TAX payment schedule was announced in 2009 in one of the weekly media outfits in town by the City Government of Baguio. A very early reminder to the micro, small, and medium enterprises (MSMEs) and the whole business community to give what is due to Caesar. We really have an ample time to set aside sum of money for these taxes as well as to prepare for the documents needed in applying a new business and/or renewal for existing business establishments.

It is now January. Taxpayers’ are obliged to contribute their share in running the City or town where they do business by paying the local business tax. Under existing laws, a city or municipality may impose a local business tax on businesses operating within its territorial jurisdiction. The applicable rate of tax depends on the nature on the amount of the annual gross sales or receipts for the preceding calendar year. The bigger the amount of annual gross sales or receipts, the higher is the rate of the local business tax that may be imposed by the City or Municipality.

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In cases where the business operation of a taxpayer is not confined within the territorial jurisdiction of a single city or municipality, it is important to know where the local business tax or taxes should be properly paid.  

For instance, what if a taxpayer has his principal office in Baguio City but his factory, warehouse and sales office are located in La Trinidad, Tuba, and Tublay, Benguet, respectively. Where should the local business taxes be paid and how much?  In the same manner, what if most of the products sold in Dagupan City sales office are delivered to residents of San Fernando City? Will the taxpayer be liable for any local business tax to San Fernando City?

The Local Government Code of 1991 and its implementing rules and regulations provide definite answers to these questions.

WHERE TO PAY: Sales transactions made through branch or sales offices.  As rules, all sales made in a locality where there is a branch, sales office or warehouse must be recorded in said branch, sales office or warehouse, and the local business tax payable must be paid to the city or municipality where these are located.

The term “branch or sales office” is defined as a fixed place in a locality that conducts operations of the business as an extension of the principal office.  For this reason, a warehouse that accepts orders and/or issues sales invoices independent of a branch or sales office is considered as a branch or sales office.  On the other hand, an office used only as a display area of the products where no stocks or items are stored for sale, although orders for the products may be received thereat, is not considered as a branch or sales office.  

If the taxpayer has a branch or sales office in a locality, then the local business tax on all sales transactions done through this branch or sales office.  

Thus assuming that the taxpayer has a branch or sales office in Baguio City, the local business tax payable on all sales booked and paid for in this branch or sales office must be paid to Baguio City and not to any other city or municipality. Please note that even if products are delivered outside of Baguio City, the local business tax payable must still be paid to Baguio City as long as the sales are booked and paid for in the Baguio City branch or sales office.