Scope of the Taxing and Other Revenue-raising Powers of Barangays vis-a-vis that of Municipalities

March 7, 1994 DILG LEGAL OPINION NO. 040-94 LEGAL SERVICE Barangay Captain Lino F. Peaflor Barangay Old San Roque Pili, Camarines Sur S i r : This has reference to your earlier letter-query, requesting this Office for clarification as to the scope of the taxing and other revenue-raising powers of Barangays vis-a-vis that of municipalities. May I invite your attention to the provisions found in Title 1, Chapter 2, Book II, of R.A. 7160, otherwise known as the Local Government Code of 1991, particularly Sections 134 to 155, inclusive thereof. As could be gleaned therefrom, the Local Government Code of 1991, (R.A. 7160), expressly enumerated the subjects in which a particular local government unit, e.g. province, city, municipality and barangay, could impose or levy taxes, fees and charges thereon. It is in this regard, therefore, that it would seem that provinces, cities, municipalities and barangays could levy taxes, fees and charges only on items specified therein as within the scope of their taxing powers, which to our mind is the most logical appreciation so as to prevent encroachment in each one's taxing powers and jurisdiction. As to your first question, the following provisions of the Local Government Code of 1991 (RA 7160), are pertinent for its resolution, to wit: Section 143. Tax on Business. The following municipality may impose taxes on the following business: xxx xxx xxx (d) On retailers, (d) On retailers, With gross sales RATE OF TAXES PER or receipts for the ANNUM preceding calendar year of: P400,000.00 or Less 2% more than P400,000.00 1% Provided, however, that barangays shall have the exclusive power to levy taxes, as provided for under Section 152 hereof, on gross sales or receipts of the preceding calendar year of Fifty Thousand Pesos (P50,000.00) or less, in the case of cities and Thirty Thousand Pesos (P30,000.00) or less, in the case of municipalities. "Section 152. Scope of Taxing Powers. The barangays may levy taxes, . . .: (a) Taxes On stores or retailers with fixed business establishments with gross sales or receipts of the preceding calendar year of Fifty Thousand Pesos (P50,000.00) or less, in the case of Cities and Thirty Thousand Pesos (P30,000.00) or less, in the case of municipalities, at a rate not exceeding one percent (1%) on such gross sales or receipt." It would appear therefore, that both the Municipality and the Barangay may levy tax on retailers. The only guideline is that if the gross receipts or sales for the preceding year is P50,000.00 or less, in case of cities or P30,000.00 or less, in case of municipalities, the power to levy tax on retailers exclusively belongs to the Barangay. If it exceeds the above-mentioned amounts, the power to tax belongs exclusively to the city or municipality, as the case may be. Hence, it is of no moment whether the business activity is outside or inside the Municipal Public Market. What controls is the gross sales or receipt for the preceding calendar year. With regard to fees on services, if the public market is owned by the Barangay, the rentals shall exclusively accrue to the barangay concerned. If it belongs to the municipality, rentals for space shall exclusively belong to the municipality. As to your second question, Section 171 of the same Code is pertinent. Said Section, in substance provides that the provincial, city, municipal or barangay treasurers may examine the books, accounts or other pertinent documents of any business activity for the purpose of assessing the proper business tax payable. In the case of Barangay, the Barangay Treasurer has the power to examine books and accounts of business located or conducted within its territorial jurisdiction. As to your third question, regarding the classification of a store, the placing of an order for goods and the making of payments thereto at a principal office does not transform said office into a store for it is a necessary element that there must also be goods or wares stored therein or on display, and provided also that the firm or person maintaining that office is actually engaged in the business of buying and selling. Hence, where the principal office of a company located in a barangay only serves to facilitate the transaction relative to the sale of its product, but does not act as a dealer or intermediary between its field office and its customers, is not a store as it lacks the elements of a store. (Opinion, Sec. of Justice, 2nd Indorsement, dated November 9, 1972). Hence, a store is just like a retailer. Finally as to your last question, a Municipal Ordinance does not take precedence over the Local Government Code. On the contrary, it is the Local Government Code that limits the powers of legislation of any local government unit. The rule on statutory construction that special laws take precedence over general laws applies only if both the general law and the special law are enacted by the same legislative body. Hoping that we have enlightened you on the matter. Very truly yours, DIR. JACOB F. MONTESA Department Legal Counsel Department of Interior and Local Government