Pennsylvania Supreme Court Clarifies Difference Between Fees and Taxes
By Craig Sharnetzka and Rory Noble
The Pennsylvania Supreme Court recently issued a decision that may have significant implications for municipalities, governmental entities, and property owners across the state. In Borough of West Chester v. Pennsylvania State System of Higher Education, the Court established when a charge is a fee for service, and when is it actually a tax.
The case involved a stormwater charge imposed by the Borough of West Chester on developed properties. The Borough argued that the charge was a fee because it helped fund services related to stormwater management. Pennsylvania State System of Higher Education (PASSHE) and West Chester University disagreed, arguing that the charge was a tax and that, as Commonwealth entities, they were immune from paying it.
The Supreme Court agreed with PASSHE and the University. In doing so, the Court emphasized that a fee is generally tied to a specific service provided to a particular user, while a tax is imposed to fund programs that benefit the public as a whole. The Court found that West Chester’s stormwater program primarily served broader public purposes, including environmental protection, public safety, and compliance with state and federal requirements.
The Court also reaffirmed that a fee must bear a reasonable relationship to the service being provided. If a charge is not connected to a specific service or is used to fund broader public functions, a court may determine that the charge is actually a tax regardless of the label attached to it.
Although the case arose in the context of stormwater management, the Court’s analysis may influence future disputes involving municipal assessments, service charges, and similar revenue-generating programs. This decision serves as a reminder that courts will look beyond the name of a charge and examine its purpose, the benefit being provided, and whether the amount charged is reasonably related to that benefit.
The bottom line is that not every charge labeled a fee will be treated as one. Municipalities and property owners alike should be aware that the legal distinction between a fee and a tax depends on substance rather than terminology.
For questions regarding fee and assessment issues, contact attorney Craig Sharnetzka at csharnetzka@cgalaw.com or using the CGA online inquiry feature to set up a consultation with Attorney Sharnetzka.
