Progressive Development Corporation vs.

Quezon City, GR
36081, 24 April 1989

Facts: The City Council of Quezon City adopted Ordinance 7997 (1969) where
privately owned and operated public markets to pay 10% of the gross
receipts from stall rentals to the City, as supervision fee. Such ordinance was
amended by Ordinance 9236 (1972), which imposed a 5% tax on gross
receipts on rentals or lease of space in privately-owned public markets in
Quezon City. Progressive Development Corp., owned and operator of
Farmers Market and Shopping Center, filed a petition for prohibition against
the city on the ground that the supervision fee or license tax imposed is in
reality a tax on income the city cannot impose.

Issue: Whether the supervision fee / license tax is a tax on income.

Held: The 5% tax imposed in Ordinance 9236 does not constitute a tax on
income, nor a city income tax (distinguished from the national income tax by
the Tax Code) within the meaning of Section 2 (g) of the Local Autonomy Act,
but rather a license tax or fee for the regulation of business in which the
company is engaged. To be considered a license fee, the imposition must
relate to an occupation or activity that so engages the public interest in
health, morals, safety and development as to require regulations for the
protection and promotion of such public interest; the imposition must also
bear a reasonable relation to the probable expenses of the regulation, taking
into account not only the costs of direct regulation but also its incidental
consequences as well. The gross receipts from stall rentals have been used
only as a basis for computing the fees or taxes due to the city to cover the
latters administrative expenses. The use of the gross amount of stall rentals,
as basis for the determination of the collectible amount of license tax, does
not by itself convert or render the license tax into a prohibited city tax on
income. For ordinarily, the higher the amount of stall rentals, the higher the
aggregate volume of foodstuffs and related items sold in the privately owned
market; and the higher the volume of goods sold in such market, the greater
extent and frequency of inspection and supervision that may be reasonably
required in the interest of the buying public.

Allied Thread vs. City of Manila, GR L-40296, 21 November

1984
Facts: Allied Thread Co. Inc. is engaged in the business of manufacturing
sewing thread and yarn. It operates its factory and maintains an office in
Pasig, Rizal. In order to sell its products in Manila and in other parts of the
Philippines, it engaged the services of a sales broker, Ker & Co. Ltd., the
latter deriving commissions from every sale made for its principal. The City
of Manila enacted Ordinance 7516 imposing business taxes based on gross
sales on a graduated basis on manufacturers, importers or producers doing
business in Manila. Allied Thread and Ker & Co. alleged that said ordinance is
invalid for being contrary to Section 54 of PD 426.

Issue: Whether Alleid Thread is properly taxed in Manila.

Held: Ordinance 7516, as amended, imposes a business tax on

manufacturers, importers or producers doing business in Manila. The tax
imposition is upon the performance of an act, enjoyment of a privilege, or
the engaging in an occupation, and hence is in the nature of an excise tax.
The power to levy an excise upon the perforance of an act or the engaging in
an occupation does not depend upon the domicile of the person subject tot
he excise, nor upon the physical location of the property and in connection
with the act or occupation taxed, but depends upon the place in which the
act is performed or occupation engaged in. Thus, since Allied Thread sells its
products in the City of Manila through its broker, Ker & Co., it cannot escapte
the tax liability imposed by Ordinance 7516, as amended.

Pepsi-Cola Bottling Co. vs. City of Butuan, GR L-22814, 28

August 1968
Facts: Ordinance 110 was enacted by the City of Butuan imposing a tax of
P0.10 per case of 24 bottles of softdrinks or carbonated drinks. The tax was
imposed upon dealers engeged in selling softdrinks or carbonated drinks.
When Ordinance 110, the tax was imposed upon an agent or consignee of
any person, association, partnership, company or corporation engaged in

selling softdrinks or carbonated drinks, with agent or consignee being

particularly defined on the inserted provision Section 3-A. In effect,
merchants engaged in the sale of softdrinks, etc. are not subject to the tax
unless they are agents or consignees of another dealer who must be one
engaged in business outside the City. Pepsi-Cola Bottling Co. filed suit to
recover sums paid by it to the city pursuant to the Ordinance, which it claims
to be null and void.
Issue: Whether the Ordinance is discriminatory.
Held: The Ordinance, as amended, is discriminatory since only sales by
agents or consignees of outside dealers would be subject to the tax. Sales
by local dealers, not acting for or on behalf of other merchants, regardless of
the volume of their sales , and even if the same exceeded those made by
said agents or consignees of producers or merchants established outside the
city, would be exempt from the tax. The classification made in the exercise
of the authority to tax, to be valid must be reasonable, which would be
satisfied if the classification is based upon substantial distinctions which
makes real differences; these are germane to the purpose of legislation or
ordinance; the classification applies not only to present conditions but also to
future conditions substantially identical to those of the present; and the
classification applies equally to all those who belong to the same class.
These conditions are not fully met by the ordinance in question.

Villanueva vs. Iloilo City, GR L-26521, 28 December 1968

Facts: On 30 September 1946, the Municipal Board of Iloilo City enacted
Ordinance 86 imposing license tax fees upon tenement house (P25);
tenemen house partly engaged or wholly engaged in and dedicated to
business in Baza, Iznart, and Aldeguer Streets (P24 per apartment); and
tenement house, padtly or wholly engaged in business in other streets (P12
per apartment). The validity of such ordinance was challenged by Eusebio
and Remedios Villanueva, owners of four tenement houses containing 34
apartments. The Supreme Court held the ordinance to be ultra vires. On 15
January 1960, however, the municipal board, believing that it acquired
authority to enact an ordinance of the same nature pursuant to the Local
Autonomy Act, enacted Ordinance 11 (series of 1960), Eusebio and Remedios
Villaniueva assailed the ordinance anew.
Issue: Whether Ordinance 11 violate the rule of uniformity of taxation.

Held: The Court has ruled that tenement houses constitute a distinct class of
property; and that taxes are uniform and equal when imposed upon all
property of the same class or character within the taxing authority. The fact
that the owners of the other classes of buildings in Iloilo are not imposed
upon by the ordinance, or that tenement taxes are imposed in other cities do
not violate the rule of equality and uniformity. The rule does not require that
taxes for the same purpose should be imposed in different territorial
subdivisions at the same time. So long as the burden of tax falls equally and
impartially on all owners or operators of tenement houses similarly classified
or situated, equality and uniformity is accomplished. The presumption that
tax statutes are intended to operate uniformly and equally was not
overthrown herein.

QUEZON CITY vs. ABS-CBN BROADCASTING CORPORATION

FACTS:
ABS-CBN was granted a franchise which provides that it shall pay a 3%
franchise tax and the said percentage tax shall be in lieu of all taxes on this
franchise or earnings thereof. It thus filed a complaint against the
imposition
of
local
franchise
tax.
ISSUE:
Does the in lieu of all taxes provision in ABS-CBNs franchise exempt it
from
payment
of
the
local
franchise
tax?
HELD:
NO. The right to exemption from local franchise tax must be clearly
established beyond reasonable doubt and cannot be made out of inference
or implications.
The uncertainty over whether the in lieu of all taxes provision pertains to
exemption from local or national taxes, or both, should be construed against
Respondent who has the burden to prove that it is in fact covered by the
exemption claimed. Furthermore, the in lieu of all taxes clause in
Respondents franchise has become ineffective with the abolition of the
franchise tax on broadcasting companies with yearly gross receipts
exceeding P10 million as they are now subject to the VAT.

PETRON CORP. vs. MAYOR TOBIAS M. TIANGCO [G.R. No.

158881. April 16, 2008.]
Facts: Petron maintains a depot or bulk plant at the Navotas Fishport
Complex in Navotas. Petron received a letter from the office of Navotas
Mayor, respondent Toby Tiangco, wherein the corporation was assessed
taxes "relative to the figures covering sale of diesel declared by your Navotas
Terminal from 1997 to 2001." Petron duly filed with Navotas a letter-protest
to the notice of assessment. The letter-protest was denied by the Navotas
Municipal Treasurer,
This was followed by a letter from the Mayor dated 15 May 2002, captioned
"Final Demand to Pay", requiring that Petron pay the assessed amount within
five (5) days from receipt thereof, with a threat of closure of Petron's
operations within Navotas should there be no payment. 5 Petron, through
counsel, replied to the Mayor by another letter posing objections to the
threat of closure. The Mayor did not respond to this last letter. Thus, on 20
May 2002, Petron filed with the Malabon RTC a Complaint for Cancellation of
Assessment for Deficiency Taxes. Malabon RTC rendered its Decision
dismissing Petron's complaint and ordering the payment of the assessed
amount. Eleven days later, Petron received a Closure Order from the Mayor,
directing Petron to cease and desist from operating the bulk plant. Petron
sought a TRO from the Malabon RTC, but this was denied.
Issue/Held: W/N a local government unit is empowered under the Local
Government Code (the LGC) to impose business taxes on persons or entities
engaged in the sale of petroleum product- NO
Ratio: We can concede that a tax on a business is distinct from a tax on the
article itself, or for that matter, that a business tax is distinct from an excise
tax. However, such distinction is immaterial insofar as the latter part of
Section 133 (h) of the Local Government Code is concerned, for the phrase
"taxes, fees or charges on petroleum products" does not qualify the kind of
taxes, fees or charges that could withstand the absolute prohibition imposed
by the provision. It would have been a different matter had Congress, in
crafting Section 133 (h), barred "excise taxes" or "direct taxes", or any
category of taxes only, for then it would be understood that only such
specified taxes on petroleum products could not be imposed under the
prohibition. The absence of such a qualification leads to the conclusion that
all sorts of taxes on petroleum products, including business taxes, are

prohibited by Section 133 (h). Where the law does not distinguish, we should
not distinguish.
1. Pepsi Cola v. City of Butuan , 24 SCRA 789 (1968) Ordinance impose
business tax only on local agents of outside dealers. Ultra vires.
2. In Petron Corp v Mayor Tobias Tiangco of Navotas, GR 158881 Apr 16,
2008, where the issue is whether sale of petroleum products may be
subject to business taxes under Navotas tax ordinance issued pursuant
to Sec 143 of LGC or is it exempt under Sec 133(h) of LGC and Art
232(h) of the IRR, the SC ruled that it is exempt.

3. Villanueva v. City of Iloilo, 26 SCRA 578 (Dec 1968) Business tax on

tenement not real property tax; no double taxation; penalty allowed.
4. Progressive Dev. Corp v. Quezon City, GR 36081 Apr 24, 1989 - 5% tax
imposed in Ordinance No. 9236 constitutes, not a tax on income, not a
city income tax (as distinguished from the national income tax
imposed by the National Internal Revenue Code) within the meaning of
Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee
for the regulation of the business in which the petitioner is engaged.
5. PLDT v. City of Bacolod, 463 SCRA 528 (GR149179 Jul 15 2005)
Franchise Tax in lieu of all other taxes
6. Allied Thread Co. and Ker & Co. v. City of Manila, 133 SCRA 338
7. National Development Company v. Cebu City, 215 SCRA 382. Sec.
133(0) Tax exemption of property of the Rep of the Phil refers to
properties owned by the gov and its agencies which do not have
separate legal personalities
8. Sps Tan v Bantegui GR554027 Oct 24, 2005 - The auction sale of real
property for the collection of delinquent taxes is in personam, not in
rem.
9. Ericson v City of Pasig, GR 176667 Nov 22, 2007 Basis of local taxes
is Gross Receipts per the local tax code. It cannot be Gross Income.
10.
Allied Bank v QC GR 154126 Oct 11, 2005 Basis of RPT per
Ordinance was the Deed of Sale instead of the General Revision Values

null and void; Prohibition does not lie because there are other
remedies; SC not trier of facts
11.
Smart Communications v City of Davao GR 155491 Sep 16, 2008
Smart is subject to Franchise Tax imposed by the Tax Code of Davao
City pursuant to Sec 137 and 151 of LGC despite the provision of its
franchise that the franchise tax imposed therein is in lieu of all other
taxes. This phrase refers to national taxes and not to local taxes.
Unlike in Globes franchise which covers both national and local taxes.
Note: Smart is now subject to VAT, Income tax, local taxes and real
property tax. VAT has replaced the Franchise Tax imposed under
Telecom franchises.
12.
Quezon City v ABS CBN Broadcasting GR 166408 Oct 6, 2008 is
the provision in its franchise issued after the enactment of the LGC
withdrawing exemptions that the 3% franchise tax is lieu of all other
taxes, except income, exempts it from the 3% franchise tax? The
present controversy essentially boils down to a dispute between the
inherent taxing power of Congress and the delegated authority to tax
of local governments under the 1987 Constitution and effected under
the LGC of 1991. Congress has the inherent power to tax, which
includes the power to grant tax exemptions. On the other hand, the
power of Quezon City to tax is prescribed by Section 151 in relation to
Section 137 of the LGC which expressly provides that notwithstanding
any exemption granted by any law or other special law, the City may
impose a franchise tax. It must be noted that Section 137 of the LGC
does not prohibit grant of future exemptions. As earlier discussed, this
Court
in
City
Government
of
Quezon
City
v.
Bayan
Telecommunications, Inc. sustained the power of Congress to grant tax
exemptions over and above the power of the local governments
delegated power to tax. The more pertinent issue now to consider is
whether or not by passing R.A. No. 7966, which contains the in lieu of
all taxes provision, Congress intended to exempt ABS-CBN from local
franchise tax. The basis for the rule on strict construction to statutory
provisions granting tax exemptions or deductions is to minimize
differential treatment and foster impartiality, fairness and equality of
treatment among taxpayers. In sum, ABS-CBNs claims for exemption
must fail on twin grounds. First, the in lieu of all taxes clause in its
franchise failed to specify the taxes the company is sought to be
exempted from. Neither did it particularize the jurisdiction from which
the taxing power is withheld. Second, the clause has become functus

officio because as the law now stands, ABS-CBN is no longer subject to

a franchise tax. It is now liable for VAT.