Bureau of Local Government Finance Opinion

February 2, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the City Treasurer, Caloocan City. This refers to the letter dated May 28, 1997 of Atty. John G. Bongat of Bongat Law Office in behalf of their client, Telengtan Bros. and Sons (TBS), relative to the claim that TBS is not liable to pay the business taxes imposed by that city for operating a redrying plant thereat. It is represented that TBS is a manufacturer of cigarettes and cigars. Its principal office and manufacturing plant are located in Paraaque while its redrying plant is in Caloocan City. TBS claims that the redrying plant is neither a branch nor a sales office as the same is used solely for redrying raw tobacco leaves which are brought there straight from sources in the Ilocos region. No manufacturing takes place in its premises nor any processing activity that changes the nature of the said raw material. On the other hand, that Office contends that a redrying plant is a branch or sales office as contemplated in subsection (a), par. 2 of Section 79 of the local tax ordinance of that city. aSDCIE Article 243(b)(1) of the Implementing Rules and Regulations (IRR) implementing Section 150 of the Local Government Code of 1991 (LGC) provides as follows: "ART. 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." Considering the above representation that no manufacturing takes place in the redrying plant, it is clear that no sales are made therein. Thus, the provisions of the Code quoted above shall not apply and TBS, therefore, should not be held as subject to, or liable to pay, any business tax to that city. However, TBS shall still be liable to pay annually the Mayor's permit and other regulatory fees and service charges that the city may have imposed under a duly-enacted tax ordinance. DISaEA Be guided accordingly. (SGD.) LORINDA M. CARLOS Executive Director