The Court of Tax Appeals (CTA) has affirmed a trial court’s ruling that Aeon Fantasy Group Philippines, Inc., the firm that operates the indoor play area Kidzoona, is not liable to pay amusement taxes to the Quezon City government.

The tax court ruled: Municipal ordinances are inferior in status and subordinate to the laws of the State. In case of conflict between an ordinance and a statute, the ordinance must be set aside.”

The legal issue arose when on Sept. 9, 2019 inspectors of the Amusement Tax Evaluation, Assessment and Monitoring (TEAM) Unit of the Quezon City Treasurer's Office served a notice against Aeon on non-payment of monthly amusement taxes on its gross receipts from Kidzoona SM North Edsa branch from January to August 2019 in the amount P697,930.29.

The notice was questioned by Aeon. It filed on Aug. 20, 2020 a petition for review before the RTC praying for the cancellation and withdrawal of the assessment for alleged deficiency amusement taxes.

The case was eventually ruled in favor of Aeon by the Quezon City regional trial court (RTC). The Quezon City Treasurer's Office filed a petition for review before the CTA and argued that the RTC erred when it ruled that Kidzoona is not an amusement place and not liable to pay amusement tax.

In a decision issued last June 27, the CTA denied for lack of merit the petition of the Quezon City Treasurer's Office and stressed that Kidzoona is not considered an amusement place under Section 131(c) of the Local Government Code (LGC).

The QC Treasurer's Office argued that Kidzoona falls under the definition fun houses under Section 3 and Section 39, Article 15 of the QC Revenue Code and, thus, liable for 30 percent amusement tax.

But the CTA disagreed. It said that Aeon's Articles of Incorporation state that its primary purpose is to engage in the business of developing and operating indoor playgrounds and/or theme parks, including facilities for different rides and games.

The tax court said: Respondent's Kidzoona stores do not belong to the same category or class as theaters, cinemas, concert halls, circuses, boxing stadia and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performances, as contemplated by Section 131(c) of the LGC.

The 14-page decision was written by Associate Justice Ma. Belen M. Ringpis-Liban with the concurrence of Associate Justices Maria Rowena Modesto-San Pedro and Corazon G. Ferrer-Flores.