The Court of Tax Appeals (CTA) has denied the petition of the provincial government of Camarines Sur which sought to continue collecting franchise tax from Camarines Sur II Electric Cooperative Inc. (CASURECO II) based in Naga City.

There are four electric cooperatives in Camarines Sur.  The three others are CASURECO I based in Libmanan town, CASURECO III based in Iriga City and CASURECO IV based in Tigaon town.

Both Naga City and Camarines Sur have assessed and collected franchise tax from CASURECO II, the former’s assessment was based on gross receipts earned within the city, while that of the latter’s was based on gross receipts earned from nine towns – Pili, Milaor, Minalabac, Canaman, Magarao, Bombon, Calabanga, Tinambac, and Siruma.

On Sept. 5, 2012, the Supreme Court (SC) affirmed the City of Iriga's power to assess and collect franchise tax based on gross receipts earned within the entire coverage of CASURECO III, specifically the City of Iriga and other covered municipalities of the fifth district of Camarines Sur.

Despite the ruling, the province of Camarines Sur still assessed CASURECO II on May 5, 2017 for franchise taxes for the years covering 2012 to 2016, which CASURECO II made a partial payment to amounting to P323,990.03 and P395,744.37. Naga City also made the same demand for payment of franchise tax.

CASURECO II then entered into a series of talks with both local governments due to conflicting claims on franchise tax. In the end, CASURECO II sent a letter dated Jan. 27, 2020 to the province of Camarines Sur requesting confirmation that it will no longer assess and collect franchise tax on gross receipts earned within the nine municipalities in line with the SC ruling on the Iriga case. However, it was denied by the provincial treasurer of Camarines Sur.

The regional trial court (RTC) Branch 21 of Naga City declared Naga City as the sole local government entitled to CASURECO II's local franchise tax on gross receipts earned within CASURECO II’s entire coverage area.

The issue was later raised to the CTA, with Camarines Sur asserting it is the rightful taxing authority entitled to CASURECO II's local franchise tax.

However, the CTA disagreed.  It said provinces "cannot impose a tax on business enjoying a franchise operating within the territorial jurisdiction of any city located within the province."

Citing Section 137 and 151 of the Local Government Code, the CTA explained that the situs of taxation is the place where the privilege is exercised and "the city in which the franchise holder has its principal office and exercises the said privilege has the power to impose franchise tax on the latter's gross receipts, even when the source thereof is beyond the territorial limits of the said city."

The CTA likewise said that the pronouncements made by the SC are "doctrinal and binding on all other courts."

"There is only one SC from whose decisions all other courts should take their bearings. Thus, whenever applicable, such as in the present case, this Court is bound to apply, and adhere to, the doctrinal pronouncements in the City of Iriga case," it said.

The 15-page decision was written by Associate Justice Catherine T. Manahan with the concurrence of Associate Justice Marian Ivy F. Reyes-Fajardo.