G.R. No. L-22814 – 24 SCRA 789 – Political Law – Municipal Corporations – Power to Tax – Municipal Corporations cannot impose import duties
Taxation – Basic Principles – Uniformity in Taxation
In 1960, Ordinance No. 110 was passed in Butuan. It was later amended by Ordinance 122. This Ordinance imposes a tax on any person, association, etc., of P0.10 per case of 24 bottles of Pepsi- Cola. Pepsi operates within Butuan and it paid under protest the amount of P4.926.63 from August 16 to December 31, 1960 and the amount of P9,250.40 from January 1 to July 30, 1961 pursuant to said ordinance. Pepsi filed a complaint for the recovery of the total amount of P14,177.03 paid under protest and those that it may later on pay until the termination of this case on the ground that Ordinance No. 110, as amended, of the City of Butuan is illegal, that the tax imposed is excessive and that it is unconstitutional. Pepsi averred it is unconstitutional because of the following reasons:
1. it partakes of the nature of an import tax because the tax “shall be based and computed from the cargo manifest or bill of lading . . . showing the number of cases” – not sold;
2. it is highly unjust and discriminatory because some dealers engaged in selling of carbonated drinks are exempt while others are covered and such exemption is not justified in the ordinance.
ISSUE: Whether or not the Ordinance is valid.
HELD: No, it is invalid. The tax prescribed in said Ordinance, as originally approved, was imposed upon dealers “engaged in selling” soft drinks or carbonated drinks. Thus, it would seem that the intent was then to levy a tax upon the sale of said merchandise. As amended by Ord No. 122, the tax is, however, imposed only upon “any agent and/or consignee of any person, association, partnership, company or corporation engaged in selling . . . soft drinks or carbonated drinks.” As a consequence, merchants engaged in the sale of soft drinks or carbonated drinks, are not subject to the tax, unless they are agents and/or consignees of another dealer, who, in the very nature of things, must be one engaged in business outside the City. Besides, the tax would not be applicable to such agent and/or consignee, if less than 1,000 cases of soft drinks are consigned or shipped to him every month.
When we consider, also, that the tax “shall be based and computed from the cargo manifest or bill of lading . . . showing the number of cases” – not sold – but “received” by the taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated drinks brought into the City from outside thereof becomes apparent. Viewed from this angle, the tax partakes of the nature of an import duty, which is beyond defendant’s authority to impose by express provision of law. It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation.
The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally to all those who belong to the same class. These conditions are not fully met by the ordinance in question.
Indeed, if its purpose were merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales thereof by dealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax.