Ferremaro, Inc., a manufacturer of handcrafted shoes, maintains its principal office in Cubao, Quezon City. It has branches/sales offices in Cebu and Davao. Its factory is located in Marikina City where most of its workers live. Its principal office in Quezon City is also a sales office.
Sales of finished products for calendar year 2009 in the amount of P10 million were made at the following locations:
i) Cebu branch
25%
ii) Davao branch
15%
iii) Quezon City branch
60%
Total
100%
Where should the applicable local taxes on the shoes be paid? Explain. (3%)
Suggested answer only. Not an official answer and not legal advice.
Local business taxes shall be paid to Cebu (25%), Davao (15%), Quezon City (18%), and Marikina City (42%). Under Sec. 150, LGC, sales made by a branch or sales outlet accrue to its location. For sales recorded
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Quick check
Under Section 150 of the Local Government Code, where are sales made at a branch or sales outlet taxable?
Section 150 of the Local Government Code dictates that sales made by a branch or sales outlet accrue to the city or municipality where it is located.
When a manufacturer records sales at its principal office but operates its factory in a different city, what percentage of those sales is taxable by the principal office location?
Under Section 150 of the LGC, thirty percent of sales recorded at the principal office is taxable by the local government unit of the principal office.
What percentage of sales recorded at a principal office is taxable by the municipality or city where the manufacturing factory is located?
Section 150 of the Local Government Code allocates seventy percent of principal office sales to the location of the factory or plant.
In the case of Ferremaro, Inc., what proportion of the 60% sales made at the Quezon City principal office is taxable in Marikina City where its factory is located?
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Which local government unit is entitled to tax the 25% sales made by Ferremaro, Inc.'s Cebu branch?
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Learn more about these topics
1. Branch Sales Allocation
Under Section 150 of the Local Government Code, all sales made by a branch, sales outlet, or warehouse of a business entity accrue to the city or municipality where such branch or sales outlet is located. Local business tax on those specific sales must be paid entirely to the local government unit having jurisdiction over that branch.
2. Principal Office Allocation
When sales are recorded at the principal office of a manufacturer or producer whose factory, project office, or plant is situated in another municipality or city, the gross sales are split by operation of law. Thirty percent of the gross sales is taxable by the local government unit where the principal office is located.
3. Factory Sales Allocation
Seventy percent of the sales recorded at the principal office is allocated and taxable by the city or municipality where the factory or manufacturing plant is located. If a manufacturer maintains its principal office in one city and its factory in another, local business taxes are apportioned between both local government units accordingly.