The major portion of own source revenue of Hetauda municipality is tax. The main purposes of this research study are to expose the own sources revenue potentiality and analyze the municipal revenue compliance in Hetauda municipality. Both analytical and descriptive research designs were applied for the analysis of revenue potentiality and its compliance in Damak municipality. Random sampling method was used to select the municipality and same method was replicated to choose the respondents for questionnaire survey. Questionnaire Survey, Focus Group Discussion, and Key Informants Interview tools were used for data collection. Both the taxpayers and municipal policymaking advisors were the respondents of the study. Participants for focus group discussion and key informants for personal interview were selected purposively. Most of the taxpayers (i.e. 85.8 %) have paid municipal tax revenues and out of them, more than 39 percent taxpayers have paid the municipal tax below one thousand rupees per annum. The contribution of own source revenue to total revenue has been fluctuating over the period of ten years. From the view point of municipal policy making advisors, integrated property tax seems more potential source of revenue in comparison to other own sources. Tax compliance is to some extent satisfactory. Tax revenue covers the main segment of municipal own source revenues. From the policymaking advisors’ perspective, there is significant correlation (0.669) between service delivery fee and service quality at the one percent level (2-tailed) which indicates that service delivery fee imposed by the municipality for sanitation service is substantially satisfactory.