Bureau of Local Government Finance Opinion

January 29, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Manny Duka Chief Accountant Philippine Belt Manufacturing Corp. 280 Dasmarias Street Binondo, Manila Sir : This refers to your letter dated January 19, 2001 requesting interpretation on the following: Interpretation of Local Government Code of 1991 Article 243 (b) (3) Situs of the Tax Sales Allocation. What percentage of our factory (Novaliches) sales shall be paid or taxable to Quezon City government? What percentage of our branch sales (Manila, Cebu, Bacolod, Davao, and Iloilo) shall be paid or taxable to their respective City government, and to Quezon City government? Representations are made that Philippine Belt Manufacturing Corp. (PBMC) is a manufacturer of industrial and automotive fan belts. Its manufacturing plant or factory is located at Novaliches, Quezon City. It maintains several sales office or branches located in Manila, Cebu, Bacolod, Davao and Iloilo. Each branch, same of the factory, conducts its own business operation in promoting and selling the products. Such branches maintain office, warehouse and accept orders and issue sales invoices. Sales are recorded in their sales books and consolidated in the principal office/factory. DIAcTE Issue No. 1. Article 243 (b) (3) of the Implementing Rules and Regulations implementing Section 150 of the Local Government Code (LGC) of 1991 provides as follows: "Art. 243. Situs of the Tax . (a) . . . "(b) Sales Allocation (1) . . . "(3) In cases where there is a factory, project office, plant or plantation in pursuit of business, thirty percent (30%) of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located and seventy percent (70%) of all sales recorded in the principal office shall be taxable by the city or municipality where the factory, project office, plant or plantation is located. LGUs where only experimental farms are located shall not be entitled to the sales allocation herein provided for. "xxx xxx xxx." The sales recorded in the principal office pertain to sales made in the locality where there is no branch, sales office or warehouse. Thus applying the said rule in the above case, sales made by sales offices or branches located in Manila, Cebu, Bacolod, Davao and Iloilo shall be recorded in said branch or sales office and shall not be consolidated with the sales recorded in the principal office. HScaCT Issue No. 2. Considering that both the principal office and factory are located in Novaliches, all sales recorded thereat shall be 100% taxable by Quezon City. Issue No. 3. Art. 243 (b) (1) shall apply, which states that all sales made in a locality where there is a branch or sales office or warehouse shall be recorded in said branch or sale office or warehouse and the tax shall be payable to the city or municipality where the same is located. Accordingly, Quezon City will not share in the business taxes that are paid to cities where said branches or sales offices are located. TCacIA We hope that this will help clarify matters. Very truly yours, (SGD.) JUANITA D. AMATONG Undersecretary and Officer-in-Charge, BLGF <www.blgf.gov.ph/downloads/opinion/localtax/2002/a2002-0113.pdf> last visited January 14, 2014.