G.R. No. L-36081, April 24, 1989
On December 24, 1969, the City Council of Quezon City adopted Ordinance No. 7997, otherwise known as the Market Code of Quezon City, where privately owned and operated public markets were imposed a 5% supervision fee on gross receipts on rentals/lease of privately owned market spaces in the city.
On July 15, 1972, Progressive Development Corporation (Progressive), owner and operator of a public market known as the “Farmers Market & Shopping Center” filed a Petition for Prohibition with Preliminary Injunction against Quezon City on the ground that the supervision fee or license tax imposed is in reality a tax on income which Quezon City may not impose, the same being expressly prohibited by Republic Act No. 2264, as amended, otherwise known as the Local Autonomy Act.
In its Answer, Quezon City, through the City Fiscal, contended that it had authority to enact the questioned ordinances, maintaining that the tax on gross receipts imposed therein is not a tax on income.
The lower court ruled that the questioned imposition is not a tax on income, but rather a privilege tax or license fee which local governments, like Quezon City, are empowered to impose and collect.
Whether the tax imposed by Quezon City on gross receipts of stall rentals is properly characterized as partaking of the nature of an income tax.
No. It is a license fee for the regulation of the business in which Progressive is engaged. The controverted ordinance constitutes, not a tax on income, not a city income tax (as distinguished from the national income tax imposed by the National Internal Revenue Code) within the meaning of Section 2 (g) of the Local Autonomy Act. While it is true that the amount imposed by the questioned ordinances may be considered in determining whether the exaction is really one for revenue or prohibition, instead of one of regulation under the police power, it nevertheless will be presumed to be reasonable.
Notes: LOCAL GOVERNMENT UNITS; NO INHERENT POWER TO TAX. — As a general rule, there must be a statutory grant for a local government unit to impose lawfully a gross receipts tax, that unit not having the inherent power of taxation. The rule, however, finds no application in the instant case where what is involved is an exercise of, principally, the regulatory power of the respondent City and where that regulatory power is expressly accompanied by the taxing power.