Bureau of Local Government Finance Opinion

June 29, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Amorsolo M. Rosario Sr. Vice-President Finance Department Nestle Philippines, Inc. Administration Office 335 Gil J. Puyat Ave. Ext. Makati City 1200 Sir : This refers to your letter dated March 5, 2001, requesting a ruling regarding the applicability of Section 150 of the Local Government Code (LGC) of 1991, in connection with Article 243 of the Implementing Rules and Regulations, (IRR), thereof. Representations are made that Nestle Philippines, Inc. (NPI) is a domestic corporation engaged in the manufacture of various food products, which are distributed and sold nationwide through its various sales office and distribution centers. On May 12, 2000, the Sangguniang Panlungsod of the City of Butuan passed SP Ordinance 2264-2000, which requires: "All business establishments located outside the political boundary of Butuan City but selling their products and services in Butuan City by means of booking of sales representatives, delivery trucks, vans and other types of delivery vehicles, shall be required to secure the necessary Mayors Permit and pay the regular business taxes based on their gross amount of sales made in Butuan City plus the annual fixed tax on delivery truck, van or other types of delivery vehicles, the same as those paid by regular businesses located and established in Butuan City." By virtue of such ordinance, the City Treasurer of Butuan City in a letter dated July 7, 2000, required NPI to continue paying business taxes for the entire year, despite the closure of its sales office/warehouse depot in the city last July 2000. The City Treasurer cited the applicability of Section 150 of the LGC which reads ". . . 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." aScIAC The City Treasurer contends that the last words of the paragraph "such city or municipality" should necessarily refer to the city or municipality where the sale or transaction is made, but not to the city or municipality where the principal office is located as envisioned by the IRR. The word "such" cannot refer to the principal office (which cannot be a city or municipality), it can refer to city or municipality preceding, otherwise there is absurdity, and the law does not delve on absurdities. The City Treasurer contends further that the implementing rules and regulations, which are only intended to supplement the law, cannot prevail against the law itself. It should be in harmony with the law which the regulations derived their very existence, and avoid as much as possible any construction that would annul them as an invalid exercise of legislative power. On the other hand, NPI contends that the above provision of Section 150 must be interpreted and implemented together with Article 243 (b) and (d) of the IRR which states: "Art. 243. Situs of Taxation. (a) ... "(b) Sales Allocation. ... "(2) In cases where there is no such branch, sales office or warehouse in the locality where the sale is made, the sale shall be recorded in the principal office along with the sales made by said principal office and the tax shall accrue to the city or municipality where said principal office is located. "xxx xxx xxx "(d) Sales made by route trucks, vans or vehicles "xxx xxx xxx "(2) For route sales made in a locality where a manufacturer, producer, wholesaler, retailer or dealer has no branch, sales office or warehouse, the sales are recorded in the branch, sales office or warehouse from where the route trucks withdraw their products for sale, and the tax due on such sales is paid to the LGU where such branch, sales office or warehouse is located. "xxx xxx xxx" Section 150 of the LGC clearly states that "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." Under the doctrine of the last antecedent, relative and qualifying words, phrases and clauses are to be applied to the word or phrase immediately preceding and not intended to others more remote. Applying the so-called doctrine, the phrase "such city or municipality" should be construed as referring to the place where the principal office is located rather than the place where the sale is made. In addition, it is a well-settled rule that rules and regulations issued by the executive or administrative officers pursuant to, and as authorized by, law has the force and effect of laws. ( Manila Jockey Club, Inc. vs. Games and Amusements Board, 107 Phil. 151) SHECcD In view of the above, this Bureau is not in a position to declare the provisions of existing laws as erroneous. In the interpretation of the provisions of existing laws, where proper interpretation is at issue, the opinion of a court of competent jurisdiction is usually given more persuasive force than that of any agency of the government. Thus, unless declared by competent authority as erroneous, the City of Butuan has no alternative but to implement the provisions of LGC and its IRR. Accordingly, the goods sourced from sales office of NPI and delivered to buyers where there is no branch, sales office or warehouse, should be considered as sales made by route trucks and should be recorded, and the tax thereon paid to the municipality/city where said sales office is located. However, if indeed, the sales office of NPI is still operating in Butuan City as claimed by the City Treasurer, Art. 243 (b) (1) of the IRR shall apply, i.e. , all sales made in Butuan City where there is a sales office or warehouse shall be recorded in said branch or sales office or warehouse and the tax shall be payable thereto. Be that as it may, it is emphasize that the foregoing views are expressed in line with the provisions of Article 287 of the IRR and not a declaration of the nullity or illegality of the SP Ordinance 2264-2000. Hence, unless said Ordinance is declared by competent authority as illegal or unconstitutional, the City Treasurer of Butuan has no alternative but to collect the tax levied thereunder. NPI should therefore question the legality or constitutionality of said Ordinance before the Department of Justice and thereafter with the regular court. It is worthwhile to mention that in a separate letter of even date, copy enclosed, the City Treasurer has been instructed to make representations with the SP thereat for the purpose of amending SP Ordinance No. 2264-2000 to ensure compliance of Section 150 of the LGC. The City Treasurer of Butuan is being furnished a copy hereof, for his information and guidance. Very truly yours, (SGD.) BENJAMIN A. GERONIMO Executive Director last visited January 16, 2014.