Bureau of Local Government Finance Opinion

August 7, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. J. A. Osana Partner SGV & Co. 6760 Ayala Avenue 1226 Makati City S i r : This refers to your letter dated July 14, 1997 requesting in behalf of your client, Novartis Agro Philippines, Inc.,(NAPI) confirmation that it is not subject to any business tax, but only to regulatory fees, inspection fees and other charges imposed by the city of Las Pias. Representations are made that NAPI is a duly registered domestic corporation engaged in the manufacture of animal health products. Its Principal office is located in Makati City and it maintains a warehouse in Las Pias which serves as the central stockroom/storage for its manufactured products. All products sold to the company's distributors and dealers throughout the country are withdrawn from the said warehouse. The company does not have a dealer or distributor based in Las Pias. In addition, all sales orders and invoices for the animal health products withdrawn from the Las Pias warehouse are prepared and recorded in the Principal office. However, delivery receipts are prepared in said warehouse prior to the release of goods to evidence the withdrawal and delivery of the Products. The sales proceeds from the above transactions are recorded and declared, for local business tax purpose, in the principal office. NAPI contends that the warehouse in Las Pias does not accept orders and/or issue sales invoices, thus the same does not qualify as a branch or sales outlet within the contemplation of Section 150 of the Local Government Code (LGC) of 1991 and Article 243 of the Implementing Rules and Regulations (IRR)thereof. NAPI contends further that the company does not sell its products by route trucks, vans, or vehicles, thus, it is not subject to the sales allocation provided for under Article 243(d)(2) of the IRR. The trucks loaded with the products do not make any sale along its route but merely delivers the products to the dealers and distributors who earlier ordered the same through its principal office. AaHcIT In this connection, it may be stated that the LGC specifically provides that business taxes that local government units may impose shall be based on the gross sales and/or receipts of a business entity during the preceding year. Thus, if as represented by NAPI, no sales are made in the warehouse in Las Pias, the company will not be subject to, or liable to pay any business tax to said city. Nevertheless, NAPI is obliged to secure a Mayor's permit and pay the corresponding fee for the operation of its warehouse in Las Pias. Said Company is likewise, liable to pay the regulatory fees and service charges imposed under a duly enacted ordinance of the said city. We trust that this will help clarify matters. Very truly yours, (SGD.) LORINDA M. CARLOS Executive Director