PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC.

vs. MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL.,

G.R. No. L-31156 February 27, 1976

FACTS:

Pepsi Cola has a bottling plant in the Municipality of Tanauan, Leyte. In September 1962, the
Municipality approved Ordinance No. 23 which levies and collects “from soft drinks producers and
manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked.”

In December 1962, the Municipality also approved Ordinance No. 27 which levies and collects “on soft
drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of one
centavo P0.01) on each gallon of volume capacity.”

Pepsi Cola assailed the validity of the ordinances as it alleged that they constitute double taxation
because Ordinance No. 27 covers the same subject matter and impose practically the same tax rate
as with Ordinance No. 23.

Pepsi Cola also questions the constitutionality of Republic Act 2264 (Local Autonomy Act) which allows
for the delegation of taxing powers to local government units; that allowing local governments to tax
companies like Pepsi Cola is confiscatory and oppressive.

The Municipality argued that only Ordinance No. 27 is being enforced and that it is an amendment of
Ordinance No. 23, hence there is no double taxation.

ISSUES:

1. Whether or not there is undue delegation of taxing powers

2. Whether or not there is double taxation
3. Whether Ordinance No. 27 imposes a percentage or a specific tax

HELD:

1. No. There is no undue delegation.

Legislative powers may be delegated to local governments in respect of matters of local

concern. By necessary implication, the legislative power to create political corporations for
purposes of local self-government carries with it the power to confer on such local governmental
 agencies the power to tax. Under the Constitution, local governments are granted the
autonomous authority to create their own sources of revenue and to levy taxes. Section 5,
Article XI of the 1987 Constitution provides: “Each local government unit shall have the power
to create its sources of revenue and to levy taxes, subject to such limitations as may be provided
by law.”

Thus, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the
sphere of the legislative power to enact and vest in local governments the power of local taxation.

2. No. There is no double taxation.

Ordinance No. was intended as a plain substitute for the prior Ordinance No. 23, and operates
as a repeal of the latter, even without words to that effect. Thus, only Ordinance No. 27, series
of 1962 is being enforced by the Municipality of Tanauan. Moreover, double taxation, in
general, is not forbidden by our fundamental law unlike in other jurisdictions. Double taxation
becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same
governmental entity or by the same jurisdiction for the same purpose, but not in a case where
one tax is imposed by the State and the other by the city or municipality.

3. Neither. The imposition of Ordinance No. 27 does not partake of the nature of a percentage tax
on sales, or other taxes in any form based thereon. The tax is levied on the produce (whether
sold or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks
is considered solely for purposes of determining the tax rate on the products, but there is not set
ratio between the volume of sales and the amount of the tax.

Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified
articles and soft drink is not one of those specified.

NOTE: Municipalities are prohibited to impose "any percentage tax or other taxes in any form based thereon nor impose
taxes on articles subject to specific tax except gasoline”, under the provisions of the National Internal Revenue Code.

FAJARDO, CARL DIANNE S. JD1A