FACTS: Petitioner Pelizloy Realty Corporation (“Pelizloy”) owns Palm Grove Resort, which is designed for recreation and which has facilities like swimming pools, a spa and function halls. It is located at Asin, Angalisan, Municipality of Tuba, Province of Benguet. 

On December 8, 2005, the Provincial Board of the Province of Benguet approved Provincial Tax Ordinance No. 05-107, otherwise known as the Benguet Revenue Code of 2005 (“Tax Ordinance”).Section 59, Article X of the Tax Ordinance levied a ten percent (10%) amusement tax on gross receipts from admissions to “resorts, swimming pools, bath houses, hot springs and tourist spots.” Specifically, it provides the following:

Article Ten: Amusement Tax on Admission

Section 59. Imposition of Tax.— There is hereby levied a tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, cockpits, dancing halls, dancing schools, night or day clubs, and other places of amusement at the rate of thirty percent (30%) of the gross receipts from admission fees; and

A tax of ten percent (10%) of gross receipts from admission fees for boxing, resorts, swimming pools, bath houses, hot springs, and tourist spots is likewise levied.[Emphasis and underscoring supplied]

Section 162 of the Tax Ordinance provided that the Tax Ordinance shall take effect on January 1, 2006.

It was Pelizloy’s position that the Tax Ordinance’s imposition of a 10% amusement tax on gross receipts from admission fees for resorts, swimming pools, bath houses, hot springs, and tourist spots is an ultra vires act on the part of the Province of Benguet. Thus, it filed an appeal/petition before the Secretary of Justice on January 27, 2006.

ISSUE: WON THE PROVINCE HAS THE POWER TO IMPOSE PERCENTAGE TAX.

WON THE SECOND PARAGRAPH MENTIONED IN THE ORDINANCE IS BEYOND THE CONTEMPLATION OF THE POWER OF THE PROVINCE TO IMPOSE AMUSEMENT TAXES.

HELD: YES. Amusement taxes are fixed at a certain percentage of the gross receipts incurred by certain specified establishments. Thus, applying the definition in CIR v. Citytrust and drawing from the treatment of amusement taxes by the NIRC, amusement taxes are percentage taxes as correctly argued by Pelizloy. However, provinces are not barred from levying amusement taxes even if amusement taxes are a form of percentage taxes. Section 133 (i) of the LGCprohibits the levy of percentage taxes “except as otherwise provided” by the LGC.

Section 140 of the LGC provides:

SECTION 140. Amusement Tax. — (a) The province may levy an amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than thirty percent (30%) of the gross receipts from admission fees.

(b) In the case of theaters of cinemas, the tax shall first be deducted and withheld by their proprietors, lessees, or operators and paid to the provincial treasurer before the gross receipts are divided between said proprietors, lessees, or operators and the distributors of the cinematographic films.

(c) The holding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows, musical programs, literary and oratorical presentations, except pop, rock, or similar concerts shall be exempt from the payment of the tax herein imposed.

(d) The Sangguniang Panlalawigan may prescribe the time, manner, terms and conditions for the payment of tax. In case of fraud or failure to pay the tax, the Sangguniang Panlalawigan may impose such surcharges, interests and penalties.

(e) The proceeds from the amusement tax shall be shared equally by the province and the municipality where such amusement places are located. [Underscoring supplied] ASaTCE

Evidently, Section 140 of the LGC carves a clear exception to the general rule in Section 133 (i). Section 140 expressly allows for the imposition by provinces of amusement taxes on “the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement.”

However, resorts, swimming pools, bath houses, hot springs, and tourist spots are not among those places expressly mentioned by Section 140 of the LGC as being subject to amusement taxes. Thus, the determination of whether amusement taxes may be levied on admissions to resorts, swimming pools, bath houses, hot springs, and tourist spots hinges on whether the phrase ‘other places of amusement’ encompasses resorts, swimming pools, bath houses, hot springs, and tourist spots.

Considering these, it is clear that resorts, swimming pools, bath houses, hot springs and tourist spots cannot be considered venues primarily “where one seeks admission to entertain oneself by seeing or viewing the show or performances”.While it is true that they may be venues where people are visually engaged, they are not primarily venues for their proprietors or operators to actively display, stage or present shows and/or performances.Thus, resorts, swimming pools, bath houses, hot springs and tourist spots do not belong to the same category or class as theaters, cinemas, concert halls, circuses, and boxing stadia. It follows that they cannot be considered as among the ‘other places of amusement’ contemplated by Section 140 of the LGC and which may properly be subject to amusement taxes.

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