The Court of Tax Appeals (CTA) has ordered the Valenzuela City government to refund North Luzon Expressway Corporation (NLEX) P3.8 million in erronously collected taxes for taxable years 2012 to 2019.
In a 34-page decision penned by Associate Justice Corazon G. Ferrer-Flores and promulgated last Nov. 18, the CTA ruled that ‘for a city to validly impose the foregoing LBT (local business tax), the situs thereof must be in that city.”
With the ruling, the CTA ordered Valenzuela City "to refund to petitioner (NLEX) the amount of P3,814,290.27, representing erroneously collected and paid Local Business Tax for Signage Services, the related Surcharge & Interest, and Tax Credited, for taxable years 2012 to 2019.”
The tax court granted NLEX's petition for review which assailed the March 13, 2023 decision and May 22, 2023 order of the Caloocan City Regional Trial Court (RTC) Branch 121 that denied the corporation’s civil case on the annulment of the assessment of local business taxes.
In its ruling, the CTA stated the Local Government Code (LGC) of 1991 provides that “when a contractor maintains or operates a branch, sales outlet or warehouse elsewhere, the recording of the sale shall be made in such branch, sales outlet or warehouse, and the corresponding business tax shall accrue and be paid to the municipality or city where the same branch, sales outlet or warehouse is located."
“However, in case there is no such a branch sales outlet or warehouse in the city or municipality where the sale or transaction was made, the sale shall be duly recorded in the principal office of the contractor and the business tax shall accrue to the city where the said principal is located,” the court pointed out.
The CTA said “offices used only as display areas of the products where no stocks or items are stored for sale, although orders for products may be received thereat, are not branch or sales offices.”
Based on the evidence presented, the tax court said “petitioner has no branch, sales outlet or warehouse in Valenzuela City” and that “all its activities or sales transactions pertaining to the income generated from such installations are consummate and recorded in petitioner’s principal office located in Caloocan City.”
“Taken together the foregoing proves that petitioner has no branch, sales outlet or warehouse in Valenzulela City within the context of Section 143 of LGC of 1991 and that all its activities or sales transactions pertaining to the income generated from such installations are consummated and recorded in petitioner’s principal office located in Caloocan City,” the court pointed out.
“On the other hand, respondents (Valenzuela City and its officials) failed to present evidence to the contrary. Respondents have not shown any evidence to prove that petitioner has a branch, sales or warehouse located in Valenzuela City or is engaged in any sales transactions through a branch or sales outlet in the said city,” it added.