TAXATION

ST 01 - LOCAL BUSINESS TAX

LECTURE NOTES

PROVINCES for the preceding calendar year, or any fraction

thereon, as provided herein.
A. Tax on Transfer of Real Property Ownership.
(SEC. 135, LGC) D. TAX ON SAND, GRAVEL AND OTHER QUARRY
RESOURCES (SEC. 138, LGC)
The province may impose a tax on the sale , donation,
barter, or on any other mode of transferring ownership The province may levy and collect not more than ten
or title of real property at the rate of not more than percent (10%) of fair market value in the locality per
fifty percent (50%) of the one percent (1%) of the cubic meter of ordinary stones, sand, gravel, earth,
total consideration involved in the acquisition of the and other quarry resources, as defined under the
property or of the fair market value in case the National Internal Revenue Code, as amended,
monetary consideration involved in the transfer is not extracted from public lands or from the beds of seas,
substantial, whichever is higher. The sale, transfer or lakes, rivers, streams, creeks, and other public waters
other disposition of real property pursuant to R.A. No. within its territorial jurisdiction.
6657 shall be exempt from this tax.
The permit to extract sand, gravel and other quarry
It shall be the duty of the seller, donor, transferor, resources shall be issued exclusively by the provincial
executor or administrator to pay the tax herein governor, pursuant to the ordinance of the
imposed within sixty (60) days from the date of the sangguniang panlalawigan.
execution of the deed or from the date of the
decedent's death. E. PROFESSIONAL TAX (SEC. 139, LGC)

B. TAX ON BUSINESS OF PRINTING AND The province may levy an annual professional tax on
PUBLICATION (SEC. 136, LGC) each person engaged in the exercise or practice of his
profession requiring government examination at such
The province may impose a tax on the business of amount and reasonable classification as the
persons engaged in the printing and/or publication of sangguniang panlalawigan may determine but shall in
books, cards, posters, leaflets, handbills, certificates, no case exceed Three hundred pesos (P300.00).
receipts, pamphlets, and others of similar nature, at a
rate not exceeding fifty percent (50%) of one percent Every person legally authorized to practice his
(1%) of the gross annual receipts for the preceding profession shall pay the professional tax to the
calendar year. province where he practices his profession or where he
maintains his principal office in case he practices his
In the case of a newly started business, the tax shall profession in several places: Provided, however, That
not exceed one-twentieth (1/20) of one percent (1%) such person who has paid the corresponding
of the capital investment. In the succeeding calendar professional tax shall be entitled to practice his
year, regardless of when the business started to profession in any part of the Philippines without being
operate, the tax shall be based on the gross receipts subjected to any other national or local tax, license, or
for the preceding calendar year, or any fraction fee for the practice of such profession.
thereof, as provided herein.
Any individual or corporation employing a person
The receipts from the printing and/or publishing of subject to professional tax shall require payment by
books or other reading materials prescribed by the that person of the tax on his profession before
Department of Education, Culture and Sports as school employment and annually thereafter.
texts or references shall be exempt from the tax
herein imposed. The professional tax shall be payable annually, on or
before the thirty-first (31st) day of January. Any
C. FRANCHISE TAX (SEC. 137, LGC) person first beginning to practice a profession after
the month of January must, however, pay the full tax
Notwithstanding any exemption granted by any law or before engaging therein. A line of profession does not
other special law, the province may impose a tax on become exempt even if conducted with some other
businesses enjoying a franchise, at the rate not profession for which the tax has been paid.
exceeding fifty percent (50%) of one percent (1%) of Professionals exclusively employed in the government
the gross annual receipts for the preceding calendar shall be exempt from the payment of this tax.
year based on the incoming receipt, or realized, within
its territorial jurisdiction. Any person subject to the professional tax shall write
in deeds, receipts, prescriptions, reports, books of
In the case of a newly started business, the tax shall account, plans and designs, surveys and maps, as the
not exceed one-twentieth (1/20) of one percent (1%) case may be, the number of the official receipt issued
of the capital investment. In the succeeding calendar to him.
year, regardless of when the business started to
operate, the tax shall be based on the gross receipts

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 40,000.00 or more 50,000.00 825.00
F. AMUSEMENT TAX (SEC. 140, LGC) but less than
50,000.00 or more 75,000.00 1,320.00
The province may levy an amusement tax to be but less than
collected from the proprietors, lessees, or operators of 75,000.00 or more 100,000.00 1,650.00
theaters, cinemas, concert halls, circuses, boxing but less than
stadia, and other places of amusement at a rate of not 100,000.00 or 150,000.00 2,200.00
more than thirty percent (30%) of the gross receipts more but less than
from admission fees. 150,000.00 or 200,000.00 2,750.00
more but less than
In the case of theaters or cinemas, the tax shall first 200,000.00 or 300,000.00 3,850.00
be deducted and withheld by their proprietors, more but less than
lessees, or operators and paid to the provincial 300,000.00 or 500,000.00 5,500.00
treasurer before the gross receipts are divided more but less than
between said proprietors, lessees, or operators and 500,000.00 or 750,000.00 8,000.00
the distributors of the cinematographic films. more but less than
750,000.00 or 1,000,000.00 10,000.00
The holding of operas, concerts, dramas, recitals,
more but less than
painting and art exhibitions, flower shows, musical
1,000,000.00 or 2,000,000.00 13,750.00
programs, literary and oratorical presentations, except
more but less than
pop, rock, or similar concerts shall be exempt from the
2,000,000.00 or 3,000,000.00 16,500.00
payment of the tax hereon imposed.
more but less than
3,000,000.00 or 4,000,000.00 19,000.00
G. ANNUAL FIXED TAX FOR EVERY DELIVERY
more but less than
TRUCK OR VAN OF MANUFACTURERS OR
4,000,000.00 or 5,000,000.00 23,100.00
PRODUCERS, WHOLESALERS OF, DEALERS, OR
RETAILERS IN, CERTAIN PRODUCTS (SEC. 141, more but less than
LGC) 5,000,000.00 or 6,500,000.00 24,375.00
more but less than
The province may levy an annual fixed tax for every 6,000,000.00 or at a rate not
truck, van or any vehicle used by manufacturers, more exceeding
producers, wholesalers, dealers or retailers in the thirty-
delivery or distribution of distilled spirits, fermented seven and a
liquors, soft drinks, cigars and cigarettes, and other half percent
products as may be determined by the sangguniang (37½%)
panlalawigan, to sales outlets, or consumers, whether of one percent
directly or indirectly, within the province in an amount (1%)
not exceeding Five hundred pesos (P500.00).

MUNICIPALITIES b) On wholesalers, distributors, or dealers in any

article of commerce of whatever kind or nature in
A. SCOPE OF TAXING POWERS (SEC. 142, LGC) accordance with the following schedule:

Except as otherwise provided in this Code, With gross Amount of Tax

municipalities may levy taxes, fees, and charges not sales or Per Annum
otherwise levied by provinces. receipts for
the preceding
B. TAX ON BUSINESS (SEC. 143, LGC) calendar year
in the amount
The municipality may impose taxes on the following of:
businesses: Less than 18.00
1,000.00
a) On manufacturers, assemblers, repackers, P1,000.00 or P2,000.00 33.00
processors, brewers, distillers, rectifiers, and more but less
compounders of liquors, distilled spirits, and wines than
or manufacturers of any article of commerce of 2,000.00 or 3,000.00 50.00
whatever kind or nature, in accordance with the more but less
following schedule: than
3,000.00 or 4,000.00 72.00
With gross sales or Amount more but less
receipts for the of Tax Per than
preceding calendar Annum 4,000.00 or 5,000.00 100.00
year in the amount more but less
of: than
Less than 165.00 5,000.00 or 6,000.00 121.00
P10,000.00 more but less
P10,000.00 or 15,000.00 220.00 than
more but less than 6,000.00 or 7,000.00 143.00
15,000.00 or more 20,000.00 202.00 more but less
but less than than
20,000.00 or more 30,000.00 440.00 7,000.00 or 8,000.00 165.00
but less than more but less
30,000.00 or more 40,000.00 660.00 than
but less than

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 8,000.00 or 10,000.00 187.00 8) Cement.
more but less
than d) On retailers
10,000.00 or 15,000.00 220.00
more but less With gross sales or Rate of
than receipts or the preceding Tax per
15,000.00 or 20,000.00 275.00 calendar year of: annum
more but less P400,000.00 or less 2%
than more than P400,000.00 1%
20,000.00 or 30,000.00 330.00
more but less Provided, however, That barangays shall have the
than exclusive power to levy taxes, as provided under
30,000.00 or 40,000.00 440.00 Section 152 hereof, on gross sales or receipts of
more but less the preceding calendar year of Fifty thousand
than pesos (P50,000.00) or less, in the case of cities,
40,000.00 or 50,000.00 660.00 and Thirty thousand pesos (P30,000.00) or less, in
more but less the case of municipalities.
than
50,000.00 or 75,000.00 990.00 e) On contractors and other independent contractors,
more but less in accordance with the following schedule:
than With gross sales Amount of Tax
75,000.00 or 100,000.00 1,320.00 or receipts for Per Annum
more but less the preceding
than calendar year in
100,000.00 or 150,000.00 1,870.00 the amount of:
more but less Less than 27.50
than 5,000.00
150,000.00 or 200,000.00 2,420.00 P5,000.00 or P10,000.00 61.60
more but less more but less
than than
200,000.00 or 300,000.00 3,300.00 10,000.00 or 15,000.00 104.50
more but less more but less
than than
300,000.00 or 500,000.00 4,400.00 15,000.00 or 20,000.00 165.00
more but less more but less
than than
500,000.00 or 750,000.00 6,600.00 20,000.00 or 30,000.00 275.00
more but less more but less
than than
750,000.00 or 1,000,000.00 8,800.00 30,000.00 or 40,000.00 385.00
more but less more but less
than than
1,000,000.00 2,000,000.00 10,000.00 40,000.00 or 50,000.00 550.00
or more but more but less
less than than
2,000,000.00 at a rate not 50,000.00 or 75,000.00 880.00
or more exceeding more but less
fifty than
percent 75,000.00 or 100,000.00 1,320.00
(50%) of more but less
one than
percent 100,000.00 or 150,000.00 1,980.00
(1%). more but less
than
c) On exporters, and on manufacturers , millers, 150,000.00 or 200,000.00 2,640.00
producers, wholesalers, distributors, dealers or more but less
retailers of essential commodities enumerated than
hereunder at a rate not exceeding one-half (½) of 200,000.00 or 250,000.00 3,630.00
the rates prescribed under subsection (a), (b) and more but less
(d) of this Section: than
1) Rice and corn; 250,000.00 or 300,000.00 4,620.00
2) Wheat or cassava flour, meat, dairy products, more but less
locally manufactured, processed or preserved than
food, sugar, salt and other agricultural, marine, 300,000.00 or 400,000.00 6,160.00
and fresh water products, whether in their more but less
original state or not; than
3) Cooking oil and cooking gas; 400,000.00 or 500,000.00 8,250.00
4) Laundry soap, detergents, and medicine; more but less
5) Agricultural implements. equipment and post- than
harvest facilities, fertilizers, pesticides, 500,000.00 or 750,000.00 9,250.00
insecticides, herbicides and other farm inputs; more but less
cdt than
6) Poultry feeds and other animal feeds;
7) School supplies; and
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 750,000.00 or 1,000,000.00 10,250.00 the tax shall be computed on the combined total gross
more but less sales or receipts of the said two (2) or more related
than businesses.
1,000,000.00 or 2,000,000.00 11,500.00 In cases where a person conducts or operates two (2)
more but less or more businesses mentioned in Section 143 of this
than Code which are subject to different rates of tax, the
2,000,000.00 or at a rate gross sales or receipts of each business shall be
more not separately reported for the purpose of computing the
exceeding tax due from each business.
fifty
percent F. FEES AND CHARGES
(50%)
of one The municipality may impose and collect such
percent reasonable fees and charges on business and
(1%) occupation and, except as reserved to the province in
Section 139 of this Code, on the practice of any
f) On banks and other financial institutions, at a rate profession or calling, commensurate with the cost of
not exceeding fifty percent (50%) of one percent regulation, inspection and licensing before any person
(1%) on the gross receipts of the preceding may engage in such business or occupation, or
calendar year derived from interest, commissions practice such profession or calling.
and discounts from lending activities, income from
financial leasing, dividends, rentals on property G. FEES FOR SEALING AND LICENSING OF WEIGHTS
and profit from exchange or sale of property, AND MEASURES
insurance premium.
The municipality may levy fees for the sealing and
g) On peddlers engaged in the sale of any licensing of weights and measures at such reasonable
merchandise or article of commerce, at a rate not rates as shall be prescribed by the sangguniang
exceeding Fifty pesos (P50.00) per peddler bayan.
annually.
The sangguniang bayan shall prescribe the necessary
h) On any business, not otherwise specified in the regulations for the use of such weights and measures,
preceding paragraphs, which the sanggunian subject to such guidelines as shall be prescribed by
concerned may deem proper to tax: Provided, the Department of Science and Technology. The
That on any business subject to the excise, value- sanggunian concerned shall, by appropriate ordinance,
added or percentage tax under the National penalize fraudulent practices and unlawful possession
Internal Revenue Code, as amended, the rate of or use of instruments of weights and measures and
tax shall not exceed two percent (2%) of gross prescribe the criminal penalty therefor in accordance
sales or receipts of the preceding calendar year. with the provisions of this Code. Provided, however,
That the sanggunian concerned may authorize the
The sanggunian concerned may prescribe a municipal treasurer to settle an offense not involving
schedule of graduated tax rates but in no case to the commission of fraud before a case therefor is filed
exceed the rates prescribed herein. in court, upon payment of a compromise penalty of
not less than Two hundred pesos (P200.00).
C. RATES OF TAX WITHIN THE METROPOLITAN
MANILA AREA (SEC. 144, LGC) H. FISHERY RENTALS, FEES AND CHARGES

The municipalities within the Metropolitan Manila Area Municipalities shall have the exclusive authority to
may levy taxes at rates which shall not exceed by fifty grant fishery privileges in the municipal waters and
percent (50%) the maximum rates prescribed in the impose rentals, fees or charges therefor in accordance
preceding Section. with the provisions of this Section.

D. RETIREMENT OF BUSINESS (SEC. 145, LGC) The sangguniang bayan may:

1) Grant fishery privileges to erect fish corrals,
A business subject to tax pursuant to the preceding oysters, mussels or other aquatic beds or bangus
sections shall, upon termination thereof, submit a fry areas, within a definite zone of the municipal
sworn statement of its gross sales or receipts for the waters, as determined by it: Provided, however,
current year. If the tax paid during the year be less That duly registered organizations and
than the tax due on said gross sales or receipts of the cooperatives of marginal fishermen shall have the
current year, the difference shall be paid before the preferential right to such fishery privileges:
business is considered officially retired. Provided, further, That the sangguniang bayan
may require a public bidding in conformity with
E. PAYMENT OF BUSINESS TAXES (SEC. 146, LGC) and pursuant to an ordinance for the grant of such
privileges: Provided, finally, That in the absence of
The taxes imposed under Section 143 shall be payable such organizations and cooperatives or their
for every separate or distinct establishment or place failure to exercise their preferential right, other
where business subject to the tax is conducted and parties may participate in the public bidding in
one line of business does not become exempt by being conformity with the above cited procedure.
conducted with some other business for which such 2) Grant the privilege to gather, take or catch bangus
tax has been paid. The tax on a business must be paid fry, prawn fry or kawag-kawag or fry of other
by the person conducting the same. species and fish from the municipal waters by
nets, traps or other fishing gears to marginal
In cases where a person conducts or operates two (2) fishermen free of any rental, fee, charge or any
or more of the businesses mentioned in Section 143 of other imposition whatsoever.
this Code which are subject to the same rate of tax,

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 3) Issue licenses for the operation of fishing vessels
of three (3) tons or less for which purpose the
sangguniang bayan shall promulgate rules and
regulations regarding the issuances of such
licenses to qualified applicants under existing laws.

Provided, however, That the sanggunian concerned

shall, by appropriate ordinance, penalize the use of
explosives, noxious or poisonous substances,
electricity, muro-ami, and other deleterious methods
of fishing and prescribe a criminal penalty therefor in
accordance with the provisions of this Code: Provided,
finally, That the sanggunian concerned shall have the
authority to prosecute any violation of the provisions
of applicable fishery laws.

I. SITUS OF THE TAX

For purposes of collection of the taxes under Section

143 of this Code, manufacturers, assemblers,
repackers, brewers, distillers, rectifiers and
compounders of liquor, distilled spirits and wines,
millers, producers, exporters, wholesalers,
distributors, dealers, contractors, banks and other
financial institutions, and other businesses,
maintaining or operating branch or sales outlet
elsewhere shall record the sale in the branch or sales
outlet making the sale or transaction, and the tax
thereon shall accrue and shall be paid to the
municipality where such branch or sales outlet is
located. In cases where there is no such branch or
sales outlet in the city or municipality where the sale
or transaction is made, the sale shall be duly recorded
in the principal office and the taxes due shall accrue
and shall be paid to such city or municipality.

The following sales allocation shall apply to

manufacturers, assemblers, contractors, producers,
and exporters with factories, project offices, plants,
and plantations in the pursuit of their business:
1) Thirty percent (30%) of all sales recorded in the
principal office shall be taxable by the city or
municipality where the principal office is located;
and
2) Seventy percent (70%) of all sales recorded in the
principal office shall be taxable by the city or
municipality where the factory, project office,
plant, or plantation is located.

In case of a plantation located at a place other than

the place where the factory is located, said seventy
percent (70%) mentioned above shall be divided as
follows:
1) Sixty percent (60%) to the city or municipality
where the factory is located; and
2) Forty percent (40%) to the city or municipality
where the plantation is located.

In cases where a manufacturer, assembler, producer,

exporter or contractor has two (2) or more factories,
project offices, plants, or plantations located in
different localities, the seventy percent (70%) sales
allocation mentioned above shall be prorated among
the localities where the factories, project offices,
plants, and plantations are located in proportion to
their respective volumes of production during the
period for which the tax is due.

The foregoing sales allocation shall be applied

irrespective of whether or not sales are made in the
locality where the factory, project office, plant, or
plantation is located.

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