Taxes vs. Fees: A Curious Confusion

In recent years, local governments have been called upon to provide an increasingly broader range of services and regulatory activities. Those governments have constantly searched for ways to finance the demands placed on them through tax increases, and other types of charges.

As detailed in this Article, there are constitutional and other restraints on how taxes and fees are structured and applied. In Washington, the distinction between taxes and fees can be decisive in determining whether a particular governmental charge will sustain judicial scrutiny. Unfortunately, Washington case law concerning the distinction between taxes and fees has been murky and confusing, primarily because the courts often resort to a simplistic dichotomy between taxes and regulatory fees. This distinction fails to recognize the existence of alternative charges.

In its 1995 decision, Covell v. City of Seattle, the Supreme Court of Washington attempted to provide an updated framework for addressing the difference between taxes and fees. The Covell tests, as they came to be known, provided a useful and significant contribution to understanding what actually makes a tax a tax and what makes a user fee a user fee. Notwithstanding Covell , Washington courts have clung to the doctrine that every governmental charge can be understood as either a tax or a regulatory fee.

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Hugh D. Spitzer, Taxes vs. Fees: A Curious Confusion, 38 Gonz. L. Rev. 335 (2003).

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