UP Law F2021 006 Pepsi Cola Bottling Co v City of Butuan

Taxation 2 Fundamental Principles (Secs 130 and 132 of LGC) 1968 Concepcion, CJ

SUMMARY

Pepsi-Cola seeks to recover the sums paid by it to the City of Butuan pursuant to its Municipal Ordinance No.
110, as amended by Municipal Ordinance No. 122, both series of 1960, which Pepsi-Cola assails as null and
void on the ground of being violative of the uniformity requirement. Under the disputed ordinance, sales by
"agents or consignees" of outside dealers would be subject to the tax. It exempts local dealers not acting for
or in behalf of outside merchants from paying the tax. 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.

FACTS
▪ Plaintiff, Pepsi-Cola Bottling Company, is a domestic corporation with offices and principal place of
business in Quezon City.
▪ Pepsi-Cola’s warehouse in the City of Butuan serves as a storage for its Pepsi-Cola soft drinks for sale
to customers in the City of Butuan and all the municipalities in the Province of Agusan. These soft
drinks are bottled in Cebu City and shipped to the Butuan City warehouse for distribution and sale in
the City of Butuan and all municipalities of Agusan.
▪ On August 16, 1960, the City of Butuan enacted Ordinance No. 110 which was subsequently amended
by Ordinance No. 112 and effective November 28, 1960.
▪ Ordinance No. 110, as amended, imposes a tax on any person, association, partnership, company or
corporation of P0.10 per case of 24 bottles of Pepsi-Cola.
▪ Pepsi-Cola 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.
▪ Pepsi-Cola filed a complaint for the recovery of the total amount of P14,177.03 paid under protest and
those that if may later on pay until the termination of the 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.
▪ The Court of First Instance of Agusan dismissed the complaint.
▪ Pepsi-Cola appealed to the SC and maintained that the disputed ordinance is null and void because:
(1) it partakes of the nature of an import tax; (2) it amounts to double taxation; (3) it is excessive,
oppressive and confiscatory; (4) it is highly unjust and discriminatory; and (5) section 2 of Republic
Act No. 2264, upon the authority of which it was enacted, is an unconstitutional delegation of
legislative powers.
RATIO
W/N Ordinance No. 110, as amended is violative of the uniformity requirement. - YES
▪ The tax prescribed in section 3 of Ordinance No. 110, as originally approved, was imposed upon dealers
"engaged in selling" soft drinks or carbonated drinks.
▪ As amended by Ordinance No. 122, the tax is imposed only upon "any agent and/or consignee1 of any
person, association, partnership, company or corporation engaged in selling x x 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.
▪ If the tax in question were regarded as a tax on the sale of said beverages, it would be invalid as
discriminatory, and hence, violative of the uniformity required by the Constitution and the law therefor.

1
Section 3-A. Definition of the Term Consignee or Agent.—For purposes of this Ordinance, a consignee or agent shall mean any person,
association, partnership, company or corporation who acts in the place of another by authority from him or one entrusted with the
business of another or to whom is consigned or shipped no less than 1,000 cases of hard liquors or soft drinks every month for resale,
either retail or wholesale.
 ▪ Only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers,
not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the
same exceeded those made by said agents or consignees of producers or merchants established outside
the City of Butuan, would be exempt from the disputed tax.
▪ 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 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 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.
W/N Ordinance No. 110, as amended partakes of the nature of an import tax and is therefore beyond
the City of Butuan’s authority to impose – YES
▪ Considering that the tax "shall be based and computed from the cargo manifest or bill of lading x x
showing the number of cases"—not sold—but "received" by the taxpayer, the intention was to limit the
application of the ordinance to soft drinks and carbonated drinks brought into the City from outside.
▪ Hence, the tax partakes of the nature of an import duty, which is beyond the City of Butuan's authority
to impose by express provision of law.
W/N Ordinance No. 110, as amended amounts to double taxation. – Not answered
Independently of whether or not a tax imposed pursuant to section 2 of Republic Act No. 2264, when
considered in relation to the sales tax prescribed by Acts of Congress, amounts to double taxation, on which
we do not express any opinion—double taxation, in general, is not forbidden by our fundamental law.
W/N Ordinance No. 110, as amended is excessive, oppressive and confiscatory -NO
The tax of "P0.10 per case of 24 bottles" or less than P0.0042 per bottle of soft drinks or carbonated drinks
in the production and sale is manifestly too small to be excessive, oppressive, or confiscatory.
W/N the enactment of Ordinance No. 110, as amended is an unconstitutional delegation of
legislative powers - No
Legislative powers may be delegated to local governments, as an exception.

FALLO
WHEREFORE, the decision appealed from is hereby reversed, and another one shall be entered annulling
Ordinance No. 110, as amended by Ordinance No. 122, and sentencing the City of Butuan to refund to plaintiff
herein the amounts collected from and paid under protest by the latter, with interest thereon at the legal rate
from the date of the promulgation of this decision, in addition to the costs, and defendants herein are,
accordingly, restrained and prohibited permanently from enforcing said Ordinance, as amended. It is so
ordered.