THIRD DIVISION

[G.R. No. L-36081. April 24, 1989.]

PROGRESSIVE DEVELOPMENT CORPORATION, petitioner, vs.
QUEZON CITY, respondent.
Jalandoni, Herrera, Del Castillo & Associates for petitioner.
SYLLABUS
1. TAXATION: REPUBLIC ACT No. 2264 (LOCAL AUTONOMY ACT); LOCAL
GOVERNMENT UNITS; GRANTED BROAD TAXING POWERS. It is now settled that
Republic Act No. 2264 confers upon local governments broad taxing authority
extending to almost "everything, excepting those which are mentioned therein,"
provided that the tax levied is "for public purposes, just and uniform," does not
transgress any constitutional provision and is not repugnant to a controlling statute.
2. ID.; ID.; ID.; CHARTERED CITIES AND MUNICIPALITIES GRANTED POWER TO
IMPOSE TAXES AND LICENSE FEES. The scope of legislative authority conferred
upon the Quezon City Council in respect of businesses like that of the petitioner, is
comprehensive: the grant of authority is not only" [to] regulate" and "x the license
fee," but also "to tax." Section 2 of Republic Act No. 2264, as amended, otherwise
known as the Local Autonomy Act, provides that: "Any provision of law to the
contrary notwithstanding, all chartered cities, municipalities and municipal districts
shall have authority to impose municipal license taxes or fees upon persons
engaged in any occupation or business, or exercising privileges in chartered cities,
municipalities or municipal districts by requiring them to secure licenses at rates
xed by the municipal board or city council of the city, the municipal council of the
municipality, or the municipal district council of the municipal district; to collect fees
and charges for service rendered by the city, municipality or municipal district; to
regulate and impose reasonable fees for services rendered in connection with any
business, profession or occupation being conducted within the city, municipality or
municipal district and otherwise to levy for public purposes just and uniform taxes
licenses or fees: . . ."
3. ID.; ID.; ID.; TAX IMPOSED UNDER CITY ORDINANCE NO. 9236, NOT A TAX ON
INCOME BUT A LICENSE FEE FOR REGULATION OF BUSINESS. The "Farmers
Market & 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 permit to sell fresh meat, sh, poultry and
other foodstus. The same resolution imposed upon petitioner, as a condition for
continuous operation, the obligation to "abide by and comply with the ordinances,
rules and regulations prescribed for the establishment, operation and maintenance
of markets in Quezon City." The "Farmers' Market and Shopping Center" being a
public market in the sense of a market open to and inviting the patronage of the
general public, even though privately owned, petitioner's operation thereof required
a license issued by the respondent City, the issuance of which, applying the
standards set forth above, was done principally in the exercise of the respondent's
police power. The operation of a privately owned market is, as correctly noted by
the Solicitor General, equivalent 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 respondent City,
for the protection of the health of the public by insuring, e.g., the maintenance of
sanitary and hygienic conditions in the market, compliance of all food stus sold
therein with applicable food and drug and related standards, for the prevention of
fraud and imposition upon the buying public, and so forth. We believe and so hold
that the ve 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) 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.
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 determining the rates
of imposable license fees even in cases of purely police power measures, in the
absence of proof as to particular municipal conditions and the nature of the business
being taxed as well as other detailed factors relevant to the issue of arbitrariness or
unreasonableness of the questioned rates. Thus: "[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 o an ordinance as unreasonable unless the amount is so
excessive as to be prohibitory, arbitrary, unreasonable, oppressive, or conscatory. 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." 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 foodstus
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 foodstus 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.
5. ID.; LICENSE FEE, AND TAX DISTINGUISHED. The term "tax" frequently
applies to all kinds of exactions of monies which become public funds. It is often
loosely used to include levies for revenue as well as levies for regulatory purposes
such that 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 the latter is imposed under the
taxing power primarily for purposes of raising revenues. Thus, 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 questioned 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 as well. When an activity, occupation or profession is of such a
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 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 that no one shall engage in the
occupation or carry out the activity until a fee or charge sucient to cover the cost
of the inspection or supervision has been paid. Accordingly, a charge of a xed sum
which bears no relation at all to the cost of inspection and regulation may be held to
be a tax rather than an exercise of the police power.
6. ID.; 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, nds 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.
D E C I S I O N
FELICIANO, J p:
On 24 December 1969, the City Council of respondent Quezon City adopted
Ordinance No. 7997, Series of 1969, otherwise known as the Market Code of
Quezon City, Section 3 of which provided:
"Sec. 3. Supervision Fee. Privately owned and operated public markets
shall submit monthly to the Treasurer's Oce, a certied list of stallholders
showing the amount of stall fees or rentals paid daily by each stallholder, . . .
and shall pay 10% of the gross receipts from stall rentals to the City, . . ., as
supervision fee. Failure to submit said list and to pay the corresponding
amount within the period herein prescribed shall subject the operator to the
penalties provided in this Code . . . including revocation of permit to operate.
. . ."
1

The Market Code was thereafter amended by Ordinance No. 9236, Series of 1972,
on 23 March 1972, which reads:
SECTION 1. There is hereby imposed a ve percent (5%) tax on gross
receipts on rentals or lease of space in privately-owned public markets in
Quezon City. cdasia
xxx xxx xxx
SECTION 3. For the effective implementation of this Ordinance, owners of
privately owned public markets shall submit . . . a monthly certied list of
stallholders of lessees of space in their markets showing . . .:
a. name of stallholder or lessee;
b. amount of rental;
c. period of lease, indicating therein whether the same is on a daily,
monthly or yearly basis.
xxx xxx xxx
SECTION 4. . . . In case of consistent failure to pay the percentage tax
for three (3) consecutive 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
and surcharge.
xxx xxx xxx"
2
On 15 July 1972, petitioner Progressive Development Corporation, owner and
operator of a public market known as the "Farmers Market & Shopping Center" led
a Petition for Prohibition with Preliminary Injunction against respondent before the
then Court of First Instance of Rizal on the 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. cda
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 led an Answer
arguing that petitioner, not having paid the ten percent (10%) supervision fee
prescribed by Ordinance No. 7997, had no personality to question, and was estopped
from questioning, its validity; that the tax on gross receipts was not a tax on income
but 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.LLpr
In its Supplemental Petition of 23 September 1972, petitioner alleged having paid
under protest the ve percent (5%) tax under Ordinance No. 9236 for the months of
June to September 1972. Two (2) days later, on 25 September 1972, petitioner
moved for judgment on the pleadings, alleging that the material facts had been
admitted by the parties.
On 21 October 1972, the lower court dismissed the petition, ruling
3
that the
questioned imposition is not a tax on income, but rather a privilege tax or license
fee which local governments, like respondent, are empowered to impose and collect.
Having failed to obtain reconsideration of said decision, petitioner came to us on the
present Petition for Review.
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.
We begin with the fact that Section 12, Article III of Republic Act No. 537, otherwise
known as the Revised Charter of Quezon City, authorizes the City Council:
"xxx xxx xxx
(b) To provide for the levy and collection of taxes and other city revenues
and apply the same to the payment of city expenses in accordance with
appropriations.
(c) To tax, fix the license fee, and regulate the business of the following:
. . . preparation and sale of meat, poultry, sh, game, butter, cheese, lard,
vegetables, bread and other provisions."
4
The scope of legislative authority conferred upon the Quezon City Council in
respect of businesses like that of the petitioner, is comprehensive: the grant of
authority is not only" [to] regulate" and "fix the license fee," but also "to tax."
5
Moreover, Section 2 of Republic Act No. 2264, as amended, otherwise known as the
Local Autonomy Act, provides that:
"Any provision of law to the contrary notwithstanding, all chartered cities,
municipalities and municipal districts shall have authority to impose municipal
license taxes or fees upon persons engaged in any occupation or business,
or exercising privileges in chartered cities, municipalities or municipal
districts by requiring them to secure licenses at rates xed by the municipal
board or city council of the city, the municipal council of the municipality, or
the municipal district council of the municipal district; to collect fees and
charges for service rendered by the city, municipality or municipal district; to
regulate and impose reasonable fees for services rendered in connection
with any business, profession or occupation being conducted within the city,
municipality or municipal district and otherwise to levy for public purposes
just and uniform taxes licenses or fees: . . ."
6
It is now settled that Republic Act No. 2264 confers upon local governments broad
taxing authority extending to almost "everything, excepting those which are
mentioned therein," provided that the tax levied is "for public purposes, just and
uniform," does not transgress any constitutional provision and is not repugnant to a
controlling statute.
7
Both the Local Autonomy Act and the Charter of respondent
clearly show that respondent is authorized to x the license fee collectible from and
regulate the business of petitioner as operator of a privately-owned public market.LexLib
Petitioner, however, insists that the "supervision fee" collected from rentals, being a
return from capital invested in the construction of the Farmers Market, practically
operates as a tax on income, one of those expressly excepted from respondent's
taxing authority, and thus beyond the latter's competence. Petitioner cites the same
Section 2 of the Local Autonomy Act which goes on to state:
8
". . . Provided, however, That no city, municipality or municipal district may
levy or impose any of the following:
xxx xxx xxx
(g) Taxes on income of any kind whatsoever;'"
The term "tax" frequently applies to all kinds of exactions of monies which become
public funds. It is often loosely used to include levies for revenue as well as levies for
regulatory purposes such that 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 the latter is
imposed under the taxing power primarily for purposes of raising revenues.
9
Thus,
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.
10
To be considered a license fee, the imposition questioned 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 as well.
11
When an activity, occupation or
profession is of such a character that inspection or supervision by public ocials is
reasonably necessary for the 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 carried out at the expense of the
persons engaged in such occupation or performing such activity, and 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.
13
In the case at bar, the "Farmers Market & 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 permit to sell
fresh meat, sh, poultry and other foodstus. 14 The same resolution imposed upon
petitioner, as a condition for continuous operation, the obligation to "abide by and
comply with the ordinances, rules and regulations prescribed for the establishment,
operation and maintenance of markets in Quezon City."
15
The "Farmers' Market and Shopping Center" being a public market in the sense of a
market open to and inviting the patronage of the general public, even though
privately owned, petitioner's operation thereof required a license issued by the
respondent City, the issuance of which, applying the standards set forth above, was
done principally in the exercise of the respondent's police power.
16
The operation of
a privately owned market is, as correctly noted by the Solicitor General, equivalent
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 respondent City,
17
for the protection of the health of
the public by insuring, e.g., the maintenance of sanitary and hygienic conditions in
the market, compliance of all food stus sold therein with applicable food and drug
and related standards, for the prevention of fraud and imposition upon the buying
public, and so forth.prcd
We believe and so hold that the ve 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) 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. 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,
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 power measures, in the
absence of proof as to particular municipal conditions and the nature of the business
being taxed as well as other detailed factors relevant to the issue of arbitrariness or
unreasonableness of the questioned rates.
19
Thus:

"[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 o an
ordinance as unreasonable unless the amount is so excessive as to be
prohibitory, arbitrary, unreasonable, oppressive, or conscatory. 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 foodstus 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 foodstus
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, nds 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.
Footnotes

1. Rollo, p. 102; Italics supplied.
2. Records on Appeal, pp. 14-15; Underscoring supplied.
3. Ibid, pp. 58-68.
4. 46 Ocial Gazette 4732 (1950); Italics supplied. Certain portions of the Charter
had been amended by R.A. 5541, 65 Ocial Gazette, p. 7126 (1968). The
amendatory law, however, did not introduce any change to the portion quoted
above.
5. See, in this connection, Pacic Commercial Co. v. Romualdez, et al., 49 Phil. 917
(1927).
6. Section 2 of R.A. 2264 has been amended by R.A. 4497, 62 Ocial Gazette, p.
8616 (1966); Underscoring supplied. R.A 2264 was further amended by P.D. No.
145, 69 Ocial Gazette, p. 2418 (1973), which however did not aect the
abovequoted portion.
7. Nin Bay Mining Co. v. Municipality of Roxas, 14 SCRA 660 (1965); See also C.N.
Hodges v. Municipal Board of the City of Iloilo, et. al., 19 SCRA 28 (1967); and
Villanueva v. City of Iloilo, 26 SCRA 578 (1968).
8. supra, note 6; underscoring supplied.
9. Compaia General de Tabacos de Filipinas v. City of Manila, 118 Phil. 383; 8 SCRA
370 (1963); Pacific Commercial Co. v. Romualdez, 49 Phil. 917 (1927).
10. Manila Electric Company v. El Auditor General y La Comision de Servicios Publicos,
73 Phil. 133 (1941); Republic v. Philippine Rabbit Bus Lines, 32 SCRA 215 (1970).
11. City of Iloilo v. Villanueva, 105 Phil. 337 (1959).
12. Manila Electric Company vs. El Auditor General y la Comision de Servicios Publicos,
supra, at 134-135.
13. Serafin Saldaa v. City of Iloilo, 104 Phil. 28. (1958).
14. Record on Appeal, p. 10.
15. Ibid.
16. In City of Jacksonville, et al. v. Ledwith, 7 So. at 892 [1890]; 26 Fla. 163, it was
held that a permit to establish a market was:
"from the nature of a market, a license. It is a permit to do something which could
not be done before without such permit, and hence is the grant of a license . . .
[T]he power to establish markets is within the police power, and [thus is] . . . the
power to charge, as a police regulation, a fee for the permit or license for selling
meats or vegetables therein, . . . The fee, however, is not a tax for revenue, but a
charge under the police power, and its amount is to be controlled by the principles
governing in such cases."
17. Brief for the Respondent, pp. 6-7; Rollo, p. 172.
18. E.g., Calalang v. Lorenzo and Villar, 97 Phil. 212 (1955).
19. Procter & Gamble PMC v. Municipality of Jagna, 94 SCRA 894 (1979); Northern
Phil. Tobacco Co. v. Municipality of Agoo, 31 SCRA 304 (1970); and San Miguel
Brewery, Inc. v. City of Cebu, 43 SCRA 275 (1972).
20. Victorias Milling Co., Inc. v. Municipality of Victorias, Negros Occidental, 25 SCRA
192 at 205 (1968), citing 9 McQuillin Municipal Corporations, 3rd ed., at 65.
In Atkins v. Philips, 8 So. at 431 (1890); 26 Fla. 281, the Supreme Court of Florida held:
"The amount of the fee might in some cases be so large as to suggest . . .,
considering the character or the business to which it was applied, that it was in
fact a tax for revenue; but [not in this case] considering the nature of the subject
before us, the sale of fresh meats, dressed poultry, and sh, . . ., [which]
require[s], for the protection of the health of the community, daily inspection and
supervision, . . ."
21. City of Ozamis v. Lumapas, 65 SCRA 33 (1975).