Pelizloy Realty Corporation v. The Province of Benguet Case Digest

Posted

G.R. No. 183137
April 10, 2013

Case Principle

Although municipal corporations have no inherent power of taxation, they can still levy taxes provided they have acted within the bounds prescribed for by Congress.

Facts

Pelizloy Realty Corporation (“Pelizloy”) owns Palm Grove Resort, which has facilities like swimming pools, a spa and function halls. It is located at the Province of Benguet.

Thereafter, the Provincial Board of the Province of Benguet approved a Tax Ordinance which levied a ten percent (10%) amusement tax on gross receipts from admissions to “resorts, swimming pools, bath houses, hot springs and tourist spots.”

With that, Pelizloy filed an appeal/petition before the Secretary of Justice, contending that the imposition of a 10% amusement tax on gross receipts from admission fees for resorts, swimming pools, bath houses, hot springs, and tourist spots is an ultra vires act on the part of the Province of Benguet. However, the Secretary of Justice did not act on the petition, so Pelizloy filed the petition before the RTC who ruled in favor of the Province of Benguet. Hence, this petition before the Supreme Court on pure questions of law.

Pelizloy argued that that Section 59, Article X of the Tax Ordinance imposed a percentage tax in violation of the limitation on the taxing powers of local government units (LGUs) under Section 133 (i) of the LGC. Thus, it was null and void ab initio.

On the other hand, Province of Benguet, citing Section 40 of the LGC, argued that Section 59, Article X of the Tax Ordinance does not levy a percentage tax “because the imposition is not based on the total gross receipts of services of the petitioner but solely and actually limited on the gross receipts of the admission fees collected.” In addition, it argued that provinces can validly impose amusement taxes on resorts, swimming pools, bath houses, hot springs, and tourist spots, these being ‘amusement place.

Issue

Whether or not provinces are authorized to impose amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots for being “amusement places” under the Local Government Code.

Held

NO.

The power to tax “is an attribute of sovereignty,” and as such, inheres in the State. However, municipal corporation unlike a sovereign state is clothed with no inherent power of taxation. Therefore, the power of a province to tax is limited to the extent that such power is delegated to it either by the Constitution or by statute.

Per Section 5, Article X of the 1987 Constitution, “the power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges.” Nevertheless, such authority is “subject to such guidelines and limitations as the Congress may provide”.

As per the statute, Section 133(i) of the Local Government Code provides that prohibits the levy by LGUs of percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided by the LGC.

Percentage taxes are tax measured by a certain percentage of the gross selling price or gross value in money of goods sold, bartered or imported; or of the gross receipts or earnings derived by any person engaged in the sale of services. Furthermore, Section 125 of Republic Act No. 8424, otherwise known as the National Internal Revenue Code (NIRC), in Section 125, lists amusement taxes as among the (other) percentage taxes which are levied regardless of whether or not a taxpayer is already liable to pay value-added tax (VAT). Hence, amusement taxes are percentage taxes.

However, the local government taxes can impose amusement taxes even if it is a percentage tax if such amusement taxes falls under the exception in Section 40 of the LGC (i.e. theaters,cinemas, concert halls etc).

In this case, resorts, swimming pools, bath houses, hot springs, and tourist spots are not among those places expressly mentioned by Section 140 of the LGC as being subject to amusement taxes. Moreover, resorts, swimming pools, bath houses, hot springs and tourist spots do not belong to the same category or class as theaters, cinemas, concert halls, circuses, and boxing stadia. It follows that they cannot be considered as among the ‘other places of amusement’ contemplated by Section 140 of the LGC and which may properly be subject to amusement taxes.

Therefore, second paragraph of Section 59, Article X of the Benguet Provincial Revenue Code of 2005, in so far as it imposes amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs and tourist spots, is declared null and void.

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Categories Taxation