Progressive Development Corporation v.
Quezon City as basis for determining the collectible amount of license tax does not, by itself,
Facts: The City Council of QC passed an ordinance known as the Market Code of
QC, which imposed a 5% supervision fee on gross receipts on rentals or lease of
privately-owned market spaces in QC.
In case of failure of the owners of the market spaces to pay the tax for three
consecutive months, the City shall revoke the permit of the privately-owned
market to operate.
Progressive Development Corp, owner and operator of Farmers Market, filed a
petition for prohibition against QC on the ground that the tax imposed by the
Market Code was in reality a tax on income, which the municipal corporation was
prohibited by law to impose.
Issue: Whether or not the supervision fee is an income tax or a license fee
Held: It is a license fee. A LICENSE FEE is imposed in the exercise of the police
power primarily for purposes of regulation, while TAX is imposed under the taxing
power primarily for purposes of raising revenues.
If the generating of revenue is the primary purpose and regulation is merely
incidental, the imposition is a tax; but if regulation is the primary purpose, the
fact that incidentally, revenue is also obtained does not make the imposition a
tax.
To be considered a license fee, the imposition must relate to an occupation or
activity that so engages the public interest in health, morals, safety, and
development as to require regulation for the protection and promotion of such
public interest; the imposition must also bear a reasonable relation to the
probable expenses of regulation, taking into account not only the costs of direct
regulation but also its incidental consequences.
In this case, the Farmers Market is a privately-owned market established for the
rendition of service to the general public. It warrants close supervision and
control by the City for the protection of the health of the public by insuring the
maintenance of sanitary conditions, prevention of fraud upon the buying public,
etc.
Since the purpose of the ordinance is primarily regulation and not revenue
generation, the tax is a license fee. The use of the gross amount of stall rentals
convert the license tax into a prohibited tax on income.
Such basis actually has a reasonable relationship to the probable costs of
regulation and supervision of Progressives kind of business, since ordinarily, the
higher the amount of rentals, the higher the volume of items sold.
The higher the volume of goods sold, the greater the extent and frequency of
supervision and inspection may be required in the interest of the buying public.
Facts: The City Council of Quezon City adopted Ordinance 7997 (1969) where
privately owned and operated public markets to pay 10% of the gross receipts
from stall rentals to the City, as supervision fee. Such ordinance was amended by
Ordinance 9236 (1972), which imposed a 5% tax on gross receipts on rentals or
lease of space in privately-owned public markets in Quezon City. Progressive
Development Corp., owner and operator of Farmers Market and Shopping Center,
filed a petition for prohibition against the city on the ground that the supervision
fee or license tax imposed is in reality a tax on income the city cannot impose.
Issue: Whether the supervision fee / license tax is a tax on income
Held: The 5% tax imposed in Ordinance 9236 does not constitute a tax on
income, nor a city income tax (distinguished from the national income tax by the
Tax Code) within the meaning of Section 2 (g) of the Local Autonomy Act, but
rather a license tax or fee for the regulation of business in which the company is
engaged. To be considered a license fee, the imposition must relate to an
occupation or activity that so engages the public interest in health, morals, safety
and development as to require regulations for the protection and promotion of
such public interest; the imposition must also bear a reasonable relation to the
probable expenses of the regulation, taking into account not only the costs of
direct regulation but also its incidental consequences as well. The gross receipts
from stall rentals have been used only as a basis for computing the fees or taxes
due to the city to cover the latters administrative expenses. The use of the gross
amount of stall rentals, as basis for the determination of the collectible amount of
license tax, does not by itself convert or render the license tax into a prohibited
city tax on income. For ordinarily, the higher the amount of stall rentals, the
higher the aggregate volume of foodstuffs and related items sold in the privately
owned market; and the higher the volume of goods sold in such market, the
greater extent and frequency of inspection and supervision that may be
reasonably required in the interest of the buying public.