XYZ Shipping Corporation is a branch of an international shipping line with voyages between Manila and the West Coast of the U.S. The company’s vessels load and unload cargoes at the Port of Manila, albeit it does not have a branch or sales office in Manila. All the bills of lading and invoices are issued by the branch office in Makati which is also the company’s principal office.
The City of Manila enacted an ordinance levying a 2% tax on gross receipts of shipping lines using the Port of Manila.
Can the City Government of Manila legally impose said levy on the corporation? Explain. (3%)
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No, the City Government of Manila cannot legally impose the 2% gross receipts tax on XYZ Shipping Corporation. Under Sec. 133(j) of the LGC, the taxing powers of local government units do not extend to the levy of taxes,
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Quick check
Under Section 133(j) of the Local Government Code, what limitation is imposed on local government units regarding common carriers?
Section 133(j) of the LGC explicitly prohibits local government units from levying taxes on gross receipts of common carriers.
Why is the City of Manila prohibited from imposing a two percent gross receipts tax on XYZ Shipping Corporation?
Common carriers are exempt from local gross receipts tax because such taxation is reserved for the national government.
Which entity possesses the statutory authority to levy taxes on the gross receipts of international shipping lines?
Taxing power over the gross receipts of common carriers is reserved exclusively to the national government.
What is the legal status of a local city ordinance that levies a gross receipts tax on transportation contractors or common carriers?
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Under Section 133 of the Local Government Code, which of the following is excluded from the taxing power of local government units?
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Learn more about these topics
1. Local Taxing Limitations
Under Section 133(j) of the Local Government Code, the taxing authority of local government units is subject to explicit statutory limitations. Local government units are expressly prohibited from levying taxes, fees, or charges on the gross receipts of common carriers by air, land, or water, as well as transportation contractors, regardless of where their operations or ports are situated.
2. Common Carrier Taxation
Gross receipts derived by common carriers engaged in domestic or international transportation are reserved exclusively for national taxation by the national government under the National Internal Revenue Code. Because common carriers pay a national percentage tax or value-added tax on their gross receipts, local government units cannot impose supplementary local business taxes or gross receipts levies upon them.
3. Ordinance Tax Validity
A local tax ordinance enacted by a municipal or city council that attempts to impose a gross receipts tax on common carriers using local ports or roads is ultra vires and void. Local ordinances cannot expand local taxing powers beyond the statutory boundaries established under the Local Government Code, making any tax assessment issued pursuant to such illegal ordinances unenforceable.