Bureau of Local Government Finance Opinion

October 10, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Alejandro Alfonso E. Navarro Atty. Anna Tencing L. Alfaro Villaraza & Angcango Law Offices 5/F LTA Building, 118 Perea Street Legaspi Village, Makati City 1229 Sir/Madam : This refers to your letter dated 15 August 2002 requesting a ruling in behalf of your client, SALVADOR FREIGHT CORPORATION (SFC),regarding the imposition of annual fixed tax on delivery trucks/vans of your client. Representations are made that SFC, a domestic corporation is a registered freight truck service based and operating in the Municipality of Tarlac (now Tarlac City),Province of Tarlac. It is represented further that its sole line of business is the delivery of goods in behalf of its clients from said municipality (now city) to any point of Luzon. On 14 December 1998, the Sangguniang Panlungsod passed Resolution No. 306, adopting City Ordinance No. 98-013 or the Revenue Code of the City of Tarlac. HTcDEa Perusal of the attached copy of said Revenue Code, particularly Sections 1 and 2 of Article H, provides as follows: "Section 1. Scope. This article shall govern the assessment, levy and collection of an annual fixed tax on any truck or van or any vehicle used by owners ,manufacturers, producers, wholesalers, dealers or retailers in the delivery of any kind of merchandise, including distilled spirits, fermented liquors, softdrinks, vigors (cigars) and cigarettes, sand, gravel and other quarry materials, sugarcane, cereals and other farm products, fruits, vegetable, fish, lumber and other hardware products, animals, etc. to sales outlets, consumers, and users, whether directly or indirectly, within the city. "Section 2. Rate of Levy. There shall be collected from every truck or van or any motor vehicle used by the owner ,manufacturers, producers, wholesalers, dealers or retailers on the delivery of any kind of merchandise, including distilled spirits, fermented liquors, softdrinks, cigar and cigarettes, sand, gravel and other quarry materials, sugarcane, cereals and other farm products, fruits, vegetable, fish, lumber and other hardware products, animals, etc. to sales outlets, consumers, and users, whether directly or indirectly, within the city in the amount of five hundred pesos (P500.00) per annum." (Underlining supplied) It is your contention, however, that the above provisions of Article H imposing such annual fixed tax on your client is beyond the powers granted to the city by the Local Government Code. In addition, it is your opinion that said Revenue Code extended the application of Section 141 of the LGC to owners of delivery trucks or vans by including the " owners " as among those subject to the tax. Such contention is also anchored on the following: 1. that the power of taxation of LGUs is subject to such guidelines and limitations provided by the Constitutions and law; ( Sec. 133, LGC .) 2. that in every case of doubt, tax statutes are construed strictly against the government and liberally in favor of the taxpayer; ( Manila Railroad Company vs. Collector of Customs, 52 Phil 956 ) and 3. that tax laws are not presumed beyond what the statute expressly and clearly declares. ( Collector vs. La Tondena, Inc. 5 SCRA 93 [1962];Marinduque Iron Mines Agents, Inc. vs. Municipal Council of Hinabangan, 11 SCRA 416 [1964] ) AaSIET On the other hand, Section 141 (a) of R.A. No. 7160, otherwise known as the Local Government Code (LGC) of 1991, reads as follows: " SEC. 141. Annual Fixed Tax for Every Delivery Truck or Van of Manufacturers, Wholesalers of, Dealers or Retailers in, Certain Products. (a) The province may levy an annual fixed tax for every truck, van or any vehicle used by manufacturers, producers, wholesalers, dealers or retailers in the delivery or distribution of distilled spirits, fermented liquors, softdrinks, cigars and cigarettes, and other products as may be determined by the sangguniang panlalawigan ,to sales outlets, or consumers, whether directly or indirectly, within the province in an amount not exceeding Five Hundred Pesos (P500.00)." (Underlining supplied) The abovequoted provisions of Section 141 of the Code, clearly, do not include nor make mention of "owners" of delivery trucks or vans liable to the payment of the annual fixed tax on delivery trucks or van which the aforementioned Sections 1 and 2 of Article H of the Revenue Code of the City of Tarlac has expressly included. What the law explicitly subjects to the said annual fixed tax, based on the provision of said Section 141 are manufactures, producers, wholesalers, dealers or retailers. In this connection, this Bureau finds merit in your contention and concurs with your stand that the imposition and collection of the said annual fixed tax on delivery trucks and vans should not extend to "owners",much more if such delivery trucks and vans are used by owners/operators in the delivery of goods in behalf of their clients for a fee in which case it would fall under the category of a transportation contractor. Corollarily, this Bureau reiterates its stand on cases similarly situated and holds that operators of delivery trucks or vans that merely deliver goods in behalf of their clients for a fee is not subject to the annual fixed tax imposed under Section 141 of the Code. The foregoing opinions are expressed in line with Article 287 of the IRR of the Code and not a declaration of nullity or illegality of the provisions of the said Revenue Code of the City of Tarlac (Tax Ordinance No. 98-013). Hence, unless said Ordinance is declared as illegal or unconstitutional by competent authority, the City Treasurer of Tarlac has no alternative but to collect the tax levied thereunder. SFC should therefore question the legality or constitutionality of said Ordinance before the Department of Justice or thereafter with the regular court. In this connection, the Office of the City Treasurer has been advised under letter of even dated to make representations with the Sangguniang Panlungsod for the necessary amendments of the provisions of the subject Article H of the Revenue Code of said city in conformity with the provisions of the Local Government Code of 1991 that governs the affairs of local government units. It is hoped that this will help clarify matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director ATTACHMENT October 10, 2002 The City Treasurer Tarlac City Sir : This has reference to the letter dated 15 August 2002 of Atty. Alejandro Alfonso E. Navarro and Atty. Anna Tencing L. Alfaro of Villaraza & Angcangco Law Offices addressed to the Department of Finance thru this Bureau, requesting a ruling in behalf of their client, SALVADOR FREIGHT CORPORATION (SFC),regarding the imposition of annual fixed tax on its delivery trucks. Enclosed for your information and guidance is a copy of our reply-letter of even date, where this Bureau reiterates its previous stand on cases similarly situated that operators of delivery trucks or vans that merely deliver goods in behalf of their clients for fee is not subject to the annual fixed tax imposed under Section 141 of the Local Government Code. Be that as it may, it was emphasized that said views are expressed in line with the provisions of Article 287 of the IRR and not a declaration of the nullity or illegality of SP Ordinance 2264-2000. Hence, unless said Ordinance is declared by competent authority as illegal or unconstitutional, that Office has no alternative but to collect the tax levied thereunder. CITcSH However, that Office is hereby advised to make representations with the Office of the Sangguniang Panlungsod for the necessary amendments to rectify the provision of Article H of the abovementioned Revenue Code of that City to conform with the provisions of the Local Government Code of 1991. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director