Opinion ID: 749433
Heading Depth: 2
Heading Rank: 2

Heading: Imposition of Licensing and Certification Fees

Text: 30 We note at the outset that the parties argued and the district court decided that the LPG Act licensing and certification assessments on V-1's out-of-state facilities are taxes. However, we decline to adopt this approach. We believe that there is considerably more to the police-power-based-regulatory-fee-versus-tax dichotomy than the parties have maintained. While a regulatory police power fee that is reasonable in relationship to its costs is almost always sustained, see Aldens, Inc. v. LaFollette, 552 F.2d 745, 749-50 (7th Cir.1977), a tax with effects upon interstate commerce is more carefully scrutinized and more consistently resisted.... Freeman v. Hewit, 329 U.S. 249, 253, 67 S.Ct. 274, 276, 91 L.Ed. 265 (1946). See also Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174 (1970) (outlining balancing test for a nondiscriminatory regulation). Because we may affirm for any grounds supported in the record, see Schalk v. Gallemore, 906 F.2d 491, 498 (10th Cir.1990), and we hold that the assessments are fees, the former inquiry is applicable here. 31 We review the district court's grant of summary judgment de novo. See Kaul v. Stephan, 83 F.3d 1208, 1212 (10th Cir.1996). Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c). This court's resolution of the conflict between the constitutional protection of free interstate commerce and the states' reserved power to tax must be accomplished on a case-by-case basis, with the particular facts and statutory characteristics determining the outcome. Boston Stock Exch. v. State Tax Comm'n, 429 U.S. 318, 329, 97 S.Ct. 599, 606, 50 L.Ed.2d 514 (1977).
32 V-1 alleges that the licensing and certification assessments imposed on its out-of-state facilities and employees impermissibly tax the privilege of engaging in interstate commerce. The police power of a state and its power to tax are of course treated differently for constitutional purposes. Aldens, 552 F.2d at 749 (citing Freeman, 329 U.S. at 253, 67 S.Ct. at 276). [T]he burden on interstate commerce involved in a direct tax upon it is inherently greater, certainly less uncertain in its consequences, than results from the usual police regulations. Freeman, 329 U.S. at 253, 67 S.Ct. at 276. Because [t]he power to tax is a dominant power over commerce .... [a]ttempts at such taxation have always been more carefully scrutinized and more consistently resisted than police power regulations of aspects of [interstate] commerce. Id. Thus, our characterization of the monetary assessment in this case as a tax or as a fee determines the level of scrutiny we shall apply. 33
34 Under Utah law, 35 If the money collected is for a license to engage in a business and the proceeds therefrom are purposed mainly to service, regulate and police such business or activity, it is regarded as a license fee. On the other hand, if the factors just stated are minimal, and the money collected is mainly for raising revenue for general municipal purposes, it is properly regarded as the imposition of a tax.... 36 Weber Basin Home Builders Ass'n v. Roy City, 26 Utah 2d 215, 487 P.2d 866, 867 (1971) (emphasis supplied). 37 Here, the fee is assessed to service, regulate and police, id., the inspection and certification of LPG facilities and employees. See Aldens, 552 F.2d at 750 (upholding Wisconsin Consumer Act's fee imposed ... to cover the costs of administering the [a]ct as valid exercise of police power). The fee must be in reasonable relation to the cost of policing these activities. See Utah Code Ann. § 53-7-315(5)(d); see Aldens, 552 F.2d at 749-50 (stating that the exercise of a state's police power ... is sustainable absent an undue burden on interstate commerce which is clearly excessive in relation to local benefits); V-1 Oil Co. v. Utah State Tax Comm'n, 942 P.2d 906, 917 (Utah 1996) (holding environmental surcharge a fee and not[ing] that fixing the amount of a fee is a legislative act to which we grant great deference.). Finally, 38 A police regulation of local aspects of interstate commerce is a power often essential to a State in safeguarding vital local interests. At least until Congress chooses to enact a nation-wide rule, the power will not be denied to the State. 39 Freeman, 329 U.S. at 253, 67 S.Ct. at 276. 40 As in Aldens, the assessments involved here cannot be characterized as use or excise taxes, but rather as an unadorned fee assessed to help defray the costs of inspecting LPG facilities and to ensure that all LPG handlers providing LPG services within the State of Utah meet minimum standards of safety. See 552 F.2d at 750; Interstate Towing Assoc., Inc. v. City of Cincinnati, 6 F.3d 1154, 1162-63 (6th Cir.1993) (The City's fee cannot properly be characterized as a user fee .... [r]ather [it] is assessed to help defray the costs of inspecting towing vehicles to ensure that all trucks providing towing services ... meet certain standards of safety....). Finally, V-1 concedes the license and certification fees assessed and collected by the Utah State Office of the Fire Marshal, as assessed against the in-state facilities of V-1 and other suppliers, are properly considered fees because they are used to defray the costs of regulation. Aplt's Br. at 10. Furthermore, we can see no discernible difference between the characterization of fees assessed against V-1's in-state facilities and against its out-of-state facilities: if the in-state facility fees are acceptable, the out-of-state facility fees which involve precisely the same kinds of state services, are also acceptable.
41 There is no question that legitimate state interests may conflict with the national interests expressed by the Commerce Clause, and as such, we review with sensitive consideration ... of the state regulatory concern Utah's regulations, applying a delicate adjustment of these conflicting interests. Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429, 440-41, 98 S.Ct. 787, 793-94, 54 L.Ed.2d 664 (1978). The test that has emerged is as follows: 42 Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities. 43 Pike, 397 U.S. at 142, 90 S.Ct. at 847 (citation omitted) (emphasis supplied); see Dorrance v. McCarthy, 957 F.2d 761, 763 (10th Cir.1992) (applying Pike principles). Accordingly, we will consider Utah's LPG fees under the three factors outlined in Pike: (1) whether there is the furtherance of a legitimate local public interest; (2) whether the statute regulates evenhandedly; and (3) whether the statute places an undue burden upon interstate commerce. 44
45 V-1 does not dispute that Utah has a legitimate interest in the regulation of the transportation and distribution of LPG within its borders. Nor does it contend that federal regulation of hazardous materials has pre-empted state regulation of licensing and certification of LPG facilities. 46 Utah deems public safety and consumer protection to be priorities for the provision of LPG services within its borders. See Utah Code Ann. § 53-7-305(1)(a) (The board shall make rules as reasonably necessary for the protection of the health, welfare, and safety of the public and persons using LPG.). V-1 has presented no evidence to disprove the State's assertion that the regulations of these hazardous materials contribute to furthering the health, welfare, and safety of the public and persons using LPG. Utah Code Ann. § 53-7-305(a); see id. § 53-7-315(4) (the Fire Marshal may declare any container, appliance, equipment, transport, or system that does not conform to the safety requirements of this part or the rules or orders of the board, or that is otherwise defective, as unsafe or dangerous for LPG service, and shall attach a red tag in a conspicuous location.); Utah Admin. Code R710-6-3.15 to -16 (the LPG Board may respond to and investigate all serious accidents involving a licensee and LPG). Cf. Raymond Motor Transp., 434 U.S. at 444, 98 S.Ct. at 795 ([A]ppellants produced a massive array of evidence to disprove the State's assertions that the regulations make some contribution to highway safety.). 47 There is no question that the proper handling of hazardous materials is a valid regulation of local aspects of interstate commerce that is a power ... essential to a State in safeguarding vital local interests. Freeman, 329 U.S. at 253, 67 S.Ct. at 276; see Blue Circle Cement, Inc. v. Board of County Comm'rs, 27 F.3d 1499, 1511 (10th Cir.1994) (noting that [l]egislation relating to public safety has long been recognized as an important public interest). We are reluctant to deny Utah the exercise of its police power, absent an excessive burden on interstate commerce, or Congressional action. See Freeman, 329 U.S. at 253, 67 S.Ct. at 276 (At least until Congress chooses to enact a nation-wide rule, the [police] power will not be denied to the State.); Raymond Motor Transp., 434 U.S. at 443, 98 S.Ct. at 795 (noting that the [Supreme] Court has been most reluctant to invalidate under the Commerce Clause 'state legislation in the field of safety where the propriety of local regulation has long been recognized.' ) (quoting Pike, 397 U.S. at 143, 90 S.Ct. at 847) (quoting Southern Pac. Co. v. Arizona, 325 U.S. 761, 796, 65 S.Ct. 1515, 1532, 89 L.Ed. 1915 (1945) (Douglas, J., dissenting))). Accordingly, we hold that Utah's LPG statutes effectuate a legitimate local public interest. 48
49 Utah's regulations impose the same fees for licensing and certification on in-state based facilities as upon out-of-state facilities. V-1 contests the even-handed nature of the fees, asserting the Utah statutes impermissibly subject it to double taxation. V-1 pays fees in Idaho and Wyoming, where its Preston and Rock Springs facilities are based, and also in Utah, whereas Utah-based facilities only pay once to engage in business within the State. As such, V-1 argues, under Utah's fee scheme, if every State were to impose an identical tax, multiple taxation would result, which decreases V-1's out-of-state facilities' ability to remain competitive, thereby discriminating against interstate commerce. Aplt's Br. at 17, 20-21 (quoting Goldberg v. Sweet, 488 U.S. 252, 261, 109 S.Ct. 582, 588, 102 L.Ed.2d 607 (1989)). 50 There is no tenable basis for this assertion, however. Clearly, Utah-based facilities will pay less, as a percentage of revenues, to engage in business exclusively in Utah, and the percentage will decrease further still if the Utah-based companies engage in a greater amount of business in Utah than does V-1. Cf. Interstate Towing, 6 F.3d at 1163 (noting that the per-mile cost of the fee on towing companies may be less, as a percentage of revenue, for those firms that do more business in Cincinnati, [but] this has nothing to do with the towing company's home state ). Accordingly, under Utah's LPG Act, an LPG company's home state is immaterial because it is unrelated to the percentage of business affected by Utah's LPG licensing fees. See id. 51 Unlike in American Trucking Associations, Inc. v. Scheiner, 483 U.S. 266, 284, 107 S.Ct. 2829, 2840, 97 L.Ed.2d 226 (1987), where Pennsylvania erected, and the Supreme Court invalidated, a tax that essentially threaten[ed] the free movement of commerce by placing a financial barrier, id., around the state, here, Utah is trying to regulate what it reasonably thinks is a potentially dangerous or troublesome activity carried on within its borders. Interstate Towing, 6 F.3d at 1165 (upholding municipal ordinance regulating towing of vehicles). The LPG Act discriminates neither in favor of local commerce or against out-of-state commerce. See Oregon Waste Sys., Inc. v. Department of Envtl. Quality of Or., 511 U.S. 93, 108, 114 S.Ct. 1345, 1354, 128 L.Ed.2d 13 (1994) (striking down as discriminatory a $2.25 per ton surcharge on solid waste generated in other States, as opposed to the $0.85 per ton surcharge on in-state waste); Scheiner, 483 U.S. at 290, 107 S.Ct. at 2843 (invalidating Pennsylvania's weight-based registration fees in combination with an axle tax that discriminate[d] against out-of-state vehicles by subjecting them to a much higher charge per mile ... and they do not even purport to approximate fairly the cost or value of the use of Pennsylvania's roads). The licensing and certification fees are imposed on in-state and out-of-state facilities and employees alike. See Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 471-72, 101 S.Ct. 715, 727-28, 66 L.Ed.2d 659 (1981) (upholding Minnesota statute because it regulated evenhandedly by prohibiting all milk retailers from selling their products in plastic, nonreturnable containers, without regard to whether the milk, the containers, or the sellers [we]re from outside the State); Baltimore Gas & Elec. Co., v. Heintz, 760 F.2d 1408, 1423 (4th Cir.1985) (concluding statute that prevents the acquisition of more than ten percent of the stock of only Maryland public service companies is an evenhanded regulation). We hold that the LPG Act's fees regulate evenhandedly. 52
53 Having determined that the LPG fees are in furtherance of a legitimate local interest, and regulate evenhandedly, we must now evaluate the LPG Act's effects on interstate commerce. 54 We first examine whether the Act imposes any burden upon interstate commerce. V-1 bears the burden of showing that the incidental burden on interstate commerce is excessive compared to the local interest. Dorrance, 957 F.2d at 763. The incidental burdens of the Pike inquiry are the burdens on interstate commerce that exceed the burdens on intrastate commerce. New York State Trawlers Ass'n v. Jorling, 16 F.3d 1303, 1308 (2d Cir.1994) (citing Clover Leaf Creamery, 449 U.S. at 471, 101 S.Ct. at 727). Such incidental burdens might also include the disruption of [interstate] travel and shipping due to a lack of uniformity in state laws, impacts on commerce beyond the borders of the defendant [S]tate, and impacts that fall more heavily on out-of-state interests. Pacific Northwest Venison Producers v. Smitch, 20 F.3d 1008, 1015, 1017 (9th Cir.1994) (upholding Washington State's regulations protecting native wildlife) (internal citations omitted). 55 Although the LPG Act's fees may have some relatively minor effects on both interstate and intrastate commerce, the fees at issue do not attempt to regulate or prohibit the introduction of LPG into Utah. The fees involved here are not assessed for the privilege of making commercial entrances into the State. Scheiner, 483 U.S. at 284, 107 S.Ct. at 2840. They do not apply to the production, manufacture or refining of LPG. See Utah Code Ann. § 53-7-303(1). They do not apply to transportation of LPG by pipeline, or by railcar, or to pipeline terminals. See id. § 53-7-303(2), (5). In a similar context, the Sixth Circuit emphasized that: 56 those cases which have held certain fees, licenses, and other local regulations impermissibly to burden interstate commerce have all dealt with trades that consist solely or essentially of interstate carriage. In such cases, the [Supreme] Court has read between the statutory lines to see whether a state ... actually has a defensible interest in regulating this commerce, or whether it is, in a sense, extorting money in exchange for permitting interstate commerce within its jurisdiction. 57 Interstate Towing, 6 F.3d at 1164 (upholding municipal license fees imposed on towing industry) (emphasis added); City of Philadelphia v. New Jersey, 437 U.S. 617, 624, 628, 98 S.Ct. 2531, 2535, 57 L.Ed.2d 475 (1978) (when one State overtly blocks the flow of interstate commerce at a State's borders or attempts to isolate itself from a problem common to many by erecting a barrier against the movement of interstate trade, a per se rule of invalidity has been erected). As emphasized above, the Utah LPG Act does not block the flow of interstate commerce in any discernible way, City of Philadelphia, 437 U.S. at 624, 98 S.Ct. at 2535 and as such, there is no need to read between the statutory lines. Interstate Towing, 6 F.3d at 1164. See also Raymond Motor Transp., 434 U.S. at 444-45, 98 S.Ct. at 795-96 (striking down Wisconsin regulation barring double-trailer trucks or vehicles longer than 55 feet from the State's highways emphasizing the substantial burden imposed on the interstate movement of goods); Bourjois, Inc. v. Chapman, 301 U.S. 183, 186, 57 S.Ct. 691, 693, 81 L.Ed. 1027 (1937) (upholding Maine statute requiring registration of dealers and manufacturers of cosmetics because [i]t does not attempt to prohibit or regulate the introduction of cosmetics into the State); Lemke v. Farmers' Grain Co., 258 U.S. 50, 53, 42 S.Ct. 244, 245, 66 L.Ed. 458 (1922) (invalidating North Dakota statute regulating and requiring licenses of interstate traders in grain that is primarily for transportation beyond [the States's] borders). 58 V-1 argues that by virtue of its Preston and Rock Springs locations near the border of the State, the fees impermissibly burden interstate commerce. See Aplt's Br. at 20-21. However, the near-border locations of V-1's facilities do not transform the essential character of the regulated services into an interstate activity, thus rendering the otherwise neutrally applicable provisions of the [statute] impermissible burdens on interstate commerce. Interstate Towing, 6 F.3d at 1165. Rather, the state boundaries are entirely irrelevant to this fee. Id. at 1163. 59 In Interstate Towing, 6 F.3d 1154, the Sixth Circuit upheld a similar municipal statute requiring licensing fees from towing companies. The court examined a Cincinnati ordinance that assessed an $80.00 licensing fee on all towing companies whose places of business were within 25 miles of the city limits. See id. at 1162-63. After determining that the fee was not a user tax, because it was assessed to help defray the costs of inspecting towing vehicles to ensure they met certain standards, id. at 1162, the court examined the fee's effect on interstate commerce. 60 The Interstate Towing court determined that the towing ordinance protects inarguably important municipal interests, id. at 1164, and that Cincinnati's serendipitous location in an area where three states converge did not foreclose it from regulating local activities, which might entail movement across state lines. Id. at 1163. 61 Similarly here, V-1 complains it is victimized because of its locations near Utah's borders. However, the regulation of the handling of LPG, a hazardous material, and the provision of fire and police services to ensure the safety of the public and persons using LPG, Utah Code Ann. § 53-7-305(1)(a), are undisputedly important local interests. Such concerns have consistently been regarded as legitimate, innately local in nature, and presumptively valid, even where regulations enacted to address those concerns have an impact on interstate commerce. Interstate Towing, 6 F.3d at 1163 (citing Pike, 397 U.S. at 142, 90 S.Ct. at 847). As in Interstate Towing, that the regulated activities might entail movement across state lines does not preclude Utah's regulation in this field. We are reluctant to invalidate state legislation that furthers a legitimate local public interest such as this one, which ensures the safety of the States's roads and provides emergency services to the public. There is no evidence that the burdens upon interstate commerce are anything but incidental, and certainly are not clearly excessive under Pike. 397 U.S. at 142, 90 S.Ct. at 847; see also Aldens, Inc. v. Ryan, 571 F.2d 1159, 1162 (10th Cir.1978) (concluding that conformance with the Oklahoma cost of credit rules would not constitute an undue burden on interstate commerce). 62 V-1 also claims that in exchange for the facility license, its out-of-state facilities receive nothing. Aplt's Br. at 21. V-1 alleges, and the defendants agree, that the State has not inspected V-1's out-of-state facilities (although there is some dispute as to why this is the case, and whether these inspections will take place in the future). The statute expressly states that the assessment of the fee may not exceed the cost of service or inspection provided. Utah Code Ann. § 53-7-(d) (emphasis supplied). There is no evidence in the record as to the costs of administering the LPG statutes' regulations or regarding the costs of the services provided by the State. See also V-1 Oil Co., 942 P.2d at 917 (Because fees are not susceptible to exact measurement, and because fee-setting bodies must have the power to deal creatively with the various problems they encounter, [f]ee-setting bodies are entitled to flexibility in their legislative solutions to problems.). 63 We also agree with the Sixth Circuit that, 64 While non-compliance with established enforcement measures does suggest ulterior motives for a regulatory scheme, particularly where part of the inspection involves collection of the fee, the evidence does not indicate that this [statute] is simply a ruse. Imperfect enforcement does not render an underlying statute unconstitutional. 65 Interstate Towing, 6 F.3d at 1164 n. 10 (citing Hameetman v. City of Chicago, 776 F.2d 636, 641 (7th Cir.1985) (The Constitution does not require states to enforce their laws ... with Prussian thoroughness as the price of being able to enforce them at all.)). More importantly, since the mandates of the [Utah statutes] promote the public safety and consumer confidence in the regulated services, we must assume that the [statutes] also benefit[ ][LPG] companies themselves. Id. at 1164. V-1's allegations that Utah's failure to inspect its out-of-state facilities do not amount to factual disputes that might affect the outcome of this suit. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986). The district court was correct when it held that V-1 receives many benefits in return for its payments of the statutes' de minimis fees. 66 Accordingly, the LPG fees had a reasonable relation to the protections and services provided by the State. Finally, because the local interest involved (i.e., the promotion and achievement of public safety and awareness with respect to the handling of hazardous materials) is undisputedly a legitimate and important public interest, see Utah Code Ann. §§ 53-7-305(1)(a), Blue Circle Cement, 27 F.3d at 1511, we hold that any potential burden the de minimis license and certification fee requirements place upon interstate commerce is purely incidental.