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Iloilo Bottlers v City of Iloilo | G.R. No.

L-52019 (August 19, 1988)

FACTS
Iloilo Bottlers Inc., a company in the business of bottling and selling soft drinks, was
demanded by the City of Iloilo to pay an amount of 59,505 in the form of an license
tax the city claims were due to it under Ordinance No. 5, Series of 1960. It provides
that manufacturers, bottlers, and distributers of soft drinks in Iloilo are subject to a
municipal license tax of 10 centavos per case of 24 bottles. Iloilo Bottling Inc.
asserted however that since their plant base has moved to municipality of Pavia
shortly after the aforementioned ordinance was enacted, they are not liable for any
taxes. The city however, still demanded taxes and also demanded back taxes under
the claim that Iloilo Bottlers is still distributing in the city of Iloilo since its transfer.
Iloilo Bottlers paid the demanded license tax and back taxes under protest.

ISSUE
WoN Iloilo Bottlers Inc. is free from liability and is thus entitled to a tax refund.

HOLDING
NO. Situs of taxation (place of taxation) depends on various factors including the
nature of the tax and subject matter thereof both of which must be scrutinized to
reach a fair decision. The tax ordinance enacted by the City of Iloilo imposes a tax
on persons, firms, and corporations engaged in the business of distribution of softdrinks, manufacture of soft-drinks, and bottling of soft drinks within the territorial
jurisdiction of the City of Iloilo. There is no question that Iloilo Bottlers has moved
out of Iloilo Citys jurisdiction and into the municipality of Pavia where its plant now
stands; therefore, the latter two conditions for taxation are no longer applicable.
The ruling now depends upon whether or not Iloilo Bottlers can be considered as
distributing its products within Iloilo city. Iloilo Bottlers disclaims liability, saying that
it does not independently distribute but rather actively sells directly to its
consumers. Distribution is therefore only incidental to its business. Iloilo Bottlers is
indeed considered as distributing within the city since while the manufacturing and
bottling occurs outside of Iloilo City, the drinks are sold in Iloilo city to consumers in
a moving store fashion. The transactions are considered to occur within the city.
The tax imposed under Ordinance No. 5 is an excise tax. By its nature, the power to
levy an excise tax depends upon the place where the business is done, or the
occupation is engaged in, or where the transaction took place. In this case, it is a

tax on the privilege of distributing, manufacturing or bottling soft drinks. Even


though the base of operations is at Pavia, the areas of transactions where it
conducts its business are within Iloilo City limits. The situs for excise tax is the area
of transaction, not necessarily base of operation. Since Iloilo Bottlers does distribute
within city limits, it is therefore subject to the ordinance and therefore should pay
the pertinent amounts to the city of Iloilo.