GR 36081; (April, 1989) (Digest)

G.R. No. L-36081, April 24, 1989
PROGRESSIVE DEVELOPMENT CORPORATION, petitioner, vs. QUEZON CITY, respondent.

FACTS

Petitioner Progressive Development Corporation, owner and operator of the “Farmers Market & Shopping Center,” challenged two Quezon City ordinances. Ordinance No. 7997 (1969) imposed a 10% “supervision fee” on gross receipts from stall rentals in privately-owned public markets. This was amended by Ordinance No. 9236 (1972), which imposed a 5% tax on the gross receipts from such rentals. Both ordinances required monthly submission of certified lists of stallholders and provided for penalties, including revocation of the permit to operate for non-compliance. Petitioner filed a Petition for Prohibition, arguing the exaction was essentially an income tax, which the city was prohibited from imposing under the Local Autonomy Act (Republic Act No. 2264). The Court of First Instance dismissed the petition, ruling it was a permissible license fee or privilege tax.

ISSUE

Whether the imposition on gross receipts from stall rentals under the Quezon City ordinances is an invalid income tax or a valid license fee/privilege tax within the city’s taxing authority.

RULING

The Supreme Court ruled the imposition is a valid license fee or privilege tax, not an income tax. The Court clarified the distinction: an income tax is levied on the net income or profit realized from business, while a license tax is imposed for the privilege of carrying on a business, often measured by gross receipts. The ordinances here explicitly tax the gross receipts from rentals, not the net income. This is a classic form of a license tax, which local governments are empowered to impose under the Local Autonomy Act and Quezon City’s Charter. The Court emphasized that RA 2264 grants broad taxing authority to local governments, allowing them to levy “just and uniform taxes, licenses, or fees” for public purposes on businesses and occupations. The authority to “tax” and “fix the license fee” for businesses like operating a public market is expressly conferred by the city charter. The fact that the fee is calculated as a percentage of gross receipts does not transform it into an income tax; it is merely a reasonable method to quantify the license fee for the privilege of operating the market. The exaction is a regulatory cost for city supervision, not a tax on profit. Therefore, the ordinances are a valid exercise of the city’s delegated taxing power. The Petition was DENIED for lack of merit.