Bureau of Local Government Finance Opinion

May 27, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. E. C. Alcantara Tax Division SGV & Co. 6760 Ayala Avenue 1226 Makati City S i r : This refers to your letter dated March 12, 1998 requesting in behalf of your client, Cargill Philippines, Inc. (CPI) confirmation that the export sales from its General Santos City plant, as well as from its toll mill contract in Gingoog City, are entirely subject to local business taxes in General Santos City. Representations are made that CPI is engaged in the manufacture and export of coconut oil. It holds its principal office in Makati City while its manufacturing plant and warehouse are located in General Santos City. It also has an existing toll mill contract in Gingoog City by which CPI sub-contracted to an independent miller the crushing/processing of its copra, for a specified tolling fee on a per ton basis. The finished products from both its General Santos City and Gingoog City operations are shipped and sold for export directly from said localities. It is further represented that, while said export sales are confirmed in the principal office, the necessary sales invoices covering its General Santos and Gingoog sales are issued and entirely recorded in its General Santos warehouse which functions as branch/sales office. In this connection, the law applicable is Article 243(b)(1) of the Implementing Rules and Regulations implementing Section 150 of the Local Government Code (LGC) of 1991, quoted as follows: "ART. 243. Situs of the Tax . . . . "(b) Sales Allocation (1) All sales made in a locality where there is a branch or sales office or warehouse shall be recorded in said branch or sales office or warehouse and the tax shall be payable to the city or municipality where the same is located. "xxx xxx xxx." Moreover, Section 5(b)(1) of Local Finance Circular No. 4-93 dated July 30, 1993 of the Department provides as follows: "SEC. 5. Situs of the Tax . . . .. "(b) Sales Allocation. For purposes of collection of the tax, the following shall apply: EcDSHT "(1) All export transactions made by the branch shall be recorded in said branch and the gross sales or receipts derived from said transactions shall be taxable by the city or municipality where such branch is located. Accordingly, if as represented, all sales made by CPI are invoiced and recorded in General Santos City, including those made in Gingoog City, 100% of said sales shall be taxable by General Santos City and that the City of Makati is not entitled to a share in the payments made to General Santos City. Hence, the present practice adopted by CPI is in full accord with the law. Very truly yours, (SGD.) LORINDA M. CARLOS Executive Director