Flashcards Studio

Nova Province enacts Ordinance No. 12-2025 imposing a 2.5% gross receipts tax on any digital platform that provides on-demand cloud gaming services to residents of Nova Province, regardless of whether the operator has any physical presence in the Philippines. CloudPlay, a foreign corporation with servers abroad and no Philippine office, offers cloud gaming to Nova Province residents via the Internet. CloudPlay challenges the ordinance as an extraterritorial tax beyond the province's taxing power; the Province defends it as a valid exercise of its power to tax commerce within its territory. (a) Identify the controlling doctrine governing the validity of such local taxation of a digital platform with no local presence. (b) Distinguish the controlling rule between local taxation of nonresident digital platforms and national taxation of Philippine-source income. (c) Apply the doctrine to the facts and determine whether the ordinance is constitutional. If not, explain the appropriate framework to tax digital services in the Philippines and the remedies for the Province.