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This theory is quite similar to the benefit theory whereby individuals pay taxes in relation to the benefits they receive from the state. However, the cost of service theory emphasizes the semi-commercial relationship between the state and the public to a greater extent. the main implications of this theory is that citizens are not entitled to any direct benefits from the state but instead they should reimburse the government or the state the cost incurred in the provision of government services. The cost of service theory if implemented would lead to a balanced budget because revenues raised by the government are a refund of the costs incurred. In real sense this is not possible so this theory suffers from the limitation that it is not possible to have a conceptual clarity of the measurement of cost. Also, just like the benefit theory , there is a problem on the measurement of cost on state services and the assignment of such costs to individual members of the society.

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