Bureau of Local Government Finance Opinion

April 28, 2003 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Emelino T. Maestro CPA/Tax Agent Room 341, Isabela Bldg. Espaa, Manila Sir : This refers to your letter dated March 10, 2003 requesting confirmation that common carriers are not subject to business tax under Republic Act 7160 otherwise known as the Local Government Code of 1991 (LGC). CIcEHS Section 117 of Republic Act 8424 provides as follows: "Percentage Tax on Domestic Carriers and Keepers of Garages Cars for rent or hire driven by the lessee, transport contractors, including persons who transport passengers for hire, and other domestic carriers by land, air or water, except owners of bancas and owners of animal-drawn two wheeled vehicle, and keepers of garages shall pay a tax equivalent to three percent (3%) of their quarterly gross receipts." On the other hand Section 133 (j) of the LGC provides as follows: Section 133. Common Limitations on the Taxing Powers of Local Government Units . Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: "(a) . . . "(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code; "xxx xxx xxx." In this connection, it must be pointed out that the percentage tax herein referred to is imposed by the national government. On the other hand, under Section 133 (j), LGUs are prohibited from imposing taxes on gross receipts of transportation contractors. Be that as it may, LGUs may impose a business tax on operators of public utility vehicles maintaining booking office, terminal or waiting station for the purpose of carrying passengers from the municipality under a certificate of public convenience and necessity or similar franchises provided that the tax shall be imposed on the basis of the number of units of vehicles. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director