus, which may or may not be attached, permanently or temporarily to the real property. "Physical facilities for production, installations and appurtenant service facilities, those which are mobile, self-powered, or self-propelled and those not permanently attached to the real property shall be classified as real property provided that: "(1) They are actually, directly and exclusively used to meet the needs of the particular industry, business or activity; and "(2) By their very nature and purpose are designed for, or necessary to manufacturing, mining, logging, commercial, and industrial, or agricultural purposes." "Machinery which are of general purpose use including but not limited to office equipment, typewriters, telephone equipment, breakable or easily damaged containers (glass or cartons), micro computers, fax, telex machines, cash dispensers, furniture and fixtures, freezers, refrigerators, display cases of racks, fruit juice or beverage automatic dispensing machines which are not directly and exclusively used to meet the needs of a particular industry, business or activity shall not be considered within the definition of machinery under this Rule. "xxx xxx xxx. "Further, under Finance Circular No. 001-2002, copy attached, the Department of Finance made the following clarification: "xxx xxx xxx. "2. Machinery that is not permanently attached to real estate is: "a. Subject to the real property tax if it is an essential and principal element of an industry, work or activity without which such industry, work or activity cannot function ; (Emphasis supplied) "b. Not subject to the real property tax if it is not an essential and principal element of an industry, work or activity. "xxx xxx xxx. "In view thereof, this Bureau believes that machineries of JVG Aqua Crystal Refilling Center such as water purifying equipment and apparatus which are being used actually, directly and exclusively in the business of purified drinking water fall within the definition of Machinery and considered real property subject to real property tax. This Bureau accordingly finds the action of the Provincial Assessor of Zamboanga Sibugay in imposing real property tax to the subject machineries of JVG Aqua Crystal Refilling Center, to be in order." Similarly, therefore, the equipment being utilized by the water refilling stations thereat in purification process fall within the definition of machinery and considered real property subject to real property tax. CEHcSI Likewise, the printing and developing machine owned by Marinduque Photo Center is a taxable real property considering that the same falls within the definition of "Machinery" without which, the work or activity of the said photo center cannot function, and therefore, an essential and principal element of the business of photography. DcCITS Be guided accordingly. (SGD.) MA. PRESENTACION R. MONTESA Executive Director