Bureau of Local Government Finance Opinion

April 17, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Romeo De Jesus, Jr. Tax Director Solid Cement Corporation 24F Petron Plaza 358 Sen. Gil J. Puyat Ave. Makati City Sir : This refers to your letter dated January 17, 2001 requesting a ruling that a sales office owned by Solid Cement Corporation (SCC) located in Calamba, Laguna be classified as "manufacturer" for purposes of its local business tax liabilities. Representations are made that SCC is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippines. The primary purpose of the corporation is "to engage in the manufacture, development, processing, exploiting, purchase and sale of cement and/or other products derived therefrom, . . . ." Representations are made further that SCC's manufacturing plant is located in Sitio Tagbak, Brgy. San Jose, Antipolo City. Said plant is classified as "manufacturer" as shown by its business permit granted by the City of Antipolo. It has rented a warehouse and sales office located at the 2nd and 3rd Floors, Anderson Building, National Highway, Brgy. Parian, Calamba, Laguna. The sole purpose and function of the said sales office is to sell or distribute the cement produced by the Antipolo manufacturing plant. Said sales office does not distribute any other product apart from the cement it manufactures. It is not engaged in any independent business of distributing cement. In view of the above, SCC contends that the above activity is but a necessary consequence of the corporation's primary business of manufacturing cement. HICATc SCC claims that it was taxed as wholesaler in 1999 but was subsequently classified as manufacturer by the municipal government of Calamba's License Division. However, the Municipal Administrator reversed the decision of said Division. Thus, SCC is anticipating that it will be taxed by the municipality of Calamba as a wholesaler and not as manufacturer. To support the above contention, SCC cited a ruling of this Bureau on the case of Coca-Cola Bottlers Philippines, Inc. (CCBPI) embodied under a 3rd Indorsement dated June 15, 1995 to the Regional Director, BLGF Region IX, the pertinent portion is quoted as follows: "It appears that CCBPI Sales Office in that municipality is an extension of its Zamboanga Plant which is classified as "Manufacturer" and sells exclusively its own products. "xxx xxx xxx "Considering that CCBPI is engaged in the manufacture of soft drinks, the distribution thereof is incidental to its line of business. Accordingly, it is the considered view of this Bureau that the sales office in Ipil, Zamboanga del Sur, should be classified as manufacturer and therefore, taxable in accordance with Art. 232(a) of the Implementing Rules and Regulations (IRR) implementing Sec. 143 of the LGC, as imposed under the duly enacted local revenue ordinances of that municipality." cHaCAS In this connection, it may be stated that on the basis of the situation laid-out and consistent with previous ruling on similar cases that a manufacturer's activity of distributing its own products is incidental to its line of business, and thus, its sales office should also be classified as manufacturer, this Bureau concurs in your stand that the sales office of SCC located in Calamba, Laguna shall be classified as "manufacturer" for purposes of its local business tax liabilities. The Municipal Treasurer of Calamba, Laguna is being furnished a copy of this letter for her information and guidance. We hope that this will help clarify matters. Very truly yours, (SGD.) BENJAMIN A. GERONIMO Executive Director