The City of Makati assessed and collected 1% tax based on preceding year’s gross sales from all business establishments selling liquor, wine, spirits, and beer pursuant to Section 15 (Tax on Wholesalers, Distributors, or Dealers) or Section 17 (Tax on Retailers) pursuant to the new Makati Revenue Code. At the same time, the City of Makati imposed a business tax pursuant to Section 21 of the new Makati Revenue Code as a condition for the renewal of business licenses for the year 2026. Section 21 of the new Makati Revenue Code stated: “Section 21. Tax on Business Subject to the Excise, Value-Added or Percentage Taxes under the NIRC – On any of the following businesses and articles of commerce subject to the excise, value-added or percentage taxes under the National Internal Revenue Code, hereinafter referred to as NIRC, as amended, a tax of 50% of 1% per annum on the gross sales or receipts of the preceding calendar year is hereby imposed: A) On [a] person who sells goods and services in the course of trade or businesses; x x x PROVIDED, that all registered businesses in the City of Makati already paying the aforementioned tax shall be exempted from payment thereof.” On January 5, 2026, Platinum Grocery, Inc. (Platinum) paid the 1% tax as a retailer under Section 17 of the new Makati Revenue Code. To secure its 2026 business permit renewal, Platinum reluctantly paid under protest the assessed business tax under Section 21 of the new Makati Revenue Code. Platinum was advised by the Business Permit and Licensing Office that it can file a protest or refund pursuant to the relevant provisions of the Local Government Code. Is the assessment and collection of business tax under Section 21 of the new Makati Revenue Code valid? Explain.
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No, the assessment and collection of business tax under Section 21 is not valid. Under the Local Government Code (R.A. No. 7160), local taxation must be equitable and uniform. Imposing two local business taxes on the same
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Quick check
Under the Local Government Code (R.A. No. 7160), what constitutes impermissible direct double taxation by a local government unit?
Direct double taxation occurs when the same taxing authority imposes two local business taxes on the same subject matter for the same purpose and period.
Which fundamental principle of local taxation under R.A. No. 7160 is violated when a city assesses duplicate local business taxes on the same gross receipts?
Assessing duplicate local business taxes on identical gross sales violates the statutory mandate that local taxation must be uniform, equitable, and not oppressive.
A retail company pays a 1% local business tax as a retailer based on its gross sales under Section 17 of a city revenue code. The city subsequently assesses an additional business tax under Section 21 on the exact same gross sales for the same year. Is the second assessment valid?
Imposing an additional local business tax on identical gross sales for the same period by the same local government unit constitutes void direct double taxation.
Under the Local Government Code, what legal remedy is available to a taxpayer who paid an invalid local business tax under protest?
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What is an essential element required to establish direct double taxation in local revenue assessment?
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1. Double Taxation
Under Philippine tax law, direct double taxation occurs when the same taxing authority imposes two taxes on the same subject matter, for the same purpose, within the same tax period, and of the same character. While double taxation is not constitutionally prohibited per se, direct duplicate taxation by a local government unit violates fundamental statutory principles under the Local Government Code. Local taxation must be uniform, equitable, and neither unjust nor oppressive. When a city assesses two separate local business taxes on identical gross receipts for the same tax year, the duplicate assessment constitutes impermissible direct double taxation.
2. Local Taxing Power
Under the Local Government Code, local government units may levy local business taxes on wholesalers, distributors, and retailers based on gross sales or receipts. However, local taxing power is strictly circumscribed by law. Local tax ordinances cannot impose taxes that are unjust, excessive, oppressive, or contrary to declared national policy. Once a commercial enterprise satisfies the prescribed local business tax applicable to its business classification, the local government cannot assess an additional business tax on that exact same gross revenue under a secondary code provision.
3. Local Tax Refunds
Under the Local Government Code, a taxpayer paying an invalid local tax under protest may seek a refund or tax credit from the local treasurer within two years from payment. Local tax assessments must strictly adhere to statutory authority, and revenues collected without legal basis or in violation of statutory limits must be returned. If the local treasurer denies the protest or fails to act within sixty days, the aggrieved taxpayer may file an appeal before the regional trial court to recover the unlawfully collected tax together with legal interest.