14. REAGAN VS.

COMMISSIONER, 30 SCRA 968

TOPIC: NATIONAL TERRITORY

FACTS: Petitioner William C. Reagan, a former civilian employee of the an American
Corporation providing technical assistance to the United States Air Force in the Philippines, is
charged by Respondent, the Commissioner of Internal Revenue for income taxes. The tax is
assessed by the respondent on the sale of an automobile by the petitioner to a member of the
United State Marine Corps. The transaction occurred in Clark Field Air Base at Pampanga.
Petitioner dispute that the power to tax cannot be imposed as the sale was made outside the
Philippine territory and the state has no jurisdiction over the place.

ISSUE: Whether or not the sale was made outside the jurisdiction of Philippine territory and
therefore cannot be taxed by the state.

HELD: The Court held that the Philippines being independent and sovereign, can exercise its
power over its territorial domains. The argument of the petitioner that the Air Field is of foreign
soil does not hold because the ground occupied by a foreign embassy does not encompass
such to be a foreign state. Thus, the action of the State to collect taxes is an act of sovereignty
over its territory and the commission shall not affirm of the requested refund of the petitioner.