Mobil Philippines vs. City Treasurer of Makati

G.R. No.
154092 July 14, 2005
MOBIL PHILIPPINES, INC., Petitioners,

vs.
THE CITY TREASURER OF MAKATI and the CHIEF OF THE LICENSE
DIVISION OF THE CITY OF MAKATI, Respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari seeks the reversal of the Decision1 dated

November 22, 2001 of the Regional Trial Court of Pasig City, Branch 268, in
Civil Case No. 67599, subsequently affirmed in an Order 2 dated May 15, 2002.
Petitioner is a domestic corporation engaged in the manufacturing, importing,

exporting and wholesaling of petroleum products, while respondents are the
local government officials of the City of Makati charged with the
implementation of the Revenue Code of the City of Makati, as well as the
collection and assessment of business taxes, license fees and permit fees
within said city.3
Prior to September 1998, petitioner’s principal office was at the National

Development Company Building, in 116 Tordesillas St., Salcedo Village, Makati
City. On August 20, 1998, petitioner filed an application with the City
Treasurer of Makati for the retirement of its business within the City of Makati
as it moved its principal place of business to Pasig City.4
In its application, petitioner declared its gross sales/receipts as follows:
Gross Sales Receipts for Calendar Year P 453,799,493.29

1997
Gross Sales Receipts for Calendar Year 267,952,766.675
1998
January to August
Upon evaluation of petitioner’s application, then OIC of the License Division,

Ms. Jesusa E. Cuneta, issued to petitioner, a billing slip 6 assessing the
following taxes against petitioner:
For the 4th Quarter of 1998 (based on 1997 gross sales)
As Manufacturer ₱ 14,439.54
As Wholesaler 550,778.58
Garbage Fee 1,250.00
Sub-Total ₱ 566,468.12
For the Gross Sales made in 1998
As Manufacturer ₱ 40,008.33
As Wholesaler 1,291,630.51
Sub-Total __1,331,638.84
TOTAL ASSESSED BUSINESS TAXES ₱ 1,898,106.967
On September 11, 1998, petitioner paid the assessed amount of ₱1,898,106.96

under protest. The City Treasurer issued therefor Official Receipt No.
9065025C8 and approved the petitioner’s application for retirement of business
from Makati to Pasig City.
On July 21, 1999, petitioner filed a claim for ₱1,331,638.84 refund.9 On

August 11, 1999, petitioner received a letter 10 denying the claim for refund on
the ground that petitioner was merely transferring and not retiring its
business, and that the gross sales realized while petitioner still maintained
office in Makati from January 1 to August 31, 1998 should be taxed in the City
of Makati.11
Petitioner subsequently filed a petition with the Regional Trial Court of Pasig
City, Branch 268, seeking the refund of business taxes erroneously collected by
the City of Makati.
In its Decision, the trial court ruled as follows:
In summary, the pertinent law provides that a person or entity doing business
in the Municipality shall be subject to business tax. The tax shall be fixed by
the quarter. The initial tax for the quarter in which a business starts to operate
shall be two and one-half percent (2½%) of one percent (1%) of its capital
investment. Thereafter, the tax shall be computed based on the gross sales or
receipts of the preceding quarter. In the succeeding calendar year, regardless of
when the business started to operate, the tax shall be based on the gross sales
or receipts for the preceding calendar year. That tax shall accrue on the first
day of January of each year and payment shall be made within the first 20
days of January or of each subsequent quarter as the case may be.
Considering therefore that the business tax accrues only on the first day of
January as provided in Sec. 3A.07 and becomes payable within the first 20
days thereof or of each subsequent quarter, the payments made by Mobil in the
year 1998 are therefore payments for the business tax for 1997 which accrued
in January of 1998 and became payable within the first 20 days of January or
of each subsequent quarter. Thus, upon retirement in August 1998, the taxes
for said year which should accrue in January 1999 [become] immediately
payable before the application for retirement can be approved (Ibid, (g), Sec.
3A.08). The assessment of the Chief of the License Division of Makati is
therefore with legal basis and does not constitute double taxation.
WHEREFORE, premises considered, the instant petition for refund is hereby

DENIED and the case is dismissed for lack of merit.
SO ORDERED.12
Petitioner filed a Motion for Reconsideration 13 which was denied in an Order

dated May 15, 2002, hence this appeal.
Before us, petitioner alleges now that,
THE TRIAL COURT ERRED IN HOLDING THAT PETITIONER’S BUSINESS TAX

PAYMENTS MADE IN 1998 ARE ACTUALLY PAYMENTS FOR BUSINESS
TAXES IN 1997. THIS CONCLUSION IS CONTROVERTED BY MAKATI CITY’S
REVENUE CODE, AND, IN FACT, CONSTITUTES DOUBLE TAXATION.14
Simply stated, the issue is: Are the business taxes paid by petitioner in 1998,
business taxes for 1997 or 1998?
According to petitioner, the 1997 gross sales/revenue is merely the basis for
the amount of business taxes due for the privilege of carrying on a business in
the year when the tax was paid.
For their part, respondents argue that since local taxes, which include
business taxes, are paid either within the first twenty days of January of each
year or of each subsequent quarter, as the case may be, what the taxpayer
actually pays during the recorded calendar year is actually its business tax for
the preceding year.
Prefatorily, it is necessary to distinguish between a business tax vis-à-vis an

income tax.
Business taxes imposed in the exercise of police power for regulatory purposes
are paid for the privilege of carrying on a business in the year the tax was paid.
It is paid at the beginning of the year as a fee to allow the business to operate
for the rest of the year. It is deemed a prerequisite to the conduct of business.
Income tax, on the other hand, is a tax on all yearly profits arising from
property, professions, trades or offices, or as a tax on a person’s income,
emoluments, profits and the like. It is tax on income, whether net or gross
realized in one taxable year.15 It is due on or before the 15th day of the 4th
month following the close of the taxpayer’s taxable year and is generally
regarded as an excise tax, levied upon the right of a person or entity to receive
income or profits.
The trial court erred when it said that the payments made by petitioner in 1998
are payments for business tax incurred in 1997 which only accrued in January
1998. Likewise, it erred when it ruled that petitioner was still liable for
business taxes based on its gross income/revenue for January to August 1998.
Section 3A.04 of the Makati City Revenue Code states:
Sec.3A.04. Computation of tax for newly-started business. In the case of newly-

started business under Sec. 3A.02, (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l),
and (m) above, the tax shall be fixed by the quarter. The initial tax of the
quarter in which the business starts to operate shall be two and one half
percent (2 ½ %) of one percent (1%) of the capital investment.
In the succeeding quarter or quarters, in cases where the business opens

before the last quarter of the year, the tax shall be based on the gross sales or
receipt for the preceding quarter at one-half ( ½ ) of the rates fixed therefor by
the pertinent schedule in Section 3A.02, (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k),
(l), and (m).
In the succeeding calendar year, regardless of when the business started to

operate, the tax shall be based on the gross sales or receipts for the preceding
calendar year, or any fraction thereof as provided in the same pertinent
schedules.16
Under the Makati Revenue Code, it appears that the business tax, like income
tax, is computed based on the previous year’s figures. This is the reason for the
confusion. A newly-started business is already liable for business taxes (i.e.
license fees) at the start of the quarter when it commences operations. In
computing the amount of tax due for the first quarter of operations, the
business’ capital investment is used as the basis. For the subsequent quarters
of the first year, the tax is based on the gross sales/receipts for the previous
quarter. In the following year(s), the business is then taxed based on the gross
sales or receipts of the previous year. The business taxes paid in the year 1998
is for the privilege of engaging in business for the same year, and not for having
engaged in business for 1997.
Upon its transfer, petitioner was apparently subjected to Sec. 3A.11 par. (g)
which states:
...
(g) Retirement of business.
...
For purposes thereof, termination shall mean that business operation are
stopped completely.
...
(2) If it is found that the retirement or termination of the business is legitimate,

[a]nd the tax due therefrom be less than the tax due for the current year based
on the gross sales or receipts, the difference in the amount of the tax shall be
paid before the business is considered officially retired or terminated. 17
Based on this foregoing provision, on the year an establishment retires or

terminates its business within the municipality, it would be required to pay the
difference in the amount if the tax collected, based on the previous year’s gross
sales or receipts, is less than the actual tax due based on the current year’s
gross sales or receipts.
For the year 1998, petitioner paid a total of ₱2,262,122.48 to the City
Treasurer of Makati18 as business taxes for the year 1998. The amount of tax
as computed based on petitioner’s gross sales for 1998 is only ₱1,331,638.84.
Since the amount paid is more than the amount computed based on
petitioner’s actual gross sales for 1998, petitioner upon its retirement is not
liable for additional taxes to the City of Makati. Thus, we find that the
respondent erroneously treated the assessment and collection of business tax
as if it were income tax, by rendering an additional assessment of
₱1,331,638.84 for the revenue generated for the year 1998.
WHEREFORE, the assailed Decision is hereby REVERSED and respondents

City Treasurer and Chief of the License Division of Makati City are ordered
to REFUND to petitioner business taxes paid in the amount of ₱1,331,638.84.
Costs against respondents.
SO ORDERED.

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G.R. No.

154092 July 14, 2005

MOBIL PHILIPPINES, INC., Petitioners,

This petition for review on certiorari seeks the reversal of the Decision1 dated

Petitioner is a domestic corporation engaged in the manufacturing, importing,

Prior to September 1998, petitioner’s principal office was at the National

In its application, petitioner declared its gross sales/receipts as follows:

Gross Sales Receipts for Calendar Year P 453,799,493.29

Upon evaluation of petitioner’s application, then OIC of the License Division,

For the 4th Quarter of 1998 (based on 1997 gross sales)

Garbage Fee 1,250.00

For the Gross Sales made in 1998

TOTAL ASSESSED BUSINESS TAXES ₱ 1,898,106.967

On September 11, 1998, petitioner paid the assessed amount of ₱1,898,106.96

On July 21, 1999, petitioner filed a claim for ₱1,331,638.84 refund.9 On

In its Decision, the trial court ruled as follows:

WHEREFORE, premises considered, the instant petition for refund is hereby

Petitioner filed a Motion for Reconsideration 13 which was denied in an Order

Before us, petitioner alleges now that,

THE TRIAL COURT ERRED IN HOLDING THAT PETITIONER’S BUSINESS TAX

Prefatorily, it is necessary to distinguish between a business tax vis-à-vis an

Section 3A.04 of the Makati City Revenue Code states:

Sec.3A.04. Computation of tax for newly-started business. In the case of newly-

In the succeeding quarter or quarters, in cases where the business opens

In the succeeding calendar year, regardless of when the business started to

(2) If it is found that the retirement or termination of the business is legitimate,

Based on this foregoing provision, on the year an establishment retires or

WHEREFORE, the assailed Decision is hereby REVERSED and respondents

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