Case Summary (G.R. No. L-21289)
Key Dates
Enactment of Provincial Tax Ordinance (Benguet Revenue Code of 2005): Approved December 8, 2005; effective January 1, 2006 (Section 162).
Administrative appeal to Secretary of Justice: Filed January 27, 2006 (within 30 days under Section 187, LGC).
Regional Trial Court decision: December 10, 2007 (dismissal of petition).
Supreme Court decision: April 10, 2013 (governing law applied: 1987 Philippine Constitution).
Applicable Law and Definitions
Constitutional basis: 1987 Constitution, Article X, Section 5 (local taxing power subject to congressional guidelines and limitations).
Statutory basis: Republic Act No. 7160 (Local Government Code of 1991), particularly Book II provisions on local taxation: Section 130 (principles), Section 131 (definitions, including “amusement” and “amusement places”), Section 133(i) (common limitations on taxing powers), Section 140 (amusement tax for provinces), and Section 187 (procedure for appeals on constitutionality of local tax ordinances).
National tax regime reference: National Internal Revenue Code (RA 8424), Title V, Section 125 (treatment of amusement taxes as percentage taxes).
Factual Background
Pelizloy operates a resort with facilities such as swimming pools, a spa, and function halls. The Benguet Provincial Board enacted Section 59, Article X of the Benguet Revenue Code of 2005, which (1) levied a 30% amusement tax on gross receipts from admission fees for certain enumerated places (theaters, cinemas, concert halls, circuses, cockpits, dancing halls, etc.), and (2) separately levied a 10% amusement tax on gross receipts from admission fees for “boxing, resorts, swimming pools, bath houses, hot springs, and tourist spots.” Pelizloy challenged the second paragraph as ultra vires.
Procedural History
Pelizloy filed an administrative appeal to the Secretary of Justice under Section 187, LGC. The Secretary did not decide within 60 days, which Pelizloy treated as an implied denial, and thereafter filed a Petition for Declaratory Relief and Injunction in the Regional Trial Court (Civil Case No. 06-CV-2232). The RTC dismissed the petition on December 10, 2007, holding declaratory relief proper and concluding that the provincial ordinance did not contravene Section 133(i) because the LGC itself provides exceptions. Pelizloy’s motion for reconsideration was denied and Pelizloy filed a petition for review on pure questions of law.
Issues Presented
- Whether Section 59, Article X of the Benguet Revenue Code of 2005 levies a prohibited percentage tax under Section 133(i) of the LGC.
- Whether provinces are authorized to impose amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots as “amusement places” under the LGC.
Parties’ Contentions
Petitioner’s position: The 10% levy on admissions for resorts and the other enumerated facilities is a percentage tax and therefore prohibited under Section 133(i) of the LGC unless explicitly authorized; because those venues are not included within the constitution of permitted “places of amusement” under Section 140 and Section 131(c), the tax is ultra vires and void ab initio.
Respondent’s position: The ordinance does not improperly levy a percentage tax because it taxes admission fees specifically rather than total gross receipts of services (argued by reference to LGC provisions) and resorts and similar venues fall within “other places of amusement” authorized under Section 140; alternatively, the LGC permits exceptions to the prohibition in Section 133(i).
Legal Principle: Local Taxing Power and Its Limitations
The taxing power is an attribute of sovereignty vested in the State; local government units (provinces, cities, municipalities, barangays) possess taxing authority only to the extent it is delegated by the Constitution and statute. Under the 1987 Constitution, local units may create revenue sources and levy taxes subject to congressional guidelines and limitations. The LGC establishes the limits and exceptions governing local taxation, and courts construe grants of taxing power to LGUs strictly (strictissimi juris), resolving any ambiguities against the taxing authority.
Nature of Percentage Taxes and Amusement Taxes
A “percentage tax” is defined as a tax measured by a percentage of gross selling price, gross value in money, or gross receipts or earnings from services. The NIRC recognizes amusement taxes as a type of percentage tax, fixed at a percentage of gross receipts of specified establishments. Applying these definitions, amusement taxes (levied as percentages of gross receipts from admission fees) qualify as percentage taxes under the LGC’s limitation in Section 133(i), unless expressly authorized by the LGC.
Statutory Interpretation: Section 140 and the Principle of Ejusdem Generis
Section 133(i) generally prohibits LGUs from levying percentage or VAT on sales or similar transactions except as provided by the LGC. Section 140 of the LGC expressly authorizes provinces to levy an amusement tax on proprietors or operators of specific places: theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement (rate not exceeding 30% of gross receipts from admission). The interpretive principle ejusdem generis requires that general terms following a list of specific items be limited to things of the same kind or class as those enumerated. The Supreme Court applied this principle and relied on Section 131(c) (which defines “amusement places” as venues where one seeks admission to entertain oneself by seeing or viewing shows or performances) to identify the typifying characteristic—venues primarily used for staging spectacles, shows, exhibitions, or performances meant to be viewed by an audience.
Application to Resorts, Swimming Pools, Bath Houses, Hot Springs, and Tourist Spots
Resorts, swimming pools, bath houses, hot springs, and tourist spots do not share the typifying characteristic of the enumerated amusement places because they are not primarily venues for staging spectacles or public performances intended to be viewed by an audience. Although patrons at such
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Procedural Posture
- Petition for Review on Certiorari under Rule 45 seeking reversal of the RTC, Branch 62, La Trinidad, Benguet Decision of December 10, 2007 in Civil Case No. 06-CV-2232.
- Petitioner sought declarations that: (1) the Province of Benguet has no authority to levy amusement taxes on admission fees for resorts, swimming pools, bath houses, hot springs, tourist spots and other places for recreation; (2) Section 59, Article X of the Benguet Provincial Revenue Code of 2005 is null and void; and (3) the Province be permanently enjoined from enforcing Section 59, Article X.
- Prior administrative step: petitioner filed an appeal/petition with the Secretary of Justice on January 27, 2006 (docketed MSO‑OSJ Case No. 03‑2006) within the 30‑day period under Section 187 of the Local Government Code (LGC); no decision issued within the 60‑day period, treated by petitioner as implied denial, and petitioner filed a declaratory relief and injunction action in the RTC (Civil Case No. 06‑CV‑2232).
- RTC dismissed the petition for lack of merit on December 10, 2007 and denied petitioner’s motion for reconsideration on May 21, 2008.
- Petition to the Supreme Court filed June 10, 2008 raising pure questions of law; Supreme Court decision rendered April 10, 2013 (G.R. No. 183137).
Relevant Facts
- Petitioner Pelizloy Realty Corporation owns Palm Grove Resort located in Asin, Angalisan, Municipality of Tuba, Province of Benguet, with facilities including swimming pools, a spa and function halls.
- On December 8, 2005, the Provincial Board of Benguet approved Provincial Tax Ordinance No. 05‑107 (Benguet Revenue Code of 2005).
- Section 59, Article X of the Tax Ordinance imposed amusement taxes: 30% on gross receipts from admission fees for theaters, cinemas, concert halls, circuses, cockpits, dancing halls, dancing schools, night or day clubs, and other places of amusement; and 10% of gross receipts from admission fees for boxing, resorts, swimming pools, bath houses, hot springs, and tourist spots.
- Section 162 of the Tax Ordinance provided an effectivity date of January 1, 2006.
Issues Presented
- Whether Section 59, Article X of Provincial Tax Ordinance No. 05‑107 levies a percentage tax.
- Whether provinces are authorized under the Local Government Code to impose amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots as “amusement places.”
Statutory and Constitutional Provisions Quoted or Applied
- Section 59, Article X, Benguet Revenue Code of 2005 (text of amusement tax provisions, including the two paragraphs cited).
- Section 162, Benguet Tax Ordinance (effectivity provision: January 1, 2006).
- Section 187, Republic Act No. 7160 (Local Government Code) — procedure for appeal to Secretary of Justice re: tax ordinances and 60‑day decision period (and effect of lapse).
- Section 133(i), LGC — prohibition on LGUs levying percentage or VAT on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided in the LGC.
- Section 140, LGC — amusement tax: province may levy an amusement tax on proprietors, lessees or operators of theaters, cinemas, concert halls, circuses, boxing stadia and other places of amusement at a rate not more than 30% of gross receipts from admission fees; additional subsections on withholding, exemptions, time/manner, surcharges, and sharing proceeds.
- Section 131(b) and 131(c), LGC — definitions: (b) “Amusement” as pleasurable diversion and entertainment; (c) “Amusement Places” include theaters, cinemas, concert halls, circuses and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performances.
- Section 5, Article X, 1987 Constitution — LGUs’ power to create revenue sources and to levy taxes, fees and charges subject to congressional guidelines and limitations.
- Section 3, Article X, 1987 Constitution (quoted excerpt) — mandate for Congress to enact a Local Government Code.
- National Internal Revenue Code (RA No. 8424), Section 125 (Title V) — amusement taxes listed among other percentage taxes and fixed as a percentage of gross receipts for specified establishments.
Parties’ Positions
- Petitioner (Pelizloy):
- Contended the 10% amusement tax on admission fees for resorts, swimming pools, bath houses, hot springs, and tourist spots is ultra vires and a prohibited percentage tax under Section 133(i) of the LGC; therefore null and void ab initio.
- Filed timely appeal to the Secretary of Justice, and when the 60‑day period lapsed without decision, proceeded to court.
- Respondent (Province of Benguet):
- Procedural defense: declaratory relief was improper; once tax liability attaches the remedy is to pay and then sue for recovery after exhausting administrative remedies.
- Substantive defense: argued that “other places of amusement” in Section 140 of the LGC encompasses resorts, swimming pools, bath houses, hot springs, and tourist spots; mistakenly cited Section 220(b) of the LGC in support (erroneous citation).
- In its Supreme Court Comment, argued Section 59 does not levy a percentage tax because it applies only to gross receipts from admission fees (not total gross receipts of services) and maintained provinces can validly impose amusement taxes on the contested venues.
RTC Ruling (Trial Court)
- Held that declaratory relief was a proper remedy given the circumstances.
- Concluded that while Section 59, Article X imposed a percentage tax, Section 133(i) of the LGC permits exceptions and d