G.R. No. 183137, April 10, 2013
PELIZLOY REALTY CORPORATION, represented by its President, GREGORY K. LOY, Petitioner, vs. THE PROVINCE OF BENGUET, Respondent.

FACTS

Petitioner Pelizloy Realty Corporation owns Palm Grove Resort, a recreational facility with swimming pools, a spa, and function halls in Tuba, Benguet. The Provincial Board of Benguet approved Provincial Tax Ordinance No. 05-107 (Benguet Revenue Code of 2005), effective January 1, 2006. Section 59, Article X of this ordinance levied a 10% amusement tax on gross receipts from admission fees to “resorts, swimming pools, bath houses, hot springs, and tourist spots.” Petitioner filed an appeal with the Secretary of Justice, arguing the ordinance was ultra vires. After the Secretary failed to act within the 60-day period prescribed by the Local Government Code (LGC), petitioner filed a Petition for Declaratory Relief and Injunction before the Regional Trial Court (RTC). Petitioner contended that Section 59 imposed a prohibited percentage tax under Section 133(i) of the LGC. The RTC dismissed the petition, ruling that declaratory relief was proper but that the tax was valid, as Section 133(i) prohibits percentage taxes on sales of goods or services, not on admissions, and that the listed establishments fell under “other places of amusement” per the LGC. Petitioner’s motion for reconsideration was denied, prompting this petition.

ISSUE

1. Whether Section 59, Article X of the Benguet Revenue Code of 2005 levies a prohibited percentage tax under Section 133(i) of the Local Government Code.
2. 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 Local Government Code.

RULING

The Supreme Court granted the petition, reversing the RTC decision.
1. On the nature of the tax: The Court ruled that the 10% tax on gross receipts from admissions is a percentage tax. However, Section 133(i) of the LGC prohibits local government units from levying a percentage or value-added tax on sales, barters, or exchanges of goods or services. The prohibition does not extend to percentage taxes on admission fees to amusement places, which are explicitly authorized under Section 140 of the LGC. Therefore, the tax is not prohibited by Section 133(i).
2. On the authority to tax: The Court held that the Province of Benguet exceeded its delegated authority. The power of local governments to tax must be construed strictly (strictissimi juris). Section 140 of the LGC authorizes provinces to impose an amusement tax on proprietors, lessees, or operators of specifically enumerated amusement places (theaters, cinemas, concert halls, circuses, cockpits, dancing halls, night/day clubs) and “other places of amusement.” Applying the doctrine of ejusdem generis, the term “other places of amusement” must be limited to places of the same kind or class as those specifically listed. The enumerated places are characterized as venues for public entertainment, performances, or spectacles where patrons are essentially passive observers or audiences. In contrast, resorts, swimming pools, bath houses, hot springs, and tourist spots are primarily places for personal recreation, leisure, and physical activity, where patrons actively participate. Therefore, these recreational places do not belong to the same genus as the amusement places enumerated in Section 140. Consequently, the Province of Benguet had no statutory authority to impose an amusement tax on admissions to these recreational facilities under Section 140. Section 59, Article X of the Provincial Tax Ordinance was declared null and void.