Sunday, February 05, 2012

Progressive Development Corporation vs. Quezon City

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 Farmer’s 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.

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 as basis for determining the collectible amount of license tax does not, by itself, 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 Progressive’s 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.

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1 comments: on "Progressive Development Corporation vs. Quezon City"

james abram said...

Thanks for the post! I am hoping that the Quezon City government and the private entities would be agreeing on giving free slots for the poor vendors.

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