Commissioner of Internal Revenue vs. Algue Inc.

GR No. L-28896 | Feb. 17, 1988

Facts:
Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities
On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency income taxes from 1958-1959,
amounting to P83,183.85
A letter of protest or reconsideration was filed by Algue Inc on Jan 18
On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its counsel, Atty. Guevara, who
refused to receive it on the ground of the pending protest
Since the protest was not found on the records, a file copy from the corp was produced and given to BIR Agent
Reyes, who deferred service of the warrant
On April 7, Atty. Guevara was informed that the BIR was not taking any action on the protest and it was only then
that he accepted the warrant of distraint and levy earlier sought to be served
On April 23, Algue filed a petition for review of the decision of the CIR with the Court of Tax Appeals
CIR contentions:
- the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable
or necessary business expense
- payments are fictitious because most of the payees are members of the same family in control of Algue
and that there is not enough substantiation of such payments
CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in the form of promotional fees.
These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of
the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development
Company.

Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction
claimed by Algue as legitimate business expenses in its income tax returns

Ruling:
Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance,
made in accordance with law.
RA 1125: the appeal may be made within thirty days after receipt of the decision or ruling challenged
During the intervening period, the warrant was premature and could therefore not be served.
Originally, CIR claimed that the 75K promotional fees to be personal holding company income, but
later on conformed to the decision of CTA
There is no dispute that the payees duly reported their respective shares of the fees in their income
tax returns and paid the corresponding taxes thereon. CTA also found, after examining the evidence,
that no distribution of dividends was involved
CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary
deduction
Algue Inc. was a family corporation where strict business procedures were not applied and immediate
issuance of receipts was not required. at the end of the year, when the books were to be closed, each
payee made an accounting of all of the fees received by him or her, to make up the total of
P75,000.00. This arrangement was understandable in view of the close relationship among the persons
in the family corporation
The amount of the promotional fees was not excessive. The total commission paid by the Philippine
Sugar Estate Development Co. to Algue Inc. was P125K. After deducting the said fees, Algue still had a
balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the
total commission. This was a reasonable proportion, considering that it was the payees who did
practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual
purchase by it of the Sugar Estate properties.
Sec. 30 of the Tax Code: allowed deductions in the net income Expenses - All the ordinary and
necessary expenses paid or incurred during the taxable year in carrying on any trade or business,
including a reasonable allowance for salaries or other compensation for personal services actually
rendered xxx
The burden is on the taxpayer to prove the validity of the claimed deduction
In this case, Algue Inc. has proved that the payment of the fees was necessary and reasonable in the
light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture
in an experimental enterprise and involve themselves in a new business requiring millions of pesos.
Taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for
lack of the motive power to activate and operate it. Hence, despite the natural reluctance to
surrender part of one's hard earned income to the taxing authorities, every person who is able to must
contribute his share in the running of the government. The government for its part, is expected to
respond in the form of tangible and intangible benefits intended to improve the lives of the people and
enhance their moral and material values
Taxation must be exercised reasonably and in accordance with the prescribed procedure. If it is not,
then the taxpayer has a right to complain and the courts will then come to his succor
Algue Inc.s appeal from the decision of the CIR was filed on time with the CTA in accordance with Rep. Act No. 1125. And we
also find that the claimed deduction by Algue Inc. was permitted under the Internal Revenue Code and should therefore not
have been disallowed by the CIR
Osmea v Orbos (1993)

Osmea v Orbos
GR No 99886, March 31, 1993

FACTS:
President Marcos created a special account in the General Fund designated as the Oil Price Stabilization
Fund (OPSF). The OPSF was designated to reimburse oil companies for cost increases in crude oil.
Subsequently, EO 137 expanded the grounds for reimbursement to oil companies for cost underrecovery.
Now, the petition avers that the creation of the trust fund violates the Constitution that if a special tax is
collected for a specific purpose, the revenue generated as a special fund to be used only for the purpose
indicated.

ISSUE:
Is the OPSF constitutional?

RULING:
Yes. The tax collected is not in pure exercise of the taxing power. It is levied with a regulatory purpose, to
provide a means for the stabilization of the petroleum products industry. The levy is primarily in the
exercise of the police power of the State.

PAL v Edu (1988)

Philippine Airlines v Edu
GR No L-41383, August 15, 1988

FACTS:
PAL is engaged in the air transportation business under a legislative franchise (Act 4271), wherein it is
exempt from the
payment of taxes. On the strength of an opinion of the Secretary of Justice, PAL was determined to have
not been paying motor vehicle registration fees since 1956. The Land Transportation Commissioner
required all tax-exempt entities, including PAL, to pay motor vehicle registration fees. PAL protested.
The trial court dismissed PALs complaint. Hence, this petition.

ISSUE:
Are motor vehicle registration fees taxes or regulatory taxes?

RULING:
They are taxes. Tax are for revenue, whereas fees are exactions for purposes of regulation and inspection,
and are for that reason limited in amount to what is necessary to cover the cost of the services rendered in
that connection.
It is the object of the charge, and not the name, that determines whether a charge is a tax or a fee. The
money collected under the Motor Vehicle Law is not intended for the expenditures of the Motor Vehicle
Law is not intended for the expenditures of the Motor Vehicles Office but accrues to the funds for the
construction and maintenance of public roads, streets and bridges.
As the fees are not collected for regulatory purposes as an incident to the enforcement of regulations
governing the operation of motor vehicles on public highways, but to provide revenue with which the
Government is to construct and maintain public highways for everyones use, they are veritable taxes, not
merely fees.
PAL is, thus, exempt from paying such fees, except for the period between June 27, 1968 to April 9,
1979, where its tax exception in the franchise was repealed.

Fees may be properly regarded as taxes even though they also serve as an instrument of regulation... If
the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then
the exaction is properly called a tax. [PAL v. Edu, G.R. No. L- 41383 August 15, 1988
Republic of the Philippines v Bacolod-Murcia
GR No. L-19824, L-19825, L-19826
July 9, 1966

FACTS:
RA 632 created the Philippine Sugar Institute, a semi-public corporation. In 1951, the Institute acquired
the Insular Sugar Refinery for P3.07 million payable in installments from the proceeds of the Sugar tax to
be collected under RA 632. The operation of the refinery for 1954 to 1957 was disastrous as the Institute
suffered tremendous losses. Contending that the purchase of refinery with money from the Institutes fund
was not authorized under RA 632, and that the continued operation of the refinery is inimical to their
interest, Bacolod-Murcia Milling Co., Ma-ao Sugar Central, Talisay-Silay Milling Co. and the Central
Azucarera del Danao refused to continue with their contribution to said fund. The trial court found them
liable under RA 632. Hence, this petition.

ISSUE:
Are the milling companies liable?

RULING:
Yes. The special assessment or levy for the Philippine Sugar Institute Fund is not so much an exercise of
the power of
taxation, nor the imposition of a special assessment, but the exercise of police power for the general
welfare of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen
may lawfully resist.
Section 2a of the charter authorizes Philsugin to acquire the refinery in question. The financial loss
resulting from the operation thereof is no means an index that the industry did profit therefrom, as other
gains of a different nature (such as experience) may have been realized.

Caltex Philippines, Inc. v Commission on Audit

GR No. 92585, May 8, 1992
FACTS:
In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil Price Stabilization Fund
(OPSF), excluding that unremitted for the years 1986 and 1988, of the additional tax on petroleum
products authorized under the PD 1956. Pending such remittance, all of its claims for reimbursement from
the OPSF shall be held in abeyance. The grant total of its unremitted collections of the above tax is
P1,287,668,820.
Caltex submitted a proposal to COA for the payment and the recovery of claims. COA approved the
proposal but prohibited Caltex from further offsetting remittances and reimbursements for the current and
ensuing years. Caltex moved for reconsideration but was denied. Hence, the present petition.

ISSUE:
Whether the amounts due from Caltex to the OPSF may be offsetted against Caltexs outstanding claims
from said funds

RULING:
No. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of
government. Taxes may be levied with a regulatory purpose to provide means for the rehabilitation and
stabilization of a threatened industry which is affected with public interest as to be within the police
power of the State.
PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is taxation. A taxpayer may
not offset taxes due from the claims he may have against the government. Taxes cannot be subject of
compensation because the government and taxpayer are not mutually creditors and debtors of each other
and a claim for taxes is not such a debt, demand,, contract or judgment as is allowed to be set-off.
Hence, COA decision is affirmed except that Caltexs claim for reimbursement of underrecovery arising
from sales to the National Power Corporation is allowed.
Chavez v Ongpin
GR No 76778, June 6, 1990

FACTS:
Section 21 of Presidential Decree 464 provides that every 5 years starting calendar year 1978, there shall be a
provincial or city general revision of real property assessments. The general revision was completed in 1984.
On November 25, 1986, President Corazon Aquino issued EO 73 stating that beginning January 1, 1987, the
1984 assessments shall be the basis of real property taxes. Francisco Chavez, a taxpayer and landowner,
questioned the constitutionality of EO 74. He alleges that it will bring unreasonable increase in real property
taxes.

ISSUE:
Is EO 73 constitutional?

RULING:
Yes. Without EO 73, the basis for collection of real property taxes will still be the 1978 revision of property
values. Certainly, to continue collecting real property taxes based on valuations arrived at several years ago, in
disregard of the increases in the value of real properties that have occurred since then is not in consonance with
a sound tax system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenue
must be adequate to meet government expenditures and their variations.

THE PHILIPPINE GUARANTY CO., INC., PETITIONER, VS. THE COMMISSIONER OF

INTERNAL REVENUE AND THE COURT OF TAX APPEALS, RESPONDENTS;
G.R. No. L-22074, April 30, 1965; REYES, J.B.L., J

Facts:
The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance contracts
with foreign insurance companies not doing business in the Philippines, thereby ceding to the foreign
reinsurers a portion of the premiums on insurances it has originally underwritten in the
Philippines. Philippine Guaranty Co., Inc. ceded to the foreign reinsurers the premiums for 1953 and
1954. Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it filed
its income tax returns for 1953 and 1951. Furthermore, it did not withhold or pay tax on them.
Consequently, the Commissioner of Internal Revenue assessed Philippine Guaranty Co., Inc. against
withholding tax on the ceded reinsurance premiums. Philippine Guaranty Co., Inc. protested the
assessment on the ground that the premiums are not subject to tax for the premiums did not constitute
income from sources within the Philippines because the foreign reinsurers did not engage in business in
the Philippines,and CIR's previous rulings did not require insurance companies to withhold income tax
due from foreign companies.

ISSUE: Are insurance companies required to withhold tax on reinsurance premiums ceded to foreign
insurance companies?

Ruling:
Yes. The reinsurance contracts however show that the transactions or activities that constituted the
undertaking to reinsure Philippine Guaranty Co., Inc. against losses arising from the original insurances
in the Philippines were performed in the Philippines. The reinsurance premiums were income created
from the undertaking of the foreign reinsurance companies to reinsure Philippine Guaranty Co., Inc.
against liability for loss under original insurances. Such undertaking, as explained above, took place in
the Philippines. These insurance premiums therefore came from sources within the Philippines and,
hence, are subject to corporate income tax.

The power to lax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary
burden to preserve the State's sovereignty and a means to give the citizenry an army to resist an
aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public
improvements designed for the enjoyment of the citizenry and those which come within the State's
territory, and facilities and protection which a government is supposed to provide. Considering that the
reinsurance premiums in question were afforded protection by the government and the recipient
foreign reinsurers exercised rights and privileges guaranteed by our laws, such reinsurance premiums
and reinsurers should share the burden of maintaining the state.
Gomez vs. Palomar
G.R. No. L-23645 October 29, 1968
Facts:
Petitioner questions the constitutionality of the statute, claiming that R.A. 1635 otherwise known as as the
Anti-TB Stamp Law, is violative of the equal protection clause of the Constitution because it constitutes mail
users into a class for the purpose of the tax while leaving untaxed the rest of the population and that even
among postal patrons the statute discriminatory grant exemptions.

Moreover, petitioner contends that the statutory classification of taxpayers has no relation to the object sought
by the Anti-TB law.

Issue:
Whether or not the Anti-Tb law violates the equal protection clause of the constitution.

Ruling:
No, Supreme Court reiterated that the legislature has the inherent power to select the subjects of taxation and to
grant exemptions. The reason for this is that traditionally, classification has been a device for fitting tax programs to
local needs and usages in order to achieve an equitable distribution of the tax burden. The legislative classifications
must be reasonable is of course undenied in this case.

The classification of mail users is not without any reason. It is based on ability to pay, let alone the enjoyment of
a privilege, and on administrative convenience. The classification is likewise based on considerations of administrative
convenience. For it is now a settled principle of law that "consideration of practical administrative convenience and cost
in the administration of tax laws afford adequate ground for imposing a tax on a well-recognized and defined class.
Lastly, mail users were already a class by themselves even before the enactment of the statue and all that the
legislature did was merely to select their class. Legislation is essentially empiric and Republic Act 1635, as amended, no
more than reflects a distinction that exists in fact. As Mr. Justice Frankfurter said, "to recognize differences that exist in
fact is living law; to disregard [them] and concentrate on some abstract identities is lifeless logic."

Petitioner's assertions that statutory classification of mail users must bear some reasonable relationship to the end
sought to be attained, and that absent such relationship the selection of mail users is constitutionally impermissible
does not hold water. This is altogether a different proposition, since explained by the court "that while the principle that
there must be a reasonable relationship between classification made by the legislation and its purpose is undoubtedly
true in some contexts, it has no application to a measure whose sole purpose is to raise revenue, so long as the
classification imposed is based upon some standard capable of reasonable comprehension, be that standard based
upon ability to produce revenue or some other legitimate distinction, equal protection of the law has been afforded."

Lorenzo vs. Posadas

64 Phil 353
Facts:
On 27 May 1922, Thomas Hanley died in Zamboanga, leaving a will and considerable amount of real and
personal properties. Hanleys will provides the following: his money will be given to his nephew, Matthew
Hanley, as well as the real estate owned by him. It further provided that the property will only be given ten
years after Thomas Hanleys death. Thus, in the testamentary proceedings, the Court of First Instance of
Zamboanga appointed P.J.M. Moore as trustee of the estate. Moore took oath of office on March 10, 1924,
and resigned on Feb. 29, 1932. Pablo Lorenzo was appointed in his stead. Juan Posadas, Collector of
Internal Revenue, assessed inheritance tax against the estate amounting to P2,057.74 which includes penalty
and surcharge. He filed a motion in the testamentary proceedings so that Lorenzo will be ordered to pay the
amount due. Lorenzo paid the amount in protest after CFI granted Posadas motion. He claimed that the
inheritance tax should have been assessed after 10 years. He asked for a refund but Posadas declined to do
so. The latter counterclaimed for the additional amount of P1,191.27 which represents interest due on the tax
and which was not included in the original assessment. However, CFI dismissed this counterclaim. It also
denied Lorenzos claim for refund against Posadas. Hence, both appealed.

Issue: Whether the estate was delinquent in paying the inheritance tax and therefore liable for the P1,191.27
that Posadas is asking for?

Held: Yes. It was delinquent because according to Sec. 1544 (b) of the Revised Administrative Code,
payment of the inheritance tax shall be made before delivering to each beneficiary his share. This payment
should have been made before March 10, 1924, the date when P.J.M. Moore formally assumed the function
of trustee. Although the property was only to be given after 10 years from the death of Hanley, the court
considered that delivery to the trustee is delivery to cestui que trust, the beneficiary within the meaning of
Sec. 1544 (b).
Even though there was no express mention of the word trust in the will, the court of first instance was correct
in appointing a trustee because no particular or technical words are required to create a testamentary trust
(69 C.J.,p. 711). The requisites of a valid testamentary trust are: 1) sufficient words to raise a trust, 2) a
definite subject, 3) a certain or ascertained object. There is no doubt that Hanley intended to create a trust
since he ordered in his will that certain of his properties be kept together undisposed during a fixed period or
for a stated purpose.
Villanueva v City of Iloilo (1968)
GR No L-26521, December 28, 1968

FACTS:
On September 30, 1946, the Municipal Board of Iloilo City enacted Ordinance 86 imposing license tax
fees upon
tenement houses. The validity of such ordinance was challenged by Eusebio and Remedios Villanueva,
owners of four tenement houses containing 34 apartments. The Supreme Court held the ordinance to be
ultra-views. On January 15, 1960, however, the municipal board, believing that it acquired authority to
enact an ordinance of the same nature pursuant to the Local Autonomy Act, enacted Ordinance 11,
Eusebio and Remedios Villanueva assailed the ordinance anew.

ISSUE:
Does Ordinance 11 violate the rule of uniformity of taxation?

RULING:
No. The Court has ruled the tenement houses constitute a distinct class of property and that taxes are
uniform and equal when imposed upon all property of the same class or character within the taxing
authority.
The fact that the owners of the other classes of buildings in Iloilo are not imposed upon by the ordinance,
or that tenement taxes are imposed in other cities do not violate the rule of equality and uniformity. The
rule does not require that taxes for the same purpose should be imposed in different territorial
subdivisions at the same time. So long as the burden of tax falls equally and impartially on all owners or
operators of tenement houses similarly classified or situated, equality and uniformity is accomplished.
The presumption that tax statutes are intended to operate uniformly and equally was not overthrown
therein.

City of Baguio vs. De Leon

25 SCRA 938 \\\ GR No. L-24756, October 31, 1968

"There is no double taxation where one tax is imposed by the state and the other is imposed by the city."

FACTS: The City of Baguio passed an ordinance imposing a license fee on any person, entity or corporation
doing business in the City. The ordinance sourced its authority from RA No. 329, thereby amending the city
charter empowering it to fix the license fee and regulate businesses, trades and occupations as may be
established or practiced in the City. De Leon was assessed for P50 annual fee it being shown that he was
engaged in property rental and deriving income therefrom. The latter assailed the validity of the ordinance
arguing that it is ultra vires for there is no statury authority which expressly grants the City of Baguio to levy
such tax, and that there it imposed double taxation, and violates the requirement of uniformity.

ISSUE: Are the contentions of the defendant-appellant tenable?

HELD: No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code
empowering the City Council not only to impose a license fee but to levy a tax for purposes of revenue, thus
the ordinance cannot be considered ultra vires for there is more than ample statury authority for the enactment
thereof.
Second, an argument against double taxation may not be invoked where one tax is imposed by the state and
the other is imposed by the city, so that where, as here, Congress has clearly expressed its intention, the statute
must be sustained even though double taxation results.
And third, violation of uniformity is out of place it being widely recognized that there is nothing inherently
obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling
or activity by both the state and the political subdivisions thereof.
TIO VS. VIDEOGRAM REGULATORY BOARD
[151 SCRA 208; G.R. No. L-75697; 18 Jun 1987]

Facts: The case is a petition filed by petitioner on behalf of videogram operators adversely
affected by Presidential Decree No. 1987, An Act Creating the Videogram Regulatory Board"
with broad powers to regulate and supervise the videogram industry.
A month after the promulgation of the said Presidential Decree, the amended the National
Internal Revenue Code provided that:
"SEC. 134. Video Tapes. There shall be collected on each processed video-tape cassette,
ready for playback, regardless of length, an annual tax of five pesos; Provided, That locally
manufactured or imported blank video tapes shall be subject to sales tax."
"Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any provision
of law to the contrary, the province shall collect a tax of thirty percent (30%) of the purchase
price or rental rate, as the case may be, for every sale, lease or disposition of a videogram
containing a reproduction of any motion picture or audiovisual program.
Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the
other fifty percent (50%) shall accrue to the municipality where the tax is collected; PROVIDED,
That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the
Metropolitan Manila Commission.
The rationale behind the tax provision is to curb the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes or any technical improvement
or variation thereof, have greatly prejudiced the operations of movie houses and theaters. Such
unregulated circulation have caused a sharp decline in theatrical attendance by at least forty
percent (40%) and a tremendous drop in the collection of sales, contractor's specific,
amusement and other taxes, thereby resulting in substantial losses estimated at P450 Million
annually in government revenues.
Videogram(s) establishments collectively earn around P600 Million per annum from rentals,
sales and disposition of videograms, and these earnings have not been subjected to tax,
thereby depriving the Government of approximately P180 Million in taxes each year.
The unregulated activities of videogram establishments have also affected the viability of the
movie industry.

Issues:
(1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
(2) Whether or nor the DECREE is constitutional.

Held: Taxation has been made the implement of the state's police power. The levy of the 30%
tax is for a public purpose. It was imposed primarily to answer the need for regulating the video
industry, particularly because of the rampant film piracy, the flagrant violation of intellectual
property rights, and the proliferation of pornographic video tapes. And while it was also an
objective of the DECREE to protect the movie industry, the tax remains a valid imposition.
We find no clear violation of the Constitution which would justify us in pronouncing Presidential
Decree No. 1987 as unconstitutional and void. While the underlying objective of the DECREE is
to protect the moribund movie industry, there is no question that public welfare is at bottom of its
enactment, considering "the unfair competition posed by rampant film piracy; the erosion of the
moral fiber of the viewing public brought about by the availability of unclassified and unreviewed
video tapes containing pornographic films and films with brutally violent sequences; and losses
in government revenues due to the drop in theatrical attendance, not to mention the fact that the
activities of video establishments are virtually untaxed since mere payment of Mayor's permit
and municipal license fees are required to engage in business."
WHEREFORE, the instant Petition is hereby dismissed. No costs.
PEPSI-COLA BOTTLING CO. OF THE PHILS. INC. vs. CITY OF BUTUAN
24 SCRA 789
GR No. L-22814, August 28, 1968

"The classification made in the exercise of power to tax, to be valid, must be reasonable ."

FACTS: Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under protest, to the City of
Butuan, and collected by the latter, pursuant to its Municipal Ordinance No. 110 which plaintiff assails as null
and void because it partakes of the nature of an import tax, amounts to double taxation, highly unjust and
discriminatory, excessive, oppressive and confiscatory, and constitutes an invlaid delegation of the power to
tax. The ordinance imposes taxes for every case of softdrinks, liquors and other carbonated beverages,
regardless of the volume of sales, shipped to the agents and/or consignees by outside dealers or any person or
company having its actual business outside the City.

ISSUE: Does the tax ordinance violate the uniformity requirement of taxation?

HELD: Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a tax on the
sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity
required by the Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers
would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of
the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers
or merchants established outside the City of Butuan, would be exempt from the disputed tax.
It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity
or equality under all circumstances, or negate the authority to classify the objects of taxation. The classification
made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not
deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are
germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present
conditions, but, also, to future conditions substantially identical to those of the present; and (4) the
classification applies equally to all those who belong to the same class.