Pepsi-Cola v. Tanauan
G.R. No. L-31156February 27, 1976
Study material, not legal advice. Written and checked by the PhilippineLaws team to the best of our knowledge; not reviewed by a lawyer. A digest is a summary — the full decision is the authority, so read it before you cite it.
Cited for
Double Taxation
Why it matters
Congress may validly delegate taxing power to municipalities, and double taxation in general is not forbidden by the Constitution. It becomes objectionable only when the same taxpayer is taxed twice by the same jurisdiction for the same purpose, not when one tax is imposed by the State and another by a municipality. The Court upheld Section 2 of the Local Autonomy Act and Tanauan's per-gallon production tax on soft drinks, which was neither a percentage tax nor a specific tax.
Digest
The Municipality of Tanauan, Leyte enacted two ordinances imposing a 'municipal production tax' on soft drinks. Ordinance No. 23 (September 25, 1962) taxed producers 1/16 of a centavo for every bottle corked. Ordinance No. 27 (October 28, 1962) imposed one centavo on each gallon of volume capacity of soft drinks produced in the municipality. On January 17, 1963, the acting municipal treasurer sought to enforce Ordinance No. 27 against Pepsi-Cola's plant. Pepsi-Cola sued in the Court of First Instance of Leyte. It asked the court to declare Section 2 of RA 2264 (the Local Autonomy Act) unconstitutional as an undue delegation of taxing power and to nullify both ordinances. The CFI dismissed the complaint and upheld the law and the ordinances. It also ordered Pepsi-Cola to pay the taxes. The Court of Appeals certified the appeal to the Supreme Court because it raised only questions of law.
- 1Whether Section 2 of RA 2264 is an undue delegation of taxing power, confiscatory and oppressive.
- 2Whether Ordinances Nos. 23 and 27 constitute double taxation and impose a percentage or specific tax.
- 3Whether the ordinances are unjust and unfair.
The Court upheld both the law and Ordinance No. 27. Legislative powers over matters of local concern may be delegated to local governments, and the power to create municipal corporations carries with it the power to confer taxing authority. The 1973 Constitution itself allows local governments to levy taxes 'subject to such limitations as may be provided by law.' A plenary delegation is not confiscatory as long as due process limits are observed. The delegation cannot be struck down on a double-taxation theory. Double taxation 'is not forbidden by our fundamental law'. It becomes obnoxious only when the taxpayer is taxed twice by the same jurisdiction for the same purpose, not when one tax is imposed by the State and the other by a municipality. There was also no double taxation between the two ordinances, because Ordinance No. 27 was a substitute that impliedly repealed Ordinance No. 23. Only Ordinance No. 27 was being enforced. The per-gallon tax falls on production, whether sold or not. It sets no ratio to the volume of sales, so it is not a percentage tax on sales. It is not a specific tax either, because soft drinks are not among the articles subject to specific tax. A rate of one centavo per gallon, or about 1-1/2 centavos per case, is not unjust or excessive. Courts give municipalities wide discretion on rates. The Court declared Ordinance No. 27 valid and assessed costs against Pepsi-Cola.
Checked against the full decision by the PhilippineLaws team on September 21, 2026. Not reviewed by a lawyer.
Separate opinions
Concurred only in the result. He relied on the explicit grant of taxing power to local governments in the 1973 Constitution and, on double taxation, on City of Baguio v. De Leon, rather than restating doctrines developed under the 1935 Charter.