Philip Morris Ltd v Commissioner of Business Franchises (Vict)

The High Court of Australia considered a dispute between Philip Morris Ltd and the Commissioner of Business Franchises (Victoria) concerning the application of the *Business Franchise Licences Act 1978* (Vic) to tobacco sales. Philip Morris challenged the validity of the licence fees imposed under the Act, arguing they constituted an excise duty and were therefore beyond the legislative power of the Victorian Parliament.

The central legal issue before the High Court was whether the licence fees levied by the *Business Franchise Licences Act 1978* (Vic) on the wholesale and retail sale of tobacco products were in substance an excise duty, and if so, whether their imposition by a State Parliament was constitutionally invalid by reason of s 90 of the Commonwealth Constitution. Section 90 of the Constitution exclusively vests the power to impose duties of excise in the Commonwealth Parliament.

The Court reasoned that the nature of a tax, for the purposes of s 90, is determined by its legal incidence, not its economic or fiscal effect. It found that the licence fees in question were imposed on the privilege of engaging in the business of selling tobacco, and were not directly related to the production or manufacture of goods. Consequently, the Court held that the fees were not duties of excise within the meaning of s 90 of the Constitution. The High Court therefore concluded that the *Business Franchise Licences Act 1978* (Vic) was a valid exercise of State legislative power.