Pelizloy Realty Corporation vs. Province of Benguet

Provinces are not authorized to levy amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots under Section 140 of the Local Government Code, because such establishments are not "amusement places" within the contemplation of the law, which is limited to venues where one seeks admission to entertain oneself by seeing or viewing shows or performances.

Pelizloy Realty Corporation owns and operates Palm Grove Resort, located in Asin, Angalisan, Municipality of Tuba, Province of Benguet. The resort features facilities such as swimming pools, a spa, and function halls designed for recreation. On December 8, 2005, the Provincial Board of Benguet approved Provincial Tax Ordinance No. 05-107 (Benguet Revenue Code of 2005), which took effect on January 1, 2006. Section 59, Article X of the Ordinance imposed a ten percent tax on gross receipts from admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots, characterizing it as an amusement tax.

• Pelizloy Realty Corporation owns Palm Grove Resort, a recreational facility with swimming pools, a spa, and function halls located at Asin, Angalisan, Municipality of Tuba, Province of Benguet.
• On December 8, 2005, the Provincial Board of Benguet approved Provincial Tax Ordinance No. 05-107 (Benguet Revenue Code of 2005), which took effect on January 1, 2006 per Section 162 thereof.
• Section 59, Article X of the Tax Ordinance levied a ten percent tax on gross receipts from admission fees to "resorts, swimming pools, bath houses, hot springs, and tourist spots" in addition to a thirty percent tax on theaters, cinemas, concert halls, circuses, cockpits, dancing halls, and other places of amusement.
• On January 27, 2006, Pelizloy filed an appeal with the Secretary of Justice within the thirty-day period allowed under Section 187 of the LGC, contending that the tax was ultra vires.
• After the Secretary of Justice failed to decide within the sixty-day period, Pelizloy filed a Petition for Declaratory Relief and Injunction with the RTC.
• The RTC dismissed the petition on December 10, 2007, ruling that the tax was valid and that resorts and similar establishments fell under "other places of amusement."
• The RTC denied Pelizloy's Motion for Reconsideration on May 21, 2008.

• Section 59, Article X of the Tax Ordinance imposes a prohibited percentage tax in violation of Section 133(i) of the LGC, which bars local government units from levying percentage or value-added taxes on sales, barters, or exchanges of goods or services.
• The tax is ultra vires and null and void ab initio because the Province of Benguet exceeded its delegated taxing authority.
• The Province has no authority to levy amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots as these are not "places of amusement" under Section 140 of the LGC.

• The Petition for Declaratory Relief is an improper remedy; the taxpayer should pay the tax under protest and sue for recovery after exhausting administrative remedies.
• The imposition is not a percentage tax because it is based solely on gross receipts from admission fees, not on total gross receipts from services.
• Resorts, swimming pools, bath houses, hot springs, and tourist spots are encompassed by the phrase "other places of amusement" in Section 140 of the LGC, citing the definition of "amusement" in Section 131(b) as "pleasurable diversion and entertainment" synonymous with relaxation, avocation, pastime, or fun.
• Provinces can validly impose amusement taxes on these establishments as they are "amusement places."

• Procedural Issues:
  • Whether the Petition for Declaratory Relief and Injunction is the proper remedy to assail the validity of a local tax ordinance.
• Substantive Issues:
  • Whether Section 59, Article X of Provincial Tax Ordinance No. 05-107 levies a prohibited percentage tax under Section 133(i) of the LGC.
  • Whether provinces are authorized to impose amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots as "amusement places" under the LGC.

• Procedural:
  • The Court noted that the RTC ruled Declaratory Relief was a proper remedy, and since the petitioner raised pure questions of law in its appeal to the Supreme Court, the procedural issue was not a barrier to resolving the substantive questions.
• Substantive:
  • Amusement taxes are percentage taxes measured by a percentage of gross receipts, but Section 140 of the LGC expressly authorizes provinces to levy them, carving an exception to the general prohibition in Section 133(i).
  • However, Section 140 limits the imposition to "theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement."
  • Applying the principle of ejusdem generis and the statutory definition in Section 131(c) of the LGC, "amusement places" are venues "where one seeks admission to entertain oneself by seeing or viewing the show or performances."
  • The enumerated places (theaters, cinemas, concert halls, circuses, boxing stadia) share the common characteristic of being venues primarily for staging spectacles or holding public shows, exhibitions, and performances meant to be viewed by an audience.
  • Resorts, swimming pools, bath houses, hot springs, and tourist spots are not primarily venues for viewing shows or performances; they are for recreation and relaxation, not for spectacles.
  • Under the principle of strictissimi juris, any doubt in the interpretation of taxing powers must be resolved against the local government unit.
  • The second paragraph of Section 59, Article X of the Tax Ordinance, insofar as it imposes amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots, is declared null and void.
  • The first paragraph of Section 59 (covering theaters, cinemas, etc.) and the portion covering boxing stadia remain valid.

• Strictissimi juris in interpreting taxing powers of local government units — The power to tax when granted to a province must be construed in strictissimi juris; any doubt or ambiguity arising out of the terms used in granting that power must be resolved against the province, and inferences, implications, or deductions have no place in the interpretation.
• Ejusdem generis — Where a general word or phrase follows an enumeration of particular and specific words of the same class, the general word or phrase is construed to include only persons, things, or cases akin to, resembling, or of the same kind or class as those specifically mentioned.
• Definition of Amusement Places under Section 131(c) of the LGC — Amusement places include theaters, cinemas, concert halls, circuses, and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performances, which serves as the statutory basis for interpreting "other places of amusement" in Section 140.

• "The power [to tax] when granted [to a province] is to be construed in strictissimi juris. Any doubt or ambiguity arising out of the term used in granting that power must be resolved against the [province]. Inferences, implications, deductions – all these – have no place in the interpretation of the taxing power of a [province]."
• "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'."
• "To do otherwise would be to countenance an arbitrary interpretation/application of a tax law and to inflict an injustice on unassuming taxpayers."

• Icard v. City Council of Baguio — Controlling precedent establishing that the taxing power of municipal corporations must be construed in strictissimi juris and that any ambiguity must be resolved against the municipality.
• Philippine Basketball Association v. Court of Appeals — Applied the principle of ejusdem generis to interpret "other places of amusement" under the old Local Tax Code; held that professional basketball games are not places of amusement akin to theaters and cinemas because the latter involve artistic expression while the former caters to sports.
• Commissioner of Internal Revenue v. Citytrust Investment Phils. Inc. — Provided the definition of percentage tax as a tax measured by a certain percentage of the gross selling price or gross receipts.
• National Power Corporation v. Angas — Explained the purpose and rationale of the ejusdem generis rule, which is to give effect to both particular and general words by treating the particular words as indicating the class.

• Section 5, Article X of the 1987 Constitution — Grants local government units the power to create their own sources of revenues and levy taxes subject to guidelines and limitations provided by Congress.
• Section 131(b) and (c) of Republic Act No. 7160 (Local Government Code) — Define "Amusement" as pleasurable diversion and entertainment, and "Amusement Places" as venues where one seeks admission to entertain oneself by seeing or viewing shows or performances.
• Section 133(i) of the LGC — Prohibits local government units from levying percentage or value-added taxes on sales, barters, or exchanges of goods or services except as otherwise provided.
• Section 140 of the LGC — Authorizes provinces to levy amusement taxes on proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement.
• Section 187 of the LGC — Governs the procedure for approval and effectivity of tax ordinances and the appeal to the Secretary of Justice.
• Section 125 of the National Internal Revenue Code (Republic Act No. 8424) — Lists amusement taxes as among the percentage taxes levied by the national government, supporting the characterization of amusement taxes as percentage taxes.