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MobilPhilsvsTreasurerofMkti:154092:July14,2005:J.Quisumbing:FirstDivision:Decision

FIRSTDIVISION

MOBILPHILIPPINES,INC.,
G.R.No.154092
Petitioner,

Present:

Davide,Jr.,C.J.,

(Chairman),
versus
Quisumbing,
YnaresSantiago,
Carpio,and
Azcuna,JJ.

THE CITY TREASURER OF Promulgated:

MAKATI and the CHIEF OF THE
LICENSEDIVISIONOFTHECITY
OFMAKATI,
July14,2005
Respondents.
xx

DECISION

QUISUMBING,J.:
[1]
This petition for review on certiorari seeks the reversal of the Decision dated
November 22, 2001 of the Regional Trial Court of Pasig City, Branch 268, in Civil Case No.
[2]
67599,subsequentlyaffirmedinanOrder datedMay15,2002.
Petitionerisadomesticcorporationengagedinthemanufacturing,importing,exporting
andwholesalingofpetroleumproducts,whilerespondentsarethelocalgovernmentofficialsof
theCityofMakatichargedwiththeimplementationoftheRevenueCodeoftheCityofMakati,
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aswellasthecollectionandassessmentofbusinesstaxes,licensefeesandpermitfeeswithin
[3]
saidcity.
Prior to September 1998, petitioners principal office was at the National Development
CompanyBuilding,in116TordesillasSt.,SalcedoVillage,MakatiCity.OnAugust20,1998,
petitionerfiledanapplicationwiththeCityTreasurerofMakatifortheretirementofitsbusiness
[4]
withintheCityofMakatiasitmoveditsprincipalplaceofbusinesstoPasigCity.
Initsapplication,petitionerdeclareditsgrosssales/receiptsasfollows:
GrossSalesReceiptsforCalendarYear1997

P453,799,493.29

GrossSalesReceiptsforCalendarYear1998
JanuarytoAugust

[5]

267,952,766.67

Uponevaluationofpetitionersapplication,thenOICoftheLicenseDivision,Ms.Jesusa
[6]
E.Cuneta,issuedtopetitioner,abillingslip assessingthefollowingtaxesagainstpetitioner:

Forthe4thQuarterof1998(basedon1997grosssales)
AsManufacturerP14,439.54
AsWholesaler550,778.58
GarbageFee1,250.00
SubTotalP566,468.12

FortheGrossSalesmadein1998
AsManufacturerP40,008.33
AsWholesaler1,291,630.51
SubTotal__1,331,638.84

[7]

TOTALASSESSEDBUSINESSTAXESP1,898,106.96

On September 11, 1998, petitioner paid the assessed amount of P1,898,106.96 under
[8]
protest.TheCityTreasurerissuedthereforOfficialReceiptNo.9065025C andapprovedthe
petitionersapplicationforretirementofbusinessfromMakatitoPasigCity.

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[9]
On July 21, 1999, petitioner filed a claim for P1,331,638.84 refund. On August 11,
[10]
1999,petitionerreceivedaletter
denyingtheclaimforrefundonthegroundthatpetitioner
was merely transferring and not retiring its business, and that the gross sales realized while
petitionerstillmaintainedofficeinMakatifromJanuary1toAugust31,1998shouldbetaxedin
[11]
theCityofMakati.
Petitioner subsequently filed a petition with the Regional Trial Court of Pasig City,
Branch268,seekingtherefundofbusinesstaxeserroneouslycollectedbytheCityofMakati.
InitsDecision,thetrialcourtruledasfollows:
In summary, the pertinent law provides that a person or entity doing business in the
Municipalityshallbesubjecttobusinesstax.Thetaxshallbefixedbythequarter.Theinitialtax
forthequarterinwhichabusinessstartstooperateshallbetwoandonehalfpercent(2%)ofone
percent(1%)ofitscapitalinvestment.Thereafter,thetaxshallbecomputedbasedonthegross
salesorreceiptsoftheprecedingquarter.Inthesucceedingcalendaryear,regardlessofwhenthe
businessstartedtooperate,thetaxshallbebasedonthegrosssalesorreceiptsforthepreceding
calendaryear.ThattaxshallaccrueonthefirstdayofJanuaryofeachyearandpaymentshallbe
madewithinthefirst20daysofJanuaryorofeachsubsequentquarterasthecasemaybe.
Considering therefore that the business tax accrues only on the first day of January as
provided in Sec. 3A.07 and becomes payable within the first 20 days thereof or of each
subsequentquarter,thepaymentsmadebyMobilintheyear1998arethereforepaymentsforthe
businesstaxfor1997whichaccruedinJanuaryof1998andbecamepayablewithinthefirst20
daysofJanuaryorofeachsubsequentquarter.Thus,uponretirementinAugust1998,thetaxes
for said year which should accrue in January 1999 [become] immediately payable before the
applicationforretirementcanbeapproved(Ibid,(g),Sec.3A.08).TheassessmentoftheChiefof
the License Division of Makati is therefore with legal basis and does not constitute double
taxation.
WHEREFORE, premises considered, the instant petition for refund is hereby DENIED
andthecaseisdismissedforlackofmerit.

[12]

SOORDERED.

[13]
Petitioner filed a Motion for Reconsideration
which was denied in an Order dated
May15,2002,hencethisappeal.
Beforeus,petitionerallegesnowthat,
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THE TRIAL COURT ERRED IN HOLDING THAT PETITIONERS BUSINESS TAX

PAYMENTS MADE IN 1998 ARE ACTUALLY PAYMENTS FOR BUSINESS TAXES IN
1997. THIS CONCLUSION IS CONTROVERTED BY MAKATI CITYS REVENUE CODE,

[14]

AND,INFACT,CONSTITUTESDOUBLETAXATION.

Simply stated, the issue is: Are the business taxes paid by petitioner in 1998, business
taxesfor1997or1998?
Accordingtopetitioner,the1997grosssales/revenueismerelythebasisfortheamountof
businesstaxesduefortheprivilegeofcarryingonabusinessintheyearwhenthetaxwaspaid.
Fortheirpart,respondentsarguethatsincelocaltaxes,whichincludebusinesstaxes,are
paideitherwithinthefirsttwentydaysofJanuaryofeachyearorofeachsubsequentquarter,as
thecasemaybe,whatthetaxpayeractuallypaysduringtherecordedcalendaryearisactuallyits
businesstaxfortheprecedingyear.
Prefatorily,itisnecessarytodistinguishbetweenabusinesstaxvisvisanincometax.
Businesstaxesimposedintheexerciseofpolicepowerforregulatorypurposesarepaid
fortheprivilegeofcarryingonabusinessintheyearthetaxwaspaid.Itispaidatthebeginning
of the year as a fee to allow the business to operate for the rest of the year. It is deemed a
prerequisitetotheconductofbusiness.
Income tax, on the other hand, is a tax on all yearly profits arising from property,
professions,tradesoroffices,orasataxonapersonsincome,emoluments,profitsandthelike.
[15]
Itistaxonincome,whethernetorgrossrealizedinonetaxableyear.
Itisdueonorbefore
the15thdayofthe4thmonthfollowingthecloseofthetaxpayerstaxableyearandisgenerally
regardedasanexcisetax,leviedupontherightofapersonorentitytoreceiveincomeorprofits.

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The trial court erred when it said that the payments made by petitioner in 1998 are
payments for business tax incurred in 1997 which only accrued in January 1998. Likewise, it
erred when it ruled that petitioner was still liable for business taxes based on its gross
income/revenueforJanuarytoAugust1998.
Section3A.04oftheMakatiCityRevenueCodestates:
Sec.3A.04. Computation of tax for newlystarted business. In the case of newlystarted
businessunderSec.3A.02,(a),(b),(c),(d),(e),(f),(g),(h),(i),(j),(k),(l),and(m)above,thetax
shallbefixedbythequarter.Theinitialtaxofthequarterinwhichthebusinessstartstooperate
shallbetwoandonehalfpercent(2%)ofonepercent(1%)ofthecapitalinvestment.
In the succeeding quarter or quarters, in cases where the business opens before the last
quarteroftheyear,thetaxshallbebasedonthegrosssalesorreceiptfortheprecedingquarterat
onehalf()oftheratesfixedthereforbythepertinentscheduleinSection3A.02,(a),(b),(c),(d),
(e),(f),(g),(h),(i),(j),(k),(l),and(m).
Inthesucceedingcalendaryear,regardlessofwhenthebusinessstartedtooperate,thetax
shall be based on the gross sales or receipts for the preceding calendar year, or any fraction

[16]

thereofasprovidedinthesamepertinentschedules.

Under the Makati Revenue Code, it appears that the business tax, like income tax, is
computed based on the previous years figures. This is the reason for the confusion. A newly
startedbusinessisalreadyliableforbusinesstaxes(i.e.licensefees)atthestartofthequarter
when it commences operations. In computing the amount of tax due for the first quarter of
operations,thebusinesscapitalinvestmentisusedasthebasis.Forthesubsequentquartersof
the first year, the tax is based on the gross sales/receipts for the previous quarter. In the
followingyear(s),thebusinessisthentaxedbasedonthegrosssalesorreceiptsoftheprevious
year.Thebusinesstaxespaidintheyear1998isfortheprivilegeofengaginginbusinessforthe
sameyear,andnotforhavingengagedinbusinessfor1997.
Uponitstransfer,petitionerwasapparentlysubjectedtoSec.3A.11par.(g)whichstates:
...
(g)Retirementofbusiness.
...
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For purposes thereof, termination shall mean that business operation are stopped
completely.
...
(2)Ifitisfoundthattheretirementorterminationofthebusinessislegitimate,[a]ndthe
taxduetherefrombelessthanthetaxdueforthecurrentyearbasedonthegrosssalesorreceipts,
thedifferenceintheamountofthetaxshallbepaidbeforethebusinessisconsideredofficially

[17]

retiredorterminated.

Basedonthisforegoingprovision,ontheyearanestablishmentretiresorterminatesits
businesswithinthemunicipality,itwouldberequiredtopaythedifferenceintheamountifthe
taxcollected,basedonthepreviousyearsgrosssalesorreceipts,islessthantheactualtaxdue
basedonthecurrentyearsgrosssalesorreceipts.
For the year 1998, petitioner paid a total of P2,262,122.48 to the City Treasurer of
[18]
Makati
as business taxes for the year 1998. The amount of tax as computed based on
petitionersgrosssalesfor1998isonlyP1,331,638.84.Sincetheamountpaidismorethanthe
amountcomputedbasedonpetitionersactualgrosssalesfor1998,petitioneruponitsretirement
is not liable for additional taxes to the City of Makati. Thus, we find that the respondent
erroneously treated the assessment and collection of business tax as if it were income tax, by
rendering an additional assessment of P1,331,638.84 for the revenue generated for the year
1998.
WHEREFORE, the assailed Decision is hereby REVERSED and respondents City
Treasurer and Chief of the License Division of Makati City are ordered to REFUND to
petitionerbusinesstaxespaidintheamountofP1,331,638.84.Costsagainstrespondents.
SOORDERED.

LEONARDOA.QUISUMBING
AssociateJustice
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WECONCUR:

HILARIOG.DAVIDE,JR.
ChiefJustice
Chairman

CONSUELOYNARESSANTIAGOANTONIOT.CARPIO
AssociateJusticeAssociateJustice

ADOLFOS.AZCUNA
AssociateJustice

CERTIFICATION

PursuanttoSection13,ArticleVIIIoftheConstitution,itisherebycertifiedthattheconclusions
intheaboveDecisionwerereachedinconsultationbeforethecasewasassignedtothewriterof
theopinionoftheCourtsDivision.

HILARIOG.DAVIDE,JR.
ChiefJustice

[1]
Rollo,pp.4955.PennedbyJudgeAmeliaC.Manalastas.
[2]
Id.at6465.
[3]
Id.at9.
[4]
Id.at10.
[5]
Id.at44.
[6]
Id.at40.
[7]
Supra,note5.
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[8]
Id.at42.
[9]
Id.at4347.
[10]
Id.at48.
[11]
Id.at1112.
[12]
Id.at5455.
[13]
Id.at5663.
[14]
Id.at13.
[15]
TeodoroandDeLeon,THELAWONINCOMETAXATION,p.6(11th ed.2001)citing61C.J.S.1559and27AmJur.308.
[16]
Rollo,p.14.
[17]
Id.at5254.
[18]
P1,695,654.36forthefirsttothethirdquarterof1998plustheassessedamountofP566,468.12forthefourthquarterof1998,
paidonSeptember11,1998.

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