Section 5.16 Franchise Taxes and License Fees

• Library: Local Government Deskbook (2017 Ed.)

5. (§5.16) Franchise Taxes and License Fees

There is a real distinction between license fees imposed under a police power for the purpose of regulation and a license tax imposed under a taxing power for revenues. A license fee under the police power is permissible only to the extent it will assist in regulation and may not exceed the probable expense of issuing the license and inspecting and regulating the business or other subject that it covers. See Kansas City v. Sch. Dist. of Kansas City, 201 S.W.2d 930 (Mo. 1947). On the other hand, an occupational license tax is a tax imposed on a business by a municipality to raise revenues and, as such, is subject to the requirement of article X, § 3, of the Missouri Constitution that taxes fall uniformly on the same class of subjects within the territorial limits of municipal authority.

But statutes, ordinances, and judicial decisions do not always observe the fundamental distinction between regulation under the police power and occupational licensing under the tax power. Both types of impositions are frequently referred to as “licenses.” Under the police power, municipalities may reasonably regulate any trade or occupation that exposes the public to misfortunes. ABC Liquidators, Inc. v. Kansas City, 322 S.W.2d 876 (Mo. 1959). But a municipality may not levy an occupational license tax unless the State has granted it power to do so. Thunder Oil Co. v. City of Sunset Hills, 349 S.W.2d 82 (Mo. banc 1961); Airway Drive-In Theatre Co. v. City of St. Ann, 354 S.W.2d 858 (Mo. banc 1962). For a discussion of factors involved in deciding whether an enactment is a regulatory or revenue measure, see Avanti Petroleum, Inc. v. St. Louis Cnty., 974 S.W.2d 506 (Mo. App. E.D. 1998).

Sections 71.610–71.670, RSMo 2016, contain general provisions authorizing and limiting the powers of cities to impose regulatory license taxes, but they also cover revenue measures. Section 71.610, RSMo 2016, provides that no city may impose a license tax on any business, avocation, pursuit, or calling unless it is specifically authorized in the city’s charter or the power is conferred by statute. Section 71.620, RSMo 2016, provides that no minister, Christian Science practitioner, teacher, professor, priest, lawyer, certified public accountant, dentist, chiropractor, optometrist, chiropodist, physician, or surgeon may be required to pay any municipal tax or license fee. Veterinarians, architects, engineers, surveyors, auctioneers, and real estate brokers may be taxed only if they maintain a business office in the municipality. Section 71.620.2. Under § 71.630, RSMo 2016, no city may collect any license or fee from a farmer for the sale of produce sold from the farmer’s wagon, cart, or vehicle.

Section 71.620’s exemption for certain livelihoods, including “teacher,” from the payment of municipal taxes or license fees for the privilege of pursuing that livelihood also prohibits the imposition of municipal license fees on a charitable and educational school. David Ranken,...