Bureau of Local Government Finance Opinion

October 6, 2014 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Eracisimo C. Veranga Head, Accounting Department Centro Escolar University 9 Mendiola Street San Miguel, Manila Sir : This refers to your letter dated August 11, 2014 regarding the Notice of Assessment issued by the office of the City Treasurer of Manila, relative to the business records submitted by Centro Escolar University (CEU), which resulted in the findings that CEU is liable for business tax deficiency amounting to P34,776,285.15 covering the period from 2008-2012. cSaATC Said letter was referred to the City Treasurer's Office of Manila for comment and/or appropriate action under a 1st Indorsement dated August 26, 2014. In reply, the CTO under a 2nd Indorsement dated September 16, 2014, copy enclosed, informed that CEU as a proprietary stock educational institution is classified under Section 29 [ All other businesses ] of the then prevailing Revenue Code of Manila (Ordinance No. 7807), with a tax rate of one percent (1%) of the preceding year's Gross Revenues. Relatedly, as regards the 30% share being claimed by the City of Manila as taxable revenues realized by CEU branches, the City Treasurer's Office is of the view that the same is proper inasmuch as the consolidated Financial Statements and Quarterly VAT Returns of CEU-Main (Mendiola), being the tax situs, reflected and incorporated these revenues. In resolving the herein issue, Section 150 of R.A. No. 7160, otherwise known as the Local Government Code (LGC) of 1991 is quoted as follows: Situs of the Tax. (a) For purposes of collection of the taxes under Section 143 of this 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 shall be paid to the municipality where such branch or sales outlet is located. In cases where there is no such branch or sales outlet in the city or municipality where the sale or transaction is made, the sale shall be duly recorded in the principal office and the taxes due shall accrue and shall be paid to such city or municipality. ( Emphasis supplied ) Clearly, based on the immediate preceding provision of law, business 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 shall be paid to the municipality where such branch or sales outlet is located. Applying the aforecited provision of law in the case at hand, CEU branches located in Malolos, Bulacan, Gil Puyat, Makati City and Legaspi City shall have to record their respective sales transactions thereat and the business tax due shall be payable to the LGU where it is located. In the same manner, CEU-Mendiola (Manila) shall be 100% liable to the City of Manila for its gross receipts realized during the preceding calendar year. For purposes of facilitating the immediate resolution of the issue, that Office may submit with the Office of the City Treasurer of Manila the official receipts evidencing the payments made by CEU branches to the LGU where it is located. Towards this end, it may be advised CEU officials to confer with the City Treasurer of Manila for the purpose of reconciling any differences in views for an amicable settlement of the issue. cHDAIS Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director