Fees are paid only by users of a service. Examples are toll roads, permits, licenses, public parking, small claims court, water bills, entertainment. Motor vehicle fuel “taxes” which are spent on roads are actually fees. Motor vehicle fuel taxes that are diverted to general governmental services are true taxes.

Taxes are paid by the general public for general governmental services, provided for the general public’s benefit, and for which it is infeasible for the users of the services to pay. Examples are jails, police and fire protection, municipal and superior courts, voter registration and elections.

Here is a summary of the differences between a tax and a fee:

Tax
1. Pays for any government service. Nexus between payer and service not required.
2. General public gets the primary benefit.
3. Payment is mandatory.
4. May be levied in any amount.
5. Levied equally on all similar payers.

Fee
1. Pays for a specific service, or to regulate payer. Nexus required.
2. Payer gets the primary benefit.
3. Payment is contingent on use of service, or choice to engage in regulated activity.
4. Covers only cost of the service: construction, maintenance, regulation, permitting, inspectin.
5. Levied in proportion to impact or extent of activity.