Bureau of Local Government Finance Opinion

September 14, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned, thru the Regional Director for Local Government Finance, Region 1, 2nd Flr. Mabanag Justice Hall Building, Governor Luna St., San Fernando City, La Union, and the Provincial Treasurer of Ilocos Norte, Laoag City, to the Municipal Treasurer of San Nicolas, same province. This refers to the letter dated July 9, 1998 requesting proper interpretation of Section 150 of the Local Government Code (LGC) of 1991 particularly in determining the gross sales of Nestle Philippines, Inc. (NESTLE for brevity) for taxation purposes. Representations are made that NESTLE is maintaining a branch/sales office at Brgy. 24 of said municipality. Said company is also distributing in Laoag City and other municipalities within the province of Ilocos Norte. In January 1998, NESTLE declared a Net Sales for 1997 in the amount of P8,128,000.64 which is very much lower than the sales declared in 1996 in the amount of P133,060,184.00. That Office has accepted their payment for business taxes for 1998, however, said company was required to present their sales book for verification. It appears that the sales made in Laoag City was paid thereat in a 70%-30% allocation. Hence, the following query: "Considering that the Sales Office is located in San Nicolas, will the sales be declared and paid in full in San Nicolas or partly in Laoag City? It is our view that the Sales should be paid in full and paid in San Nicolas." In this connection and considering the representations made by that office, the law applicable is Article 243 b(l) d(2) of the Implementing Rules and Regulations (IRR) implementing Section 150 of the LGC, quoted as follows: "Article 243. Situs of the Tax . . . . "(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." "xxx xxx xxx. "(d) Sales made by route trucks, vans or vehicles . "xxx xxx xxx." "(2) For route sales made in a locality where a manufacturer, producer, wholesaler, retailer or dealer has no branch, sales office or warehouse, the sales are recorded in the branch, sales office or warehouse from where the route trucks withdraw their products for sale, and the tax due on such sales is paid to the LGU where such branch, sales office or warehouse is located." Accordingly, this Bureau expresses the following views: 1. All sales made in its sales office in San Nicolas shall be recorded thereat where such sales office is located and shall be 100% taxable by San Nicolas. 2. The goods sourced from said sales office and delivered to buyers outside said municipality, where there is no branch, sales office or warehouse, should be considered as sales made by route trucks and should be recorded and the tax thereon paid in San Nicolas where said sales office is located. EHDCAI 3. The City of Laoag may levy and collect an annual fixed tax for every delivery truck of NESTLE imposed under the existing local tax ordinance of the city. Be guided accordingly. (SGD.) ANGELINA M. MAGSINO (Deputy Executive Director) Officer-In-Charge