(j) Taxes on the gross receipts of transportation contractors and

persons engaged in the transportation of passengers or freight by

hire and common carriers by air, land or water, except as provided
in
this
Code;
SEC. 143. Tax on Business. The municipality may impose taxes
on
the
following
businesses:
x

(h) On any business, not otherwise specified in the preceding

paragraphs, which the sanggunian concerned may deem proper
to tax: Provided, That on any business subject to the excise,
value-added or percentage tax under the National Internal
Revenue Code, as amended, the rate of tax shall not exceed two
percent (2%) of gross sales or receipts of the preceding calendar
year.
The sanggunian concerned may prescribe a schedule of
graduated tax rates but in no case to exceed the rates prescribed
herein. (Emphases supplied by the Supreme Court)

ISSUE:
Is Sec. 21 (B) of the Manila Revenue Code, as amended,
unconstitutional?
HELD:
Yes. The power to tax is not inherent in LGUs to whom the power
must be delegated by Congress and must be exercised within the
guidelines and limitations that Congress may provide.
Sec. 5 of Article X of the Constitution granted LGUs the power to
create its own sources of revenues and to levy taxes, fees, and
charges subject to such guidelines and limitations as the

4. City of Manila vs Hon. Colet

FACTS:
The case involves 10 consolidated petitions involving several
corporations operating as transportation contractors, persons
who transport passenger or freight for hire, and common carriers
by land, air or water with principal offices in Metro Manila, and
City of Manilas Ordinance No. 7807 which amended Sec. 21 (B)
of the Manila Revenue Code. Sec.21 (B) imposed business tax on
transportation contractors, persons who transport passenger or
freight for hire, and common carriers by land, air or water; while
the subject ordinance amended such by lowering the tax rate from
3% per annum to .5% per annum. The City of Manila, through its
City Treasurer, began imposing and collecting the business tax
under Section 21(B) of the Manila Revenue Code, as amended,
beginning January 1994.
Because they were assessed and/or compelled to pay business
taxes pursuant to Section 21(B) of the Manila Revenue Code
before they were issued their business permits for 1994, several
corporations questioned the constitutionality of Sec. 21 (B) for
being contrary to the Constitution and the Local Government
Code, and asked for the refund of what they had paid as business
tax.
The City of Manila, argued that it was constitutional and valid; and
such position was adopted by the RTC and the CA when the case
reached the respective fora. The City argued that the enactment
of Sec. 21 (B) is based on the exempting clause found at the
beginning of Sec. 133, in conjunction with Section 143(h), of the
LGC.
SEC. 133. Common Limitations on the Taxing Powers of Local
Government Units.
Unless otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and barangays shall
not
extend
to
the
levy
of
the
following:
x

Congress may provide... In conformity with said constitutional

provision, the Local Govt Code was enacted by Congress.
The succeeding proviso of Section 143(h) of the LGC,
viz., Provided, That on any business subject to the excise, valueadded or percentage tax under the National Internal Revenue
Code, as amended, the rate of tax shall not exceed two percent
(2%) of gross sales or receipts of the preceding calendar year, is
not a specific grant of power to the municipality or city to impose
business tax on the gross sales or receipts of such a business.
Rather, the proviso only fixes a maximum rate of imposable
business tax in case the business taxed under Section 143(h) of
the LGC happens to be subject to excise, value added, or
percentage
tax
under
the
NIRC.
The omnibus grant of power to municipalities and cities under
Section 143(h) of the LGC cannot overcome the specific
exception/exemption in Section 133(j) of the same Code.
In the case at bar, the sanggunian of the municipality or city
cannot enact an ordinance imposing business tax on the gross
receipts of transportation contractors, persons engaged in the
transportation of passengers or freight by hire, and common
carriers by air, land, or water, when said sanggunian was already
specifically prohibited from doing so.
Such construction gives effect to both Sections 133(j) and 143(h)
of the LGC. Also, Sec. 5(b) of the LGC itself, on Rules of
Interpretation, provides that in case of doubt, any tax ordinance
shall be construed strictly against the LGU enacting it, and
liberally in favor of the taxpayer. Furthermore, such a construction
is pursuant to the legislative intent to exclude from the taxing
power of the LGU the imposition of business tax against common
carriers to prevent a duplication of the so-called common carriers
tax.

Sec. 130 of the LGC provides for the fundamental principles

governing the taxing powers of LGUs. Sec. 133 provides for the
common limitations on the taxing powers of LGUs. Among the
common limitations on the taxing power of LGUs is Section 133(j)
of the LGC, which states that unless otherwise provided herein,
the taxing power of LGUs shall not extend to taxes on the gross
receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code.
Section 133(j) of the LGC clearly and unambiguously proscribes
LGUs from imposing any tax on the gross receipts of
transportation contractors, persons engaged in the transportation
of passengers or freight by hire, and common carriers by air, land,
or water. Yet, confusion arose from the phrase unless otherwise
provided herein, found at the beginning of the said provision, and
the City of Manila anchors the validity of Sec. 21 (B) on said
phrase.
However, the Court is not convinced with the Citys contention.
Sec. 133(j) of the LGC prevails over Sec. 143(h) of the same
Code, and Sec. 21(B) of the Manila Revenue Code, as amended,
was
manifestly
in
contravention
of
the
former.

Sec. 133(j) of the LGC is a specific provision that explicitly

withholds from any LGU the power to tax the gross receipts of
transportation contractors, common carriers, persons engaged in
the transportation of passengers or freight by hire, and common
carriers by air, land, or water. In contrast, Sec. 143 of the LGC
defines the general power of the municipality (as well as the city, if
read in relation to Section 151 of the same Code) to tax
businesses
within
its
jurisdiction.