Pelizloy Realty v. Benguet
NEW DOCTRINEFacts
The Antecedents: Pelizloy Realty Corporation (Pelizloy), owner of Palm Grove Resort, a recreational facility, challenged the Province of Benguet's authority to impose an amusement tax. The Province enacted Provincial Tax Ordinance No. 05-107, the Benguet Revenue Code of 2005, which levied a ten percent (10%) amusement tax on gross receipts from admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots. Pelizloy contended that this imposition was an ultra vires act by the Province. Procedural History: Pelizloy initially filed an appeal with the Secretary of Justice on January 27, 2006, within the 30-day period from the ordinance's effectivity. When the Secretary of Justice failed to render a decision within the prescribed 60 days, Pelizloy treated this as an implied denial and filed a Petition for Declaratory Relief and Injunction before the Regional Trial Court (RTC), Branch 62, La Trinidad, Benguet. The RTC dismissed Pelizloy's petition on December 10, 2007, ruling that the ordinance was valid. Pelizloy's motion for reconsideration was denied, leading to the present petition. The Petition: Pelizloy Realty Corporation filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the RTC's decision. The core of Pelizloy's argument is that Section 59, Article X of the Benguet Provincial Revenue Code of 2005 imposes a prohibited percentage tax, violating Section 133 (i) of the Local Government Code (LGC). Pelizloy seeks to have Section 59, Article X declared null and void and to permanently enjoin the Province of Benguet from enforcing it concerning admission fees for resorts, swimming pools, bath houses, hot springs, and tourist spots.
Issue(s)
Whether or not Section 59, Article X of Provincial Tax Ordinance No. 05-107 (Benguet Revenue Code of 2005) levies a percentage tax, and if so, whether the targeted establishments fall within the scope of "places of amusement" permitted by Section 140 of the Local Government Code (LGC). Whether or not "resorts, swimming pools, bath houses, hot springs and tourist spots" are included within the phrase "other places of amusement" under Section 140 of the LGC, considering the canon of ejusdem generis and the LGC's definitional provision in Section 131(c).
Ruling
The petition for review on certiorari is GRANTED in part. The second paragraph of Section 59, Article X of the Benguet Provincial Revenue Code of 2005 is declared null and void insofar as it levies amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs and tourist spots. The Province of Benguet is permanently enjoined from enforcing that portion of the ordinance with respect to those establishments. The remainder of Section 59, Article X (first paragraph) insofar as it applies to theaters, cinemas, concert halls, circuses, cockpits, dancing halls, dancing schools, night or day clubs, and related "places of amusement" is sustained.
Ratio Decidendi
On Issue 1: The Court held that the amusement tax is a form of percentage tax as defined in Commissioner of Internal Revenue v. Citytrust Investment Phils. Inc., which described percentage tax as "a tax measured by a certain percentage of the gross selling price or gross value in money of goods sold, bartered or imported; or of the gross receipts or earnings derived by any person engaged in the sale of services." The Court also relied on the treatment of amusement taxes under Republic Act No. 8424, otherwise known as the National Internal Revenue Code (NIRC), which lists amusement taxes among percentage taxes. Having established that amusement taxes are percentage taxes, the Court nonetheless recognized that Section 133(i) of the Local Government Code (LGC) prohibits percentage or value-added taxes "except as otherwise provided" by the LGC. Section 140 of the LGC is such an exception because it expressly authorizes provinces to levy an amusement tax on admissions for specified "places of amusement." Applying these principles, the Court concluded that Section 59, Article X of the Benguet Tax Ordinance does levy a percentage (amusement) tax, but that the impropriety of the levy depends on whether the targeted establishments fall within the scope of "places of amusement" permitted by Section 140. The Court therefore analyzed the statutory definition to determine whether the challenged facilities are encompassed by that exception. On Issue 2: The Court analyzed whether "resorts, swimming pools, bath houses, hot springs and tourist spots" are included within the phrase "other places of amusement" under Section 140 of the LGC. It applied the canon of ejusdem generis, explaining that the general words following specific enumerations should be restricted to things akin to those specifically named, and cited Philippine Basketball Association v. Court of Appeals where the Court rejected expansion of "other places of amusement" to include professional basketball because it did not share the typifying characteristic of the enumerated venues. The Court then relied on the LGC's own definitional provision, Section 131(c), which states that "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." Applying that statutory definition and ordinary meanings of "show" and "performance," the Court concluded that the typifying characteristic of "amusement places" under Section 140 is that they are venues primarily for staging spectacles or performances meant to be viewed by an audience. The Court found that resorts, swimming pools, bath houses, hot springs and tourist spots are not primarily venues for shows or performances of that sort and therefore do not belong to the same class as theaters, cinemas, concert halls, circuses and boxing stadia. Consequently, the second paragraph of Section 59, Article X is void insofar as it imposes amusement tax on admissions to the listed establishments, while the portion covering boxing stadia and other venues properly classed as "amusement places" remains valid.
Main Doctrine
Provinces may levy amusement taxes only on venues that qualify as "amusement places" under Section 131(c) and Section 140 of the Local Government Code (LGC); resorts, swimming pools, bath houses, hot springs and tourist spots are not "other places of amusement" under Section 140 and therefore may not be subjected to provincial amusement taxes on admission fees.