4 reasons to distinguish TAX from LICENSE FEE

[1] It is necessary to determine whether a particular imposition is a tax or a license fee because some limitations apply only to one and not to the other, and for the reason that exemption from taxes may not include exemption from license fee.

[2] The power to regulate as an exercise of police power does not include the power to impose fees for revenue purposes. The amount of tax bears no relation at all to the probable cost of regulating the activity, occupation, or property being taxed.

For, ordinarily, the higher the amount of stall rentals, the higher the aggregate volume of foodstuffs and related items sold in petitioner's privately owned market; and the higher the volume of goods sold in such private market, the greater the extent and frequency of inspection and supervision that may be reasonably required in the interest of the buying public. Moreover, what we started with should be recalled here: the authority conferred upon the respondent's City Council is not merely "to regulate" but also embraces the power "to tax" the petitioner's business. (G.R. No. L-36081. April 24, 1989)

[3] An exaction, however, may be considered both a tax and a license fee. This is true in the case of car registration fees which may be regarded as taxes even as 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. (G.R. No. L-41383 August 15, 1988)

It is possible for an exaction to be both tax arose. regulation. License fees are changes. looked to as a source of revenue as well as a means of regulation (Sonzinky v. U.S., 300 U.S. 506) This is true, for example, of automobile license fees. Isabela such case, the fees may properly be 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. (1955 CCH Fed. tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo. 97 Phil. 213-214) Lutz v. Araneta 98 Phil. 198.) These exactions are sometimes called regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.) (Umali, Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593).[4] A tax may have only a regulatory purpose. The general rule, however, is that the imposition is a tax if its primary purpose is to generate revenue, and regulation is merely incidental; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax.

In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will be deemed a tax even though the measure results in some form of regulation. On the other hand, if the purpose is primarily to regulate, then it is deemed a regulation and an exercise of the police power of the state, even though incidentally, revenue is generated. (G.R. No. 189999. June 27, 2012)

The conservative and pivotal distinction between these two (2) powers rests in the purpose for which the charge is made. If generation 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 revenue is incidentally raised does not make the imposition a tax. (G.R. No. 189999. June 27, 2012)

Popular Posts