National Cable Television Association, Inc. v. Federal Communications Commission and United States of America, Lamb Communications, Inc., Liberty Communications, Inc. And Summit Communications, Inc. v. Federal Communications Commission and United States of AmericaNational Cable Television Association, Inc. v. Federal Communications Commission and United States of America, Lamb Communications, Inc., Liberty Communications, Inc. And Summit Communications, Inc. v. Federal Communications Commission and United States of America
Jack David Smith, Counsel, F.C.C., Washington, D.C., with whom Ashton R. Hardy, Gen. Counsel, Daniel M. Armstrong, Acting Associate Gen. Counsel, C. Grey Pash, Jr., Counsel, F.C.C., Robert B. Nicholson and Laurence K. Gustafson, Attys., Dept. of Justice, Washington, D.C., were on the brief for respondents. Joseph A. Marino, Associate Gen. Counsel, F.C.C., Washington, D.C., at the time the record was filed, and Howard E. Shapiro, Dept. of Justice, Washington, D.C., also entered appearances for respondents.
Herbert M. Schulkind, James K. Edmundson, Benito Gaguine and Arthur G. House, Washington, D.C., entered appearances for petitioner in No. 75-1132.
Opinion for the court filed by MacKINNON, Circuit Judge.
MacKINNON, Circuit Judge:
Petitioners, an association of cable television operators and two individual operators, seek review of two orders of the Federal Communications Commission (FCC) which (1) promulgate a schedule of annual fees to be collected from all cable television operators,1 and (2) determine that these fees, with certain modifications, be collected retroactively to March 29, 1974, when collections under a previous fee schedule were suspended.2 Because we find that the annual fees assessed by the first order do not meet tests established by the Supreme Court under the relevant statute, and thus that the first order is invalid, we do not reach the challenge to the second order.
The statutory authority and direction for the FCC to assess fees against members of the industries it regulates is the Independent Offices Appropriation Act of 1952 (IOAA).3 That Act provides:
It is the sense of the Congress that any work, service, publication, report, document, benefit, privilege, authority, use, franchise, license, permit, certificate, registration, or similar thing of value or utility performed, furnished, provided, granted, prepared, or issued by any Federal agency (including wholly owned Government corporations as defined in the Government Corporation Control Act of 1945) to or for any person (including groups, associations, organizations, partnerships, corporations, or businesses), except those engaged in the transaction of official business of the Government, shall be self-sustaining to the full extent possible, and the head of each Federal agency is authorized by regulation (which, in the case of agencies in the executive branch, shall be as uniform as practicable and subject to such policies as the President may prescribe) to prescribe therefor such fee, charge, or price, if any, as he shall determine, in case none exists, or redetermine, in case of an existing one, to be fair and equitable taking into consideration direct and indirect cost to the Government, value to the recipient, public policy or interest served, and other pertinent facts, and any amount so determined or redetermined shall be collected and paid into the Treasury as miscellaneous receipts. . . .
The annual fees assessed against members of the cable television industry were struck down by the Supreme Court on March 4, 1974, in National Cable Television Assn. v. United States (NCTA), 415 U.S. 336, 94 S.Ct. 1146, 39 L.Ed.2d 370 (1974). That case and a companion case, FPC v. New England Power Co., 415 U.S. 345, 94 S.Ct. 1151, 39 L.Ed.2d 383 (1974), established standards which must be met by fees adopted by agencies under the IOAA. In NCTA, the Court found that the FCC assessment of 30 cents per subscriber was calculated to reimburse the total cost (direct and indirect) to the Commission of regulating the cable television industry, regardless of whether or not each individual operator had received any “special benefit” from that regulation. Holding in effect that it was the intent of the IOAA to require fees to be based on “value to the recipient” and not upon “public policy or interest served (or) other pertinent facts,” 415 U.S. at 341, 342-343, 94 S.Ct. at 1150, the Court found that the FCC‘s failure to use this measure made the 30 cent assessment a tax, which the agency had no power to levy.
After the 1970 fee schedule had been invalidated by the Court, the Commission suspended collection of the annual fee for cable television systems,9 stating that the appropriate annual fees for calendar year 1973 would be published after further proceedings.10 On January 15, 1975, after the public had been afforded an opportunity to comment,11 the Commission adopted the 1975 fee schedule.
In 1975, on the other hand, the fee set for each of the basic bureaus was “devised to recover basically the costs associated with the processing of applications and tariff filings.”16 In order to do this, the Commission first calculated a figure representing the “total projected costs” of each bureau, composed of “all costs which can be attributed to the (particular bureau) including costs allocated from the administrative law judges, the Review Board, the Office of Opinions and Review, the Data Automation Division, and the Dockets Branch”17 plus a pro rata share of certain indirect costs of the Executive Director‘s office.18 Once the “total projected costs” figure had been thus calculated, it was multiplied by the “percentage of each activity that was devoted to application processing” to determine the cost of processing applications.19 The record does not adequately explain how this percentage of 44.6% was determined. Finally, a portion of the cost of the Antenna Survey Program conducted by the Field Operations Bureau was added in to arrive at a “fee recoverable cost” for the particular bureau, and a fee was then set which would bring in revenue equal to that final figure. The actual rate at which the fee would be assessed was determined by scaling down the rates used in the 1970 fee schedule until it was estimated that revenue equal to the newly calculated “fee recoverable cost” for 1975 would be raised.20 The resulting 1975 fee schedule assesses, inter alia, an annual authorization fee at a rate of 13 cents per subscriber, due on April 1, 1976.
On July 28, 1975, this court issued a partial stay pending appeal, “so that the Federal Communications Commission may collect fifty percent, but no more, of the fees which are due on August 1, 1975, and on April 1, 1976, until further order of this Court.” In response to that order, and to lessen administrative burdens, the Commission suspended all cable annual fee collections until completion of judicial review.24
II.
The criticisms made by petitioners of the 1975 fee schedule can be divided into three categories: first, it is alleged that there is no proper justification under the statute for an annual cable television authorization fee; second, petitioners contend that the cost basis for the fee was improperly calculated; and third, they argue that the rate at which the fee itself is assessed is so high as to be confiscatory. We shall deal with these issues in that order. In doing so we are required to follow the Supreme Court opinions in NCTA and New England Power, which “greatly narrow(s) the act.” 415 U.S. at 351, 94 S.Ct. 1151.
The IOAA clearly specifies that fees assessed under its authority must be justified by some “work, service, publication, report, document, benefit, privilege, authority, use, franchise, license, permit, certificate, registration, or similar thing of value or utility performed, furnished, provided, granted, prepared, or issued by any Federal agency. . . .”
Cable television systems clearly are identifiable recipients of services performed by the Commission related to the processing of applications either through the grant of individual certificate of compliance applications, or by the general authority under which all cable systems are permitted to operate pursuant to the Commission‘s rules until 1977 without an individual certificate of compliance.
48 F.C.C.2d at 417.26 The annual authorization fee therefore appears to be a grant fee charged for the annual conferral upon cable operators of their authority to operate or for the permission for them to operate without written authority under a “grandfather clause.” But the Commission has not explained which application processing activities are reimbursed by its filing fee and which by its grant fee, making it impossible for us to conclude that the two fees do not charge the cable operators twice for the cost of the same services. On that basis alone we could remand the case to the FCC.27 It is essential that an agency make clear the basis for a fee it assesses under the IOAA, so that a reviewing court can determine whether or not the “value to the recipient” standard is met.
The issuance of a certificate of compliance under
It is not so clear, however, that the limited “grandfather” rights conferred by the Commission on certain cable operators under
In addition, it seems clear that a proper interpretation of the IOAA directs the FCC to charge a fair and equitable fee for the expenses it incurs in granting cable television operators authority to operate. The Supreme Court said as much in NCTA:
A fee . . . is incident to a voluntary act, e. g., a request that a public agency permit an applicant to practice law or medicine or construct a house or run a broadcast station. The public agency performing those services normally may exact a fee for a grant which, presumably, bestows a benefit on the applicant, not shared by other members of society.
415 U.S. at 340-41, 94 S.Ct. at 1149. This interpretation is also supported by the legislative history, which indicates that Congress contemplated that agencies would assess fees for their grants of operating authority:
. . . I think it is only fair that in exchange for the franchise that the Government gives the broadcasting company and the protection which the Government affords to such broadcasting company to assure its freedom from interference in the operation of its broadcasting facilities in the particular point of the spectrum which it occupies, that it should pay some of the costs of the hearings. It is perfectly proper that the franchised company make a profit, and there has been much profit making. Such companies should assume a greater share of the costs, because regulation is necessary.
97 Cong.Rec. 4809 (1951) (statement of Cong. Yates).33 Nor does the holding of New England Power require a different conclusion. The Supreme Court did say in that decision that
(s)ome of the assessments made by the Commission under its formula would be on companies which had no proceedings before the Commission during the year in question. The ‘identifiable recipient’ of a unit of service from which ‘he derives a special benefit,’ to quote the Office of Management and Budget, does not describe members of an industry which have neither asked for nor received the Commission‘s services during the year in question.
415 U.S. at 351, 94 S.Ct. at 1155. However, we reject the argument that this statement requires actual contact with the agency during the year in question by each cable station assessed as a prerequisite to charging those persons a fee. The Court in New England Power was dealing with a factual situation in which there was no demonstrated specific service to the individual power and gas companies; rather, the FPC was attempting to assess the costs of administering its programs against the industry as a whole. Indeed, the Court in that case went on to observe:
A blanket ruling by the Commission, say on accounting practices, may not be the result of an application. But each member of the industry which is required to adopt the new accounting system is an “identifiable recipient” of the service and could be charged a fee, if the new system was indeed beneficial to the members of the industry. There may well be other variations of a like nature which would warrant the fixing of a “fee” for services rendered.
Id. Thus the Court recognized that a fee may be permissible in certain situations despite a lack of contacts between the agency and the person assessed during the year in question. The fact that the application which initiates the service is not filed annually is no bar to an annual assessment, so long as there has been service rendered and expenses incurred that benefitted those charged during the year. Therefore the existence of a grant of operating authority by the FCC is a proper justification for a properly assessed annual fee. Again, the fact that the public interest is also benefitted by the regulation of entry into the industry does not mean that cable operators cannot be charged, so long as those operators are identifiable beneficiaries of agency services.
(w)hile those who operate CATV‘s may receive special benefits, we cannot be sure that the Commission used the correct standard in setting the fee. It is not enough to figure the total cost (direct and indirect) to the commission for operating a CATV unit of supervision and then to contrive a formula that reimburses the Commission for that amount. Certainly, some of the costs inured to the benefit of the public . . ..
415 U.S. at 343, 94 S.Ct. at 1150 (emphasis added).
The FCC, in formulating its 1975 fee schedule, interpreted the above-quoted holding of the Supreme Court to command “that the cable television annual fee should not include the agency‘s costs ‘for the protective services rendered the public by the Commission.’ ”35 In accordance with this view, the Commission went on to propose
a revised schedule of fees whereby only those activities that are specifically identified as primarily benefitting identifiable recipients will be included as costs in the fee program. The costs of those activities which either cannot be identified as specifically benefitting identifiable recipients, or which can be identified as primarily benefitting the general public will not be recouped through collection of fees. The Commission does not consider that either (the IOAA) or the NCTA decision establishes mutually exclusive categories of services, i. e., the Commission is not limited to charging fees for services which solely benefit the recipients of those services. Such a view would render (the IOAA) a nullity because the very basis for the establishment of the Commission was the protection of the public interest in wire and radio communication, and public interest considerations are thus an inherent part of all Commission activities. It is our view that the Commission is authorized to charge fees for those services that provide a value to identifiable recipients, which we have identified as activities associated with processing of application that provide authorization for individuals, for example, to operate radio transmitters, or sell radio equipment, or collect common carrier charges. The fact that the general public may also benefit by Commission authorization of such activities, in that the activities may directly or indirectly provide a service to the public, does not limit the Commission‘s authority to charge a fee to the recipients of the services that will allow those services provided by the Commission to be operated on a self-sustaining basis as mandated in (the IOAA).
48 F.C.C.2d at 404.36 Thus,
(t)he proposed fee schedule is devised to recover basically the cost associated with processing of applications and tariff filings. It is our view that this approach is consistent with the Court‘s interpretation of the statute, since the fees will recover only so much of the Commission‘s total costs as are attributable to work done to create value to the recipients. The costs of activities that are not directly related to the providing of specific services through application or tariff processing will not be recovered through the fee program.
Id.37 Up to this point, there is nothing in the record that would permit us to disagree to any major extent with this general description of the cost basis for the Commission‘s fees. The statement that fees will be assessed only for “those activities that are specifically identified as . . . benefitting identifiable recipients” is fully consistent with the letter and the spirit of the NCTA decision,38 and we find no fault with the idea that a fee may be charged for an activity so identified despite the fact that the general public secondarily benefits from it. See generally Electronic Industries Assn. v. FCC, 554 F.2d 1109 (1976). Similarly, the direct costs associated with the processing of applications and tariff filings are clearly expenses for activities that benefit an identifiable recipient (the applicant or person filing). Id.
This was not done here, and thus we cannot conclude from the record before us that the 1975 annual authorization fee has been formulated in a manner consistent with the requirements of the IOAA. Instead of listing the specific expenses which form the cost basis of the cable television fees, the FCC began with its total budget and eliminated whole offices or activities which it found to be “too far removed” from the direct regulatory function. Cable television operators were assessed the total cost of operating the Cable Television Bureau, plus a “pro rata” share of certain general support activities, all reduced by an unexplained percentage.39 There was no explanation of what activities were performed by the Cable Bureau that amounted to 44.6 percent of its budget, nor how these activities related to the grant of operating authority to cable systems. There was no time cost study explanation of how the Cable Bureau‘s “pro rata share” of indirect costs was arrived at, nor any evidence that 44.6 percent of those indirect costs relate to the grant of authority to operate (rather than to other functions of the Cable Bureau). Indeed, there was no explanation of why 44.6 percent was chosen to represent that portion of the previously calculated “total costs” which could be recovered through a fee. Perhaps most importantly, there was no explanation of the criteria used in eliminating certain costs and retaining others (what, for example, differentiates the eliminated “general support” costs from the included “indirect costs to be allocated to application processing based on the essential nature of the support function performed“? 48 F.C.C.2d at 405). In short, the Commission appears to have gone at its task backwards, starting with totals and eliminating items rather than selecting certain expenses which are directly or indirectly related in a significant degree to the particular service which is the alleged justification for assessing the fee, and then adding up such items.
This is not to say that the Commission must calculate the exact cost of servicing each individual; that would be an all but impossible task.40 Any computation such as those must necessarily be based on numerous approximations and can only be expected to be accurate within reasonable limits. It is sufficient for the Commission to identify the specific items of direct or indirect cost incurred in providing each service or benefit for which it seeks to assess a fee, and then to divide that cost among the members of the recipient class (here, cable operators) in such a way as to assess each a fee which is roughly proportional to the “value” which that member has thereby received.41 The important step which the Commission has eliminated here is the identification of the specific items of cost and the criteria by which they are found to relate in the determined percentage to the service or benefit for which the fee is assessed.
In this regard, in the absence of some specific justification, we hold serious doubts about the Commission‘s use of the number of subscribers to a particular cable television system as a means of determining the share of the Cable Bureau‘s total recoverable cost to be borne by that system. By setting the annual fee at 13 cents per subscriber, see note 20 supra, the FCC has in effect adopted a fee justified and measured largely by the gross revenue of particular cable operators. This characterization of the fee is admitted by the agency:
Although monthly subscription rates do vary somewhat from one system to another, utilization of a system‘s subscriber count in determining the amount of the fee results in a fee reasonably related to earnings differences among systems. At the same time, it is convenient for use by the Commission in verifying the correctness of the amount paid, and avoids the need for reference to cable systems income data (net or gross) which should be respected as confidential in nature. It is apparent that the larger a cable operation is, the more its owners benefit from the cable system operating authority which they have received from the Commission. At the same time, the formula is designed to yield a total income not in excess of the total cost to the Commission of its activity in authorizing cable operation.
50 F.C.C.2d 906, 922 (1975) (emphasis added). While we do not hold that the Commission may under no circumstances assess a fee based on the number of subscribers, or on gross revenues, we interpret the mandate of the Supreme Court in NCTA to mean that the agency must in all cases demonstrate a “necessary, natural, or . . . probable correspondence between the sums to be paid . . . and . . . the character or extent of the services (rendered). . . .” State ex rel. Davidson v. Gorman, supra, 40 Minn. at 234, 41 N.W. at 949-50 (quoted in note 44 supra). There is no evidence in the record before us that supports the conclusion that it costs the agency twice as much to authorize and regulate a cable system with 2000 subscribers as it does to authorize and regulate one with 1000 subscribers. Thus there is no way for us to verify that the fee is justified by the value conferred rather than by the profits derived by cable operators.
Whatever standard the Commission uses as a basis for its rate it should not have the potentiality in any substantial number of individual instances to produce fees that are not reasonably related to the cost of the services that benefit the individual recipients who are being charged. The fee schedule should be reasonably related to the individual cost of services as well as to the total costs for the particular segments of recipients. This is required so that the “fee” does not become a “tax.” In other words, the fact that the Commission may assess a class of recipients with a fee is no justification for imposing a tax upon some of the members of that class to produce the total cost of the service. Ability to pay is frequently used as a justification for levying a tax but is of very limited value in assessing a fee which is supposedly related as closely as reasonably possible to the cost of servicing each individual recipient. NCTA, 415 U.S. at 340, 94 S.Ct. 1146. However, this would not prohibit the use of a fee base with inherent ability to pay features if such base also reasonably reflected varying cost factors that benefitted individual recipients.
III.
In conclusion, we remand this case to the Commission for (1) clarification of the justification for its fee, (2) an explanation of the specific items of direct and indirect expense that make up the cost basis of the fee, and (3) a reconsideration of the rate at which the fee is assessed. Because of the broad effect of our holding in this and the companion cases decided this date,48 we recommend that the FCC not limit its consideration on remand to the fee in issue here, but rather review its entire 1975 fee schedule. In this process the Commission shall recalculate and collect the fees for the period here at issue in accordance with the principles announced in this opinion and in the companion cases decided today.49
Judgment accordingly.
Notes
3. General policy. A reasonable charge, as described below, should be made to each identifiable recipient for a measurable unit or amount of Government service or property from which he derives a special benefit.
a. Special services.
(1) Where a service (or privilege) provides special benefits to an identifiable recipient above and beyond those which accrue to the public at large, a charge should be imposed to recover the full cost to the Federal Government of rendering that service. For example a special benefit will be considered to accrue and a charge should be imposed when a Government-rendered service:
(a) Enables the beneficiary to obtain more immediate or substantial gains or values (which may or may not be measurable in monetary terms) than those which accrue to the general public (e. g., receiving a patent, crop insurance, or a license to carry on a specific business); or
(b) Provides business stability or assures public confidence in the business activity of the beneficiary (e. g., certificates of necessity and convenience for airline routes, or safety inspections of craft); or
(c) Is performed at the request of the recipient and is above and beyond the services regularly received by other members of the same industry or group, or of the general public (e. g., receiving a passport, visa, airman‘s certificate, or an inspection after regular duty hours).
(2) No charge should be made for services when the identification of the ultimate beneficiary is obscure and the service can be primarily considered as benefitting broadly the general public (e.g., licensing of new biological products).
(J.App. 130-31, emphasis added). The Court construed the italicized portion above as requiring that the person assessed have some nexus with the agency such as proceedings before it during the year in question.“All costs” of Cable Bureau $2,252,808 Add: pro rata share of indirect costs 324,396 Subtotal: “Total projected costs” 2,577,204 x .446 ----------- “Application processing costs” 1,149,432 Add: allocated portion of Antenna Survey 8,082 Total: “Fee Recoverable Costs” 1,157,514J.App. 145, 152. The fee was then apparently set in the manner described in an internal memorandum from Walter Morse of the Cable Television Bureau to Daniel R. Ohlboum, Deputy General Counsel, dated June 25, 1974:
1. * * *
(d) In view of the foregoing, the FY 1975 fee collection target reported to the Cable Television Bureau by the FCC Budget Office is $1,157,514, a target to be reached by
(1) estimating
(i) the number of items to be received in FY 1975 in each of the fee-coolectible (sic) categories, and
(ii) the average number of cable television subscribers in calendar year 1974 (the basis on which annual-fee payments will be made during FY 1975); and
(2) proportionally scaling-down the fees set forth
(i) in the existing (1970) fee schedule for cable and CAR applications referred to therein, and
(ii) in the adopted-and-rescinded “Report and Order” in Docket No. 19658 (wherein proposed increases in the 1970 fee schedule were adopted and then rescinded shortly after the Supreme Court action. See 38 F.C.C.2d 587 (1972); J.App. 1-19) for the fee items referred to in paragraph 1(c) supra
so that the new proposed fees, when respectively multiplied by the estimated number of pertinent items to be received in FY 1975, or the estimated number of cable subscribers in calendar year 1974, will yield a total anticipated revenue approximating the aforementioned fee-collection target.
2. By successive approximations, it was ascertained that such a scaling-down to 42 percent of the previous fee levels, followed by a rounding of each resultant filing-fee to the nearest multiple of 5, would yield the following fees and anticipated revenues:
Fee No. of items: Revenue:
--- ------------- --------
--CAR application:
--For a construction permit $20 323 $ 6,460
--For a license or renewal $ 5 103 $ 515
--For a modification of construction permit or of license $ 5 120 $ 600
--For reinstatement of an expired construction permit or license $ 5 9 $ 45
--For assignment of license or construction permit or for
transfer of control therefor $10 145 $ 1,450
--Application for certificate pursuant to Section 76.11 $15 (or $5) 1,089 $ 10,890
--Annual fee (per subscriber) $0.13 8,784,250 $1,141,952.50
-------------
--TOTAL $1,161,912.50
The total anticipated revenue, as set forth in the above table, would be $4,398.50 above the fee-collection target specified by the Budget Office.
J.App. 154-55 (footnote eliminated). The fees suggested in paragraph 2 are in fact the ones adopted by the Commission. CompareWe think petitioners ask too much in claiming the identification of Commission function and costs with respect to each of the over 500,000 yearly applicants. The general terms are sufficient to inform applicants what services are rendered in considering applications for licenses for use of radio in the various categories.
Aeronautical Radio, Inc. v. United States, 335 F.2d 304, 309 (7th Cir. 1964), cert. denied, 379 U.S. 966, 85 S.Ct. 658, 13 L.Ed.2d 559 (1965). To the extent that this passage is interpreted to mean that the Commission need not specify the exact cost of each benefit rendered to each individual, we agree with it. “Allocation of costs is not a matter for the slide-rule. It involves judgment on a myriad of facts. It has no claim to an exact science. Hamilton, Cost as a Standard for Price, 4 Law & Cont. Prob. 321.” Colorado Interstate Gas Co. v. FPC, 324 U.S. 581, 589, 65 S.Ct. 829, 833, 89 L.Ed. 1206 (1945). See also Clay Broadcasting Corp. of Texas v. United States, 464 F.2d 1313, 1317-18 (5th Cir. 1972), rev‘d on other grounds, 415 U.S. 336, 94 S.Ct. 1146, 39 L.Ed.2d 370 (1974). In light of the subsequent Supreme Court decisions in this area, however, we do not believe Aeronautical Radio can be read to allow the agency to identify only the general services or benefits for which they are charging and the total cost which they seek to recover. As we have previously explained, that information is insufficient to allow a reviewing court to determine that the “value to the recipient” standard has been met.But the sums required by this act to be paid into the county treasury must be regarded as “taxes,” in the ordinary sense of that word, and as it is used in the (state) constitution. They are not in any proper sense fees or costs assessed impartially, or with regard to the expense occasioned or services performed. The amounts are regulated wholly, but arbitrarily, with regard to the value of the estate. They have no proximate relation to the amount of the compensation to be paid to the probate judge, nor to the other expenses of the court, nor to the nature or extent of the services which may become necessary in the proceedings. There is no necessary, natural, or even probable correspondence between the sums to be paid (widely different in amounts with respect to estates of different values) and the nature of the proceedings, or the character or extent of the services, which may be required in the probate court. It cannot be assumed, upon any ground of probability, that these proceedings or services will be different or greater in the case of an estate of the value of more than $500,000 than in one of the value of from $35,000 to $50,000, yet in the former case $5,000 must be paid; in the latter, $100. The formerly existing law for the payment of fees for the services of the probate judge is superseded. The only compensation which the probate judge may now receive for the performance of his judicial duties is a salary, fixed in amount, and payable from the county treasury. That salary is in no manner dependent upon, or affected by, the amounts which may be paid into the county treasury under this law; and, if such payments shall exceed the amount of the judge‘s salary, no reimbursement to the estates or persons making such payments is contemplated.
It is thus apparent that these exactions are “taxes” in the general and in the precise meaning of that word . . ..
40 Minn. at 233-235, 41 N.W. at 949-50.While a revenue measure based on gross receipts must apply equally to all for the privilege of doing the same act, that is, making a sale or completing a transaction, the test of the validity of an inspection fee is that such fees must bear a reasonable relationship to the cost of the inspection service or the protection rendered thereby. See 44 C.J.S. Inspection, § 12, and cases cited therein.
Even if the registration fee in this case were held to be a license tax, the fact that those making greater use of the privilege are charged a larger fee (but one that represents a smaller percentage of the total sales of the dealer) would not invalidate the tax.
This Court has repeatedly held that a license tax need not be identical for each licensee, and that it need not be limited to the exact expense of issuing the license. We have held that licenses ar (sic) fees charged for services rendered, and may include any reasonably probable cost of supervision, regulation, inspection and examination that may be required to be rendered by the licensing authority. To be valid such charges only need be commensurate with the services required to be rendered by the licensing body. State ex rel. James v. Gerrell, 1938, 137 Fla. 324, 183 So. 812; State ex rel. Harkow v. McCarthy, 1936, 126 Fla. 433, 171 So. 314; Jackson v. O‘Connell, 1934, 114 Fla. 705, 154 So. 697; Heriot v. City of Pensacola, 1933, 108 Fla. 480, 146 So. 654; City of Jacksonville v. Ledwith, 1890, 26 Fla. 163, 7 So. 885, 9 L.R.A. 69; and Young v. Thomas, 1879, 17 Fla. 169, 35 Am.Rep. 93.
The cost of inspection and enforcement no doubt increases with the quantity of seed involved. However, the cost is not likely to increase in direct proportion to the increase in quantity of seed measured by dollar volume of gross sales or otherwise. This is so because in all probability it costs less to inspect seed in larger lots than in smaller ones. Therefore, it requires no effort to find a reasonable relationship between the cost of the service rendered by the state and the graduated registration fee imposed on those who receive the service.
167 So.2d at 572-73.