GR L 18129; (January, 1963) (Digest)
G.R. No. L-18129; January 31, 1963
C. N. HODES, petitioner-appellant, vs. THE MUNICIPAL BOARD OF THE CITY OF ILOILO, ET AL., respondents-appellants.
FACTS
The Municipal Board of Iloilo City enacted Ordinance No. 33, series of 1960, imposing a sales tax of one-half of one percent on the selling price of any motor vehicle sold within the city. The ordinance further mandated that payment of this tax was a prerequisite for the registration of the sale and transfer of ownership at the Motor Vehicles Office. C. N. Hodges, engaged in the business of buying and selling used motor vehicles, filed a petition for declaratory judgment, challenging the ordinance’s validity. He argued it was enacted in excess of the city’s authority under the Local Autonomy Act ( Republic Act No. 2264 ). The City of Iloilo defended the ordinance as a valid exercise of its taxing powers under Section 2 of the same Act.
ISSUE
The primary issue is whether Ordinance No. 33 is a valid exercise of the taxing power granted to Iloilo City under the Local Autonomy Act, particularly concerning both the imposition of a percentage sales tax on motor vehicles and the requirement that tax payment precede vehicle registration.
RULING
The Supreme Court upheld the ordinance in its entirety, reversing the lower court’s partial invalidation. On the first point, the Court ruled that the imposition of a percentage sales tax on second-hand motor vehicles is a valid exercise of the city’s power to “levy for public purposes just and uniform taxes” under Section 2 of Republic Act No. 2264 . While the Act prohibits municipalities and municipal districts from imposing percentage taxes on sales, this prohibition explicitly does not extend to chartered cities like Iloilo. Therefore, the city was within its authority to enact such a tax.
Regarding the requirement linking tax payment to vehicle registration, the Court disagreed with the trial court’s finding that this constituted an invalid tax on motor vehicle registration, which is prohibited by Section 2(h) of the Act. The Court clarified that this requirement is not a separate tax but a legitimate coercive measure to ensure the effective collection of the validly imposed sales tax. The Court invoked the principle that the grant of taxing power carries with it the implied authority to employ necessary and reasonable means to enforce collection. The registration prerequisite was deemed a reasonable and indispensable enforcement mechanism to prevent evasion, falling within the city’s implied powers to accomplish the essential objects of its expressly granted taxation authority. Thus, the entire ordinance was declared valid.