5. Pelizloy Realty Corporation V. Province Of Benguet.docx

PELIZLOY REALTY CORPORATION vs. PROVINCE OF BENGUET GR No. 183137 – April 10, 2013 – Leonen DOCTRINE: 1. The power to tax “is an attribute of sovereignty,” and as such, inheres in the State. Such, however, is not true for provinces, cities, municipalities and barangays as they are not the sovereign; rather, they are mere “territorial and political subdivisions of the Republic of the Philippines. The charter or statute must plainly show an intent to confer that power or the municipality, cannot assume it. 2. 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 Local Government Code and which may properly be subject to amusement taxes. FACTS:  

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Pelizloy Realty Corporation (petitioner) owns Palm Grove Resort, which is designed for recreation and which has facilities like swimming pools, spa, among others. 8 December 2005: Prov. Board of respondent approved Prov. Tax Ordinance 05-107 (Benguet Revenue Code). o Sec. 59, Art. X thereof provides a levy of 10% amusement tax, on gross receipt from admission to “resorts, swimming pools, bath houses, hot springs and tourist sports.” 27 January 2006: Petitioner filed an appeal/petition before the Secretary of Justice arguing that the imposition of such amusement tax is an ultra vires act on the part of the Prov. of Benguet; thus, it filed an appeal/petition before the Sec. of Finance. Treating the Secretary of Finance’s failure to decide the matter within the 60 days as required by Sec. 187 (LGC) as an implied denial, petitioner filed a petition of declaratory relief before the RTC, arguing therein that Sec. 59, Art. X of the BRC is in violation of the limitation on the taxing power of LGUs under Sec. 133 (i) of the LGC, hence, null and void.

RTC: dismissed the petition for lack of merit. It noted that the LGC does not prohibit the imposition by LGUs of percentage taxes in general but the “imposition & levy of percentage tax on sales, barter, etc, on goods and services only.” 

ISSUE: 1. 2.

HELD: 1.

Petitioner posits that Sec. 59, Art. X of the Tax Ordinance levies a prohibited percentage tax as per Sec. 133 (i) of the LGC and that its swimming pools, spa, among others, are not covered by amusement taxes.

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.  The power to tax “is an attribute of sovereignty,” and as such, inheres in the State. Such, however, is not true for provinces, cities, municipalities and barangays as they are not the sovereign; rather, they are mere “territorial and political subdivisions of the Republic of the Philippins. The charter or statute must plainly show an intent to confer that power or the municipality, cannot assume it. Sec. 133 of the LGC provides for the common limitations on the taxing powers of LGUs.  Paragraph (i) of said provision prohibits the levy by LGUs of percentage or VAT on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided by the LGC. Percentage tax  Defined as a “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”  The NIRC lists amusement taxes as among the other percentage taxes which are levied regardless of whether or not a taxpayer is already liable to pay VAT. Provinces are not bared from levying amusement taxes even if amusement taxes are a form of percentage tax.  As a general rule, the LGC prohibits the levy of percentage tax “except otherwise provided” by the same code. Sec. 140 expressly allows the imposition by provinces of amusement taxes on the “proprietors, leases, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other place of amusement.” 2.

RESORTS, SWIMMING POOLS, BATH HOUSE, HOT SPRINGS AND TOURIST SPOTS ARE NOT WITHIN THE TERM ‘OTHER PLACES OF AMUSEMENT’

Sec. 131 defines the term “amusement places” as to “include theaters, cinemas, concert halls, circuses and other places of amusement, where one seeks admission to entertain oneself by seeing/viewing the show/performances.” The stated enumerations are bound by common typifying characteristics in that they all are venues primarily for the staging of spectacles or the holding of public shows, exhibitions, performances, and other events meant to be viewed by an audience. Clearly, resorts, swimming pools, bath houses, hot springs and tourist spots cannot be considered venues primarily “where one seeks admission to entertain oneself by seeing /viewing the show/performance.

WON the Province of Benguet may impose percentage taxes. WON provinces are authorized to impose amusement taxes on admission fees to resorts, swimming pools, bath house, hot springs and tourist spots for being “amusement places” under the LGC. NO.

PROVINCES MAY IMPOSE PERCENTAGE TAXES