Bureau of Local Government Finance Opinion

April 3, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. E.C. Alcantara Tax Division SyCip Gorres & Co. 6760 Ayala Avenue, 1226 Makati City S i r : This refers to your letter dated March 5, 1997, requesting in behalf of your client, Amtrust Holdings, Incorporated (AHI) confirmation that the local amusement tax is based only on the gross receipts from admission fees excluding the amount charged for services rendered within the amusement place pursuant to Section 140 of the Local Government Code (LGC) of 1991. It is represented that AHI is a corporation engaged, among others, in the business of operating a theme park in the municipality of Sta. Rosa, Laguna, otherwise known as the Enchanted Kingdom which provides, various forms of attraction to patrons in the form of rides as well as entertainment and shows such as performances of live bands and other artists. For the year 1995, AHI charged an amount of P15.00 as admission fee and P265.00 for other services. Said breakdown was based on actual costs expended by the theme park. Beginning November 1995, AHI increased its rates to P380.00 due to the high costs of running the Enchanted Kingdom and as a part of marketing strategy, said company decided not to show the breakdown of the ticket cost (P380.00). However, based on actual operational and administrative costs, the company allocates 40% of the ticket price as admission fees and remaining 60% as payment for the rides and other forms of entertainment and services. Section 140 of the Local Government Code (LGC) of 1991 provides as follows: "Sec. 140. Amusement Tax . (a) The province may levy an amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than thirty percent (30%) of the gross receipts from admission fees." On the basis of the above provisions of law, therefore, the amusement tax should be based on gross receipts from admission fees at the rate of not more than 30% thereof. EDHTAI Considering, therefore, the representations made by AHI, it may be stated that only 40% of the ticket price representing admission fees, or P152.00, shall be subject to the amusement tax pursuant to Section 140 of the Code as, implemented by duly-enacted ordinance of the Province of Laguna. On the other hand the remaining sixty percent (60%) of the ticket price shall be subject to local business tax on amusement places imposable by the municipality of Sta. Rosa under a duly-enacted tax ordinance, provided however, that the terms and conditions under Section 136 of the Code are complied with. The Provincial Treasurer of Laguna and the Municipal Treasurer of Sta. Rosa, in separate letters, are being furnished with a copy hereof, for their information and guidance. (SGD.) LORINDA M. CARLOS Executive Director