THIRD DIVISION both are established for the rendition of service to the general public, which warrants close

supervision and control by the respondent City, for the protection of the health of the public by
[G.R. No. 36081. April 24, 1989.] insuring, e.g., the maintenance of sanitary and hygienic conditions in the market, compliance of all
food stuffs sold therein with applicable food and drug and related standards, for the prevention of
PROGRESSIVE DEVELOPMENT CORPORATION, Petitioner, v. QUEZON fraud and imposition upon the buying public, and so forth. We believe and so hold that the five
CITY, Respondent. percent (5%) tax imposed in Ordinance No. 9236 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)
Jalandoni, Herrera, Del Castillo & Associates for Petitioner. within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the
regulation of the business in which the petitioner is engaged.

SYLLABUS 4. ID.; ID.; ID.; TAX ORDINANCE PRESUMED REASONABLE AND VALID. — 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. Local governments are allowed wide discretion in
1. TAXATION: REPUBLIC ACT No. 2264 (LOCAL AUTONOMY ACT); LOCAL determining the rates of imposable license fees even in cases of purely police power measures, in the
GOVERNMENT UNITS; GRANTED BROAD TAXING POWERS. — It is now settled that absence of proof as to particular municipal conditions and the nature of the business being taxed as
Republic Act No. 2264 confers upon local governments broad taxing authority extending to almost well as other detailed factors relevant to the issue of arbitrariness or unreasonableness of the
"everything, excepting those which are mentioned therein," provided that the tax levied is "for public questioned rates. Thus:" [A]n ordinance carries with it the presumption of validity. The question of
purposes, just and uniform," does not transgress any constitutional provision and is not repugnant to a reasonableness though is open to judicial inquiry. Much should be left thus to the discretion of
controlling statute. municipal authorities Courts will go slow in writing off an ordinance as unreasonable unless the
amount is so excessive as to be prohibitory, arbitrary, unreasonable, oppressive, or confiscatory. A
2. ID.; ID.; ID.; CHARTERED CITIES AND MUNICIPALITIES GRANTED POWER TO rule which has gained acceptance is that factors relevant to such an inquiry are the municipal
IMPOSE TAXES AND LICENSE FEES. — The scope of legislative authority conferred upon the conditions as a whole and the nature of the business made subject to imposition." Petitioner has not
Quezon City Council in respect of businesses like that of the petitioner, is comprehensive: the grant shown that the rate of the gross receipts tax is so unreasonably large and excessive and so grossly
of authority is not only" [to] regulate" and "fix the license fee," but also "to tax." Section 2 of disproportionate to the costs of the regulatory service being performed by the respondent as to
Republic Act No. 2264, as amended, otherwise known as the Local Autonomy Act, provides that: compel the Court to characterize the imposition as a revenue measure exclusively. The lower court
"Any provision of law to the contrary notwithstanding, all chartered cities, municipalities and correctly held that the gross receipts from stall rentals have been used only as a basis for computing
municipal districts shall have authority to impose municipal license taxes or fees upon persons the fees or taxes due respondent to cover the latter’s administrative expenses, i.e., for regulation and
engaged in any occupation or business, or exercising privileges in chartered cities, municipalities or supervision of the sale of foodstuffs to the public. The use of the gross amount of stall rentals as basis
municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city for determining the collectible amount of license tax, does not by itself, upon the one hand, convert or
council of the city, the municipal council of the municipality, or the municipal district council of the render the license tax into a prohibited city tax on income. Upon the other hand, it has not been
municipal district; to collect fees and charges for service rendered by the city, municipality or suggested that such basis has no reasonable relationship to the probable costs of regulation and
municipal district; to regulate and impose reasonable fees for services rendered in connection with supervision of the petitioner’s kind of business. For, ordinarily, the higher the amount of stall rentals,
any business, profession or occupation being conducted within the city, municipality or municipal the higher the aggregate volume of foodstuffs and related items sold in petitioner’s privately owned
district and otherwise to levy for public purposes just and uniform taxes licenses or fees: . . ."cralaw market; and the higher the volume of goods sold in such private market, the greater the extent and
virtua1aw library 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
3. ID.; ID.; ID.; TAX IMPOSED UNDER CITY ORDINANCE NO. 9236, NOT A TAX ON respondent’s City Council is not merely "to regulate" but also embraces the power "to tax" the
INCOME BUT A LICENSE FEE FOR REGULATION OF BUSINESS. — The "Farmers Market & petitioner’s business.
Shopping Center" was built by virtue of Resolution No. 7350 passed on 30 January 1967 by
respondents’ local legislative body authorizing petitioner to establish and operate a market with a 5. ID.; LICENSE FEE, AND TAX DISTINGUISHED. — The term "tax" frequently applies to all
permit to sell fresh meat, fish, poultry and other foodstuffs. The same resolution imposed upon kinds of exactions of monies which become public funds. It is often loosely used to include levies for
petitioner, as a condition for continuous operation, the obligation to "abide by and comply with the revenue as well as levies for regulatory purposes such that license fees are frequently called taxes
ordinances, rules and regulations prescribed for the establishment, operation and maintenance of although license fee is a legal concept distinguishable from tax: the former is imposed in the exercise
markets in Quezon City." The "Farmers’ Market and Shopping Center" being a public market in the of police power primarily for purposes of regulation, while the latter is imposed under the taxing
sense of a market open to and inviting the patronage of the general public, even though privately power primarily for purposes of raising revenues. Thus, if the generating of revenue is the primary
owned, petitioner’s operation thereof required a license issued by the respondent City, the issuance of purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary
which, applying the standards set forth above, was done principally in the exercise of the purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. To be
respondent’s police power. The operation of a privately owned market is, as correctly noted by the considered a license fee, the imposition questioned must relate to an occupation or activity that so
Solicitor General, equivalent to or quite the same as the operation of a government-owned market; 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 a. name of stallholder or lessee;
to the probable expenses of regulation, taking into account not only the costs of direct regulation but
also its incidental consequences as well. When an activity, occupation or profession is of such a b. amount of rental;
character that inspection or supervision by public officials is reasonably necessary for the
safeguarding and furtherance of public health, morals and safety, or the general welfare, the c. period of lease, indicating therein whether the same is on a daily, monthly or yearly basis.
legislature may provide that such inspection or supervision or other form of regulation shall be
carried out at the expense of the persons engaged in such occupation or performing such activity, and x       x       x
that no one shall engage in the occupation or carry out the activity until a fee or charge sufficient to
cover the cost of the inspection or supervision has been paid. Accordingly, a charge of a fixed sum
which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather SECTION 4. . . . In case of consistent failure to pay the percentage tax for three (3) consecutive
than an exercise of the police power. months, the City shall revoke the permit of the privately-owned market to operate and/or take any
other appropriate action or remedy allowed by law for the collection of the overdue percentage tax
6. ID.; LOCAL GOVERNMENT UNITS; NO INHERENT POWER TO TAX. — As a general rule, and surcharge.
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 x       x       x" 2 
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. On 15 July 1972, petitioner Progressive Development Corporation, owner and operator of a public
market known as the "Farmers Market & Shopping Center" filed a Petition for Prohibition with
Preliminary Injunction against respondent before the then Court of First Instance of Rizal on the
DECISION ground that the supervision fee or license tax imposed by the above-mentioned ordinances is in
reality a tax on income which respondent may not impose, the same being expressly prohibited by
Republic Act No. 2264, as amended.chanroblesvirtuallawlibrary:red
FELICIANO, J.:
In its Answer, respondent, 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 Solicitor General also filed an Answer arguing that petitioner, not having paid the ten
On 24 December 1969, the City Council of respondent Quezon City adopted Ordinance No. 7997, percent (10%) supervision fee prescribed by Ordinance No. 7997, had no personality to question, and
Series of 1969, otherwise known as the Market Code of Quezon City, Section 3 of which was estopped from questioning, its validity; that the tax on gross receipts was not a tax on income but
provided:jgc:chanrobles.com.ph one imposed for the enjoyment of the privilege to engage in a particular trade or business which was
within the power of respondent to impose.chanrobles law library : red
"Sec. 3. Supervision Fee. — Privately owned and operated public markets shall submit monthly to
the Treasurer’s Office, a certified list of stallholders showing the amount of stall fees or rentals paid In its Supplemental Petition of 23 September 1972, petitioner alleged having paid under protest the
daily by each stallholder, . . . and shall pay 10% of the gross receipts from stall rentals to the five percent (5%) tax under Ordinance No. 9236 for the months of June to September 1972. Two (2)
City, . . ., as supervision fee. Failure to submit said list and to pay the corresponding amount within days later, on 25 September 1972, petitioner moved for judgment on the pleadings, alleging that the
the period herein prescribed shall subject the operator to the penalties provided in this Code . . . material facts had been admitted by the parties.
including revocation of permit to operate. . . ." 1 
On 21 October 1972, the lower court dismissed the petition, ruling 3 that the questioned imposition is
The Market Code was thereafter amended by Ordinance No. 9236, Series of 1972, on 23 March not a tax on income, but rather a privilege tax or license fee which local governments, like
1972, which reads:chanrob1es virtual 1aw library respondent, are empowered to impose and collect.

SECTION 1. There is hereby imposed a five percent (5%) tax on gross receipts on rentals or lease of Having failed to obtain reconsideration of said decision, petitioner came to us on the present Petition
space in privately-owned public markets in Quezon City.chanroblesvirtuallawlibrary for Review.

x       x       x The only issue to be resolved here is whether the tax imposed by respondent on gross receipts of stall
rentals is properly characterized as partaking of the nature of an income tax or, alternatively, of a
license fee.
SECTION 3. For the effective implementation of this Ordinance, owners of privately owned public
markets shall submit . . . a monthly certified list of stallholders of lessees of space in their markets We begin with the fact that Section 12, Article III of Republic Act No. 537, otherwise known as the
showing . . .:chanrob1es virtual 1aw library Revised Charter of Quezon City, authorizes the City Council:jgc:chanrobles.com.ph
"x       x       x license fees are frequently called taxes although license fee is a legal concept distinguishable from
tax: the former is imposed in the exercise of police power primarily for purposes of regulation, while
(b) To provide for the levy and collection of taxes and other city revenues and apply the same to the the latter is imposed under the taxing power primarily for purposes of raising revenues. 9 Thus, if the
payment of city expenses in accordance with appropriations. 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
(c) To tax, fix the license fee, and regulate the business of the following:chanrob1es virtual 1aw not make the imposition a tax. 10 
library
To be considered a license fee, the imposition questioned must relate to an occupation or activity that
. . . preparation and sale of meat, poultry, fish, game, butter, cheese, lard, vegetables, bread and other so engages the public interest in health, morals, safety and development as to require regulation for
provisions." 4  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
The scope of legislative authority conferred upon the Quezon City Council in respect of businesses regulation but also its incidental consequences as well. 11 When an activity, occupation or profession
like that of the petitioner, is comprehensive: the grant of authority is not only" [to] regulate" and "fix is of such a character that inspection or supervision by public officials is reasonably necessary for the
the license fee," but also "to tax." 5  safeguarding and furtherance of public health, morals and safety, or the general welfare, the
legislature may provide that such inspection or supervision or other form of regulation shall be
Moreover, Section 2 of Republic Act No. 2264, as amended, otherwise known as the Local carried out at the expense of the persons engaged in such occupation or performing such activity, and
Autonomy Act, provides that:jgc:chanrobles.com.ph that no one shall engage in the occupation or carry out the activity until a fee or charge sufficient to
cover the cost of the inspection or supervision has been paid. 12 Accordingly, a charge of a fixed sum
"Any provision of law to the contrary notwithstanding, all chartered cities, municipalities and which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather
municipal districts shall have authority to impose municipal license taxes or fees upon persons than an exercise of the police power. 13 
engaged in any occupation or business, or exercising privileges in chartered cities, municipalities or
municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city In the case at bar, the "Farmers Market & Shopping Center" was built by virtue of Resolution No.
council of the city, the municipal council of the municipality, or the municipal district council of the 7350 passed on 30 January 1967 by respondents’s local legislative body authorizing petitioner to
municipal district; to collect fees and charges for service rendered by the city, municipality or establish and operate a market with a permit to sell fresh meat, fish, poultry and other foodstuffs. 14
municipal district; to regulate and impose reasonable fees for services rendered in connection with The same resolution imposed upon petitioner, as a condition for continuous operation, the obligation
any business, profession or occupation being conducted within the city, municipality or municipal to "abide by and comply with the ordinances, rules and regulations prescribed for the establishment,
district and otherwise to levy for public purposes just and uniform taxes licenses or fees: . . ." 6  operation and maintenance of markets in Quezon City." 15 

It is now settled that Republic Act No. 2264 confers upon local governments broad taxing authority The "Farmers’ Market and Shopping Center" being a public market in the sense of a market open to
extending to almost "everything, excepting those which are mentioned therein," provided that the tax and inviting the patronage of the general public, even though privately owned, petitioner’s operation
levied is "for public purposes, just and uniform," does not transgress any constitutional provision and thereof required a license issued by the respondent City, the issuance of which, applying the
is not repugnant to a controlling statute. 7 Both the Local Autonomy Act and the Charter of standards set forth above, was done principally in the exercise of the respondent’s police power. 16
respondent clearly show that respondent is authorized to fix the license fee collectible from and The operation of a privately owned market is, as correctly noted by the Solicitor General, equivalent
regulate the business of petitioner as operator of a privately-owned public market.cralawnad to or quite the same as the operation of a government-owned market; both are established for the
rendition of service to the general public, which warrants close supervision and control by the
Petitioner, however, insists that the "supervision fee" collected from rentals, being a return from respondent City, 17 for the protection of the health of the public by insuring, e.g., the maintenance of
capital invested in the construction of the Farmers Market, practically operates as a tax on income, sanitary and hygienic conditions in the market, compliance of all food stuffs sold therein with
one of those expressly excepted from respondent’s taxing authority, and thus beyond the latter’s applicable food and drug and related standards, for the prevention of fraud and imposition upon the
competence. Petitioner cites the same Section 2 of the Local Autonomy Act which goes on to state: 8  buying public, and so forth.chanrobles.com : virtual law library

". . . Provided, however, That no city, municipality or municipal district may levy or impose any of We believe and so hold that the five percent (5%) tax imposed in Ordinance No. 9236 constitutes, not
the following:chanrob1es virtual 1aw library 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, but
x       x       x rather a license tax or fee for the regulation of the business in which the petitioner is engaged. 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
(g) Taxes on income of any kind whatsoever;’"  police power,18 it nevertheless will be presumed to be reasonable. Local governments are allowed
wide discretion in determining the rates of imposable license fees even in cases of purely police
The term "tax" frequently applies to all kinds of exactions of monies which become public funds. It is power measures, in the absence of proof as to particular municipal conditions and the nature of the
often loosely used to include levies for revenue as well as levies for regulatory purposes such that business being taxed as well as other detailed factors relevant to the issue of arbitrariness or
unreasonableness of the questioned rates. 19 Thus:jgc:chanrobles.com.ph

" [A]n ordinance carries with it the presumption of validity. The question of reasonableness though is
open to judicial inquiry. Much should be left thus to the discretion of municipal authorities Courts
will go slow in writing off an ordinance as unreasonable unless the amount is so excessive as to be
prohibitory, arbitrary, unreasonable, oppressive, or confiscatory. A rule which has gained acceptance
is that factors relevant to such an inquiry are the municipal conditions as a whole and the nature of
the business made subject to imposition." 20 

Petitioner has not shown that the rate of the gross receipts tax is so unreasonably large and excessive
and so grossly disproportionate to the costs of the regulatory service being performed by the
respondent as to compel the Court to characterize the imposition as a revenue measure exclusively.
The lower court correctly held that the gross receipts from stall rentals have been used only as a basis
for computing the fees or taxes due respondent to cover the latter’s administrative expenses, i.e., for
regulation and supervision of the sale of foodstuffs to the public. The use of the gross amount of stall
rentals as basis for determining the collectible amount of license tax, does not by itself, upon the one
hand, convert or render the license tax into a prohibited city tax on income. Upon the other hand, it
has not been suggested that such basis has no reasonable relationship to the probable costs of
regulation and supervision of the petitioner’s kind of business. 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.

Finally, petitioner argues that respondent is without power to impose a gross receipts tax for revenue
purposes absent an express grant from the national government. 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. 21 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.

ACCORDINGLY, the Decision of the then Court of First Instance of Rizal, Quezon City, Branch 18,
is hereby AFFIRMED and the Court Resolved to DENY the Petition for lack of merit.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.