Privilege tax

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A privilege tax is a tax levied in exchange for a privilege or license granted to the taxpayer. The fee for registering a motor vehicle is one example of a privilege tax.

Many taxes on businesses are characterized as privilege taxes. For example, Arizona's transaction privilege tax is a gross receipts tax on business. In the 1911 case of Flint v. Stone Tracy Co. , the United States Supreme Court upheld the constitutionality of a corporate income tax, determining that it was an indirect tax on the privilege of doing business as a corporation. [1]

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References

  1. Oxford Companion to the US Supreme Court: Income Tax, accessed on answers.com, April 30, 2011