#### The People of the State of New York ex rel. Genesee Light and Power Company, Relator, *v.*William Sohmer, as Comptroller of the State of New York, Respondent.

Third Department,

May 6, 1914.

Tax—franchise tax on electric company—“ gross earnings ”—deduction for electricity purchased unauthorized.

Under the provision of section 186 of"the Tax Law that “the term 1 gross earnings,’ as used in this section, means all receipts from the employment of capital without any deduction,” money paid by a power company for electricity should not be deducted from its gross earnings in assessing a franchise tax.

*208Certiorari issued out of the Supreme Court and attested on the 13th day of September, 1913, directed to William Sohmer, as Comptroller of the State of New York, commanding him to certify and return to the office of the clerk of the county of Albany all and singular his proceedings had in imposing a tax upon the relator under section 186 of the Tax Law (Consol. Laws, chap. 60; Laws of 1909, chap. 62) for the year ending October 31, 1911.

*Strebel, Corey, Tubbs & Beals [Elton H. Beals*and *Fred D. Corey*of counsel], for the relator.

*Thomas Carmody, Attorney-General [Franklin Kennedy*of counsel], for the respondent.

Kellogg, J.:

Section 186 of the Tax Law imposes a franchise tax upon corporations supplying gas, water or electricity *“*for the privilege of exercising its corporate franchises or carrying on its business ” of five-tenths of one per cent upon its gross earnings from all sources. The question arises under the last clause of the section, which was added in 1907 and reads as follows: “ The term (gross earnings,’ as used in this section, means all receipts from the employment of capital, without any deduction.” The gross receipts of the relator were $85,349.22, but of that sum it paid to the Niagara, Lock-port and Ontario Power Company for electricity purchased $45,237.91. It is claimed that this last item was erroneously taken into consideration.

In *People ex rel. Brooklyn Union Gas Co.*v. *Morgan*(114 App. Div. 266) we held that the cost of the coal and the raw material going into the making of the gas was not a part of the gross receipts. Our decision was in 1906; in 1907 the above clause was added to the section, presumably to do away with the effect of that decision.

In *People ex rel. Westchester Lighting Co.*v. *Gaus*(199 N. Y. 147), a case arising after the amendment, it was held that the cost of the raw material, converted into gas or electric current, could not be deducted from the gross earnings. That case is absolutely controlling here. If. the relator had *209generated its own current, the cost of the raw material which was used in making it could not be deducted. In other words, the cost of the current to the taxable company could not be deducted from the receipts. Instead of generating the current the relator purchased it, and the purchase price is the cost of the current to it, the same as the cost of raw material would be if it had generated the current.

The relator contends that the Niagara Company is taxable upon its receipts for this same current, and that there is double taxation. But in the *Westchester*case the amount which the relator paid for the coal was the gross receipts of another company for which that company was taxable; the question of double taxation could be raised as well there as here.

The section imposes the tax upon the gross earnings'; it then describes the gross earnings to be all receipts from the employment of capital, without any deduction. The language used, as interpreted by the *Westchester*case, leaves nothing for discussion. The determination should be confirmed, with costs.

Determination unanimously confirmed, with fifty dollars costs and disbursements.