40 March 26, 2015 No. 11

11Powerex Corp. v. Dept. of Rev. March 26, 2015 357 Or 2015

IN THE SUPREME COURT OF THE

STATE OF OREGON

POWEREX CORPORATION,

Plaintiff-Respondent,

v.

DEPARTMENT OF REVENUE,

State of Oregon,

Defendant-Appellant.

(TC 4800; SC S060859)

En Banc

On appeal from the Oregon Tax Court.*

Henry C. Breithaupt, Judge.

Argued and submitted May 1, 2014.

Marilyn Harbur, Assistant Attorney General, Salem, 

argued the cause and filed the briefs for appellant. With her 

on the briefs was Ellen F. Rosenblum, Attorney General.

Eric J. Coffill, Morrison & Foerster LLP, Sacramento, 

California, argued the cause and filed the brief for respondent. With him on the brief were Jenny Choi and Carol Vogt 

Lavine, Gladstone, Oregon.

Scott G. Seidman, Tonkon Torp LLP, Portland, filed the 

briefs for amicus curiae Portland General Electric Company. 

With him on the briefs was Michael J. Millender.

KISTLER, J.

The judgment of the Tax Court is affirmed in part and 

reversed in part. The case is remanded for proceedings consistent with this opinion.

______________

* 20 OTR 338 (2011).
Cite as 357 Or 40 (2015) 41

Powerex filed for a refund of taxes on the ground that the Department of 

Revenue had incorrectly applied the “sales factor” to Powerex’s natural gas and 

electricity sales. The Tax Court ruled that Powerex’s natural gas sales were not 

delivered or shipped to a purchaser within this state and thus should not have 

been included in the numerator of the sales factor. Additionally, the Tax Court 

ruled that, because electricity is not “tangible personal property” and because the 

greater part of the income-producing activity had not occurred here, Powerex’s 

electricity sales should be not be attributed to Oregon. Held: (1) Powerex’s sales of 

natural gas occurred in Oregon if the gas was “delivered or shipped to a purchaser 

*** within this state” regardless of “the f.o.b. point and other conditions of the 

sale.” In this case, the gas was shipped to a purchaser in California, not Oregon. 

The contractual “points of delivery” in Malin, Oregon, on which the department 

relied to show that the sales occurred here, were “other conditions of the sale” 

that functioned substantially same as an “f.o.b point.” (2) Electricity constitutes 

“tangible personal property” for the purposes of ORS 314.665. (3) Because the 

Tax Court did not find where the electricity was shipped or delivered to the purchaser, the case is remanded for the Tax Court to make the requisite findings.

The judgment of the Tax Court is affirmed in part and reversed in part. The 

case is remanded for proceedings consistent with this opinion.
42 Powerex Corp. v. Dept. of Rev.

KISTLER, J.

Powerex wholesales natural gas and electricity to 

purchasers throughout the western part of North America. 

The question in this case is how much of Powerex’s income 

may Oregon tax. Under the terms of a uniform statute that 

Oregon has adopted, the answer to that question turns on 

the extent to which Powerex’s sales of natural gas and electricity were “in this state.” ORS 314.665(1). For the reasons 

explained below, we agree with the Tax Court that none of 

Powerex’s natural gas sales occurred in Oregon. However, 

we do not necessarily agree with the Tax Court that none 

of Powerex’s electricity sales occurred in Oregon. The Tax 

Court did not reach an issue—whether the electricity that 

Powerex sold was “delivered or shipped to a purchaser *** 

within this state”—that, as we explain below, controls 

whether Powerex’s electricity sales were “in this state.” See 

ORS 314.665(2)(a) (stating that standard). We accordingly 

affirm the Tax Court’s judgment in part, reverse it in part, 

and remand the case for further proceedings.

Before setting out the facts in this case, we first 

describe briefly the statutory framework in which this case 

arises. In 1965, Oregon adopted the Uniform Division of 

Income for Tax Purposes Act (UDITPA), codified at ORS 

314.605 to 314.675, to apportion income earned by unitary 

businesses that operate within and without Oregon. See Or 

Laws 1965, ch 152; Crystal Communications, Inc. v. Dept. 

of Rev., 353 Or 300, 302, 297 P3d 1256 (2013).1

 Generally, 

UDITPA uses the percentage of a multistate company’s sales 

within Oregon (the “sales factor”) to determine the percentage of the company’s business income that Oregon may tax. 

See ORS 314.650. Specifically, for each tax year, a company’s 

sales “in this state” are divided by the company’s total sales 

to arrive at the sales factor. ORS 314.665(1). Currently, the 

company’s total income is multiplied by the sales factor to 

1 ORS 314.280 governs the apportionment of income earned by public utilities and financial institutions. UDITPA governs the apportionment of income 

earned by other types of businesses. See Crystal Communications, Inc., 353 Or 

at 302. Throughout this litigation, the Oregon Department of Revenue has taken 

the position that UDITPA governs the apportionment of Powerex’s income. We 

accept that assumption for the purposes of deciding the department’s claims on 

appeal. We express no opinion on whether ORS 314.280, if applicable, would lead 

to a different result.
Cite as 357 Or 40 (2015) 43

determine the percentage of the company’s income that is 

subject to taxation in Oregon. ORS 314.650.2

This case turns on whether Powerex’s sales of electricity and natural gas occurred “in this state.” The rules 

for making that determination differ depending on whether 

the sales are sales of “tangible personal property” or other 

types of sales. ORS 314.665(2), (4).3

 Generally, sales of tangible personal property are “in this state” if “[t]he property 

is delivered or shipped to a purchaser ** * within this state 

regardless of the f.o.b. point or other conditions of the sale.” 

ORS 314.665(2)(a). Generally, sales of something other than 

tangible personal property are “in this state” if the greater 

part of the activity that produced the income from those 

sales occurred within Oregon. ORS 314.665(4).

In the Tax Court, the parties agreed that natural 

gas is tangible personal property. They disagreed whether, 

in selling natural gas, Powerex shipped or delivered natural 

gas to purchasers “within this state.” The Tax Court found 

that Powerex shipped gas to purchasers in other states 

through a hub in Malin, Oregon, where two pipelines intersect. It concluded that, in doing so, Powerex had not shipped 

or delivered gas to purchasers within Oregon.

Regarding Powerex’s sales of electricity, the parties 

disagreed whether electricity is tangible personal property. 

The Tax Court ruled that electricity is not tangible personal 

property and that, because the greater part of the activity 

that produced the income from Powerex’s electricity sales 

occurred in British Columbia, those sales were not attributable to Oregon. The Tax Court accordingly concluded that, 

2 Oregon law currently provides that only the sales factor is used to determine the percentage of a multistate company’s income that is taxable in Oregon. 

ORS 314.650. For the tax years at issue here, a company’s income was multiplied 

by a weighted average of three factors (the sales factor, the property factor, and 

the payroll factor) to determine the percentage of its income that was taxable 

in Oregon. See, e.g., ORS 314.650 (2001); ORS 314.650 (1999). However, only the 

sales factor is at issue on this appeal, and we discuss only that factor.

3 UDITPA divides sales into two categories: “sales of tangible personal 

property” and “[s]ales, other than sales of tangible personal property.” ORS 

314.665(2), (4). The latter category is not limited to sales of intangible property 

but also includes other types of sales, such as the sale of services. See Jerome R. 

Hellerstein, Walter Hellerstein, and John A. Swain, 1 State Taxation ¶ 8.06[3][b]

(3d ed 2000 & Supp 2014) (discussing allocation of sales other than sales of tangible personal property).
44 Powerex Corp. v. Dept. of Rev.

for the tax years at issue here, neither Powerex’s sales of 

electricity nor its sales of natural gas were “in this state.”

On appeal, the Oregon Department of Revenue (the 

department) challenges both of the Tax Court’s rulings. We 

begin with the Tax Court’s ruling that the natural gas that 

Powerex sold was not shipped or delivered to purchasers 

“within this state.” We then turn to its ruling that electricity is not tangible personal property.

I. NATURAL GAS

Natural gas is transmitted through interstate and 

intrastate pipelines organized around regional “market 

centers” or “hubs.”4

 The concept of a market center or hub 

(for our purposes, the terms are synonymous) emerged as 

a result of a 1992 Federal Energy Regulatory Commission 

order, which required that “interstate natural gas pipeline 

companies transform themselves from buyers and sellers of 

natural gas to [become] strictly gas transporters.” “Market 

centers and hubs evolved to provide new gas shippers with 

many of the physical capabilities and administrative support services formally handled by the interstate pipeline 

company as ‘bundled’ sales services.” Among other things, 

market centers and hubs provide “transportation between 

and interconnections with other pipelines, and the physical 

coverage of short-term receipt/delivery balancing needs.”5

In 2003, there were 37 market centers or hubs in the 

United States and Canada. Two of those hubs, Stanfield and 

Malin, were in Oregon. In 2003, Powerex sold natural gas 

to retailers in California through the hub in Malin. When 

Powerex filed its Oregon tax returns for the 2003 tax year, 

it treated those sales as sales “in this state” for the purpose 

of calculating the “sales factor”—i.e., for the purpose of calculating the percentage of Powerex’s total income that was 

attributable to Oregon. In 2006, Powerex filed a claim for a 

refund for the 2003 tax year. In its filing, Powerex explained 

4 The following facts regarding the shipment of natural gas are taken from a 

stipulated exhibit. Neither side offered any testimony on that subject.

5 Depending on the market center or hub’s infrastructure, market centers 

or hubs can balance the supply of and demand for natural gas by, among other 

things, parking or loaning natural gas on a short-term basis, storing it on a longer 

term basis, and entering into other “short-term interruptible arrangement[s].”
Cite as 357 Or 40 (2015) 45

that it had shipped the natural gas to the hub at Malin, 

Oregon “where title transferred to the purchaser.” Its refund 

claim stated that the gas then “entered into PG&E’s system 

for transport into California.”6

Before the Tax Court, the department argued that, 

because the contractual point of delivery was in Malin, 

Oregon, Powerex “delivered or shipped [the natural gas] to 

a purchaser * * * within this state.” Powerex responded that 

the department’s focus on the contractual point of delivery 

missed the mark. In Powerex’s view, Malin merely served 

as the point at which gas was transferred from one pipeline 

to another on its way to a purchaser in California. Powerex 

argued that, because it shipped the gas to a purchaser in 

California, it did not deliver or ship it to a purchaser within 

Oregon.

The Tax Court agreed with Powerex. It found that 

the gas was being transmitted over pipelines that functioned 

as common carriers. It explained that both the majority of 

cases interpreting other states’ analogues to ORS 314.665(2) 

and the purpose of that rule supported the conclusion that 

“where delivery by a seller is to a common carrier for further shipment an ultimate destination approach is followed.” Because the ultimate destination in this case was 

California, the Tax Court concluded that Powerex’s natural gas sales were not sales “to a purchaser * ** within this 

state.” See ORS 314.665(2)(a).

On appeal, the department does not dispute that the 

natural gas that Powerex sold was destined for California. It 

also does not question the Tax Court’s implicit finding that 

two pipelines connected at the “hub” in Malin so that the 

natural gas that Powerex delivered through one pipeline to 

Malin flowed from that pipeline into another pipeline on its 

way to the purchaser in California. The department argues, 

however, that the hub at Malin was critical for two reasons: 

(1) the natural gas contracts that Powerex entered into specified Malin as the “contractual point of delivery” and (2) they 

6 The Tax Court found that the gas that Powerex sold was shipped or delivered to purchasers outside of Oregon. Powerex stated that the natural gas was 

shipped or delivered to purchasers in California, and we assume that California 

was the gas’s ultimate destination.
46 Powerex Corp. v. Dept. of Rev.

also specified that title to the gas passed from Powerex to 

the purchaser at Malin. The department reasons that, given 

those two facts, we should conclude that the natural gas was 

“delivered or shipped to [the] purchaser” in Malin, Oregon, 

not in California.

In considering the department’s argument, we look 

initially to the text, context, and history of ORS 314.665(2). 

See State v. Gaines, 346 Or 160, 171-72, 206 P3d 1042 (2009). 

We begin with the text of that statute, which provides, in 

part:

“Sales of tangible personal property are in this state if:

“(a) The property is delivered or shipped to a purchaser, 

other than the United States, within this state regardless 

of the f.o.b. point or other conditions of the sale[.]”

ORS 314.665(2)(a).7 The text of subsection (2)(a) divides into 

two parts. The first part provides that a sale of tangible personal property is “in this state if [t]he property is delivered 

or shipped to a purchaser ** * within this state.” The second part provides that the determination where property is 

shipped or delivered to the purchaser should be made without regard to “the f.o.b. point or other conditions of the sale.”

Textually, the first part of the statute asks a simple question: Where was the property shipped or delivered 

to the purchaser? See Arthur D. Lynn, Jr., The Uniform 

Division of Income for Tax Purposes Act, 19 Ohio St LJ 

41, 50 (1958) (noting the “conceptual simplicity” of the 

Uniform Act formulation).8

 In asking that question, ORS 

314.665(2)(a) uses the passive voice. The question under 

that statute is not who shipped or delivered the property 

to the purchaser but where the property was shipped or 

delivered to the purchaser.

7 The subsection quoted above states the general rule. ORS 314.665(2)

(b) states two exceptions to that rule. ORS 314.665(2)(b) addresses sales to the 

United States and sales to purchasers in states where the taxpayer is exempt 

from taxation. It provides that sales are within this state if the goods are shipped 

from an office, warehouse, or other place of storage in this state and either the 

purchaser is the United States Government or the taxpayer is not taxable in the 

state where the goods are shipped or delivered to the purchaser.

8 We refer to the Oregon statute as UDITPA. We refer to the uniform act 

on which Oregon based UDITPA as the Uniform Act. ORS 314.665(2)(a) tracks 

essentially verbatim the corresponding section of the Uniform Act.
Cite as 357 Or 40 (2015) 47

The second part of the statute reinforces that conclusion. It provides that the determination of where property is shipped or delivered to the purchaser should be made 

“regardless of the f.o.b. point or other conditions of the sale.” 

We assume that the rule of ejusdem generis applies so that 

the phrase “other conditions of the sale” shares the same 

qualities as the specific term that precedes it, “the f.o.b. 

point.” See Baker v. City of Lakeside, 343 Or 70, 76, 164 P3d 

259 (2007). That is, the phrase “other conditions of the sale” 

refers to those conditions of the sale that are similar to “the 

f.o.b. point.” See id. The primary conclusion that we draw, 

at this point, from the second part of the text is that it reinforces what the first part says. The question where tangible 

property was delivered or shipped to the purchaser should 

not turn on legal technicalities, such as the f.o.b. point; 

rather, the question calls for a more practical answer.

In addition to the text of ORS 314.665(2)(a), we also 

consider its context. See Stevens v. Czerniak, 336 Or 392, 

401, 84 P3d 140 (2004) (explaining that the context for interpreting a statute’s text includes the preexisting common 

law and the statutory framework within which the law was 

enacted). ORS 314.665 is modeled on a uniform law that the 

Commissioners on Uniform State Laws proposed in 1957 

and that Oregon adopted in 1965. Compare Or Laws 1965, 

ch 152, § 17, with Uniform Act, § 16 (1957). In 1957 and also 

in 1965, the meaning of the phrase “the f.o.b. point” was wellestablished. See Samuel Williston, 2 The Law Governing the 

Sale of Goods §§ 280-280b (rev ed 1948); Laurence Vold, The 

Handbook of the Law of Sales § 33 (2d ed 1959).

The initials f.o.b. stand for the words “free on board” 

and were originally used in connection with the shipment of 

goods by sea. Williston, 2 The Law of Sales § 280. “[T]he primary significance of the words was that the seller [wa]s bound 

to put the goods free of expense on board a vessel for transportation to the buyer.” Id. The same rule also applied when 

goods were shipped by rail or other forms of transportation, 

although questions could arise regarding the extent of the 

seller’s obligation. See id. Williston explained that, to avoid 

those questions, the parties could specify more precisely the 

point to which the seller was bound to deliver the goods. For 
48 Powerex Corp. v. Dept. of Rev.

example, “[w]here the contract is for a sale f.o.b., the place of 

destination, undoubtedly the seller contracts to get the goods 

to that place, and this involves getting cars in which to load 

the goods when transportation is to be by rail ***.” Id. § 280a. 

Williston explained that two presumptions attach to the f.o.b. 

point. Id. § 280b. First, title to the goods passes at the f.o.b. 

point. Id. Second, “the place where the goods are to be delivered f.o.b. is the place of delivery to the buyer.” Id.

That established definition of “the f.o.b. point” 

informs the meaning of the first part of the statute, as an 

example will illustrate. Suppose that a seller agrees to ship 

goods by rail from Vancouver, Washington, to a purchaser 

in Los Angeles, California. Those goods could be shipped 

f.o.b. Vancouver, f.o.b. Portland, or even f.o.b. Los Angeles. 

See id. at § 280a (explaining that even “though the expressions f.o.b. the point of destination or some intermediate 

point are less common [than f.o.b. the point of shipment], 

such bargains are not infrequent”). Whichever f.o.b. point 

the agreement specified would establish, as a condition of 

the sale, the place where the seller was responsible for delivering the goods, the place where title passed to the buyer, 

and the place of delivery to the buyer. See id. at §§ 280a, 

280b. However, the text of ORS 314.665(2)(a), read in context, makes clear that, for the purposes of determining the 

“sales factor,” the place where property is shipped or delivered to the purchaser is determined without regard to “the 

f.o.b. point or other conditions of the sale.” In the example 

set out above, the place where the goods were shipped to the 

purchaser would be Los Angeles. That is true even if the 

goods were shipped f.o.b. Portland and even if, as a result, 

title passed to the buyer in Portland and the contractual 

place of delivery was Portland.

The history of the rule leads to the same conclusion. 

Before the Commissioners on Uniform State Laws adopted 

the Uniform Act in 1957, sales of tangible property by multistate businesses were allocated among states based on the 

property’s (1) destination; (2) origin; (3) the location of the 

sales office; (4) sales activity; or (5) place of acceptance by 

the purchaser. State Taxation of Interstate Commerce: Report 

of the Special Subcommittee on State Taxation of Interstate 
Cite as 357 Or 40 (2015) 49

Commerce, House Committee on the Judiciary, H R Rep 

No 952, 89th Cong, 1st Sess, 181-83 (1965); see Jerome R. 

Hellerstein, Walter Hellerstein, and John A. Swain, 1 State 

Taxation ¶ 9.18(1) (3d ed 2000 & Supp 2014).

Each of those theories for allocating sales of tangible personal property had its disadvantages. However, one 

theory—allocating sales to the state or country where title 

passed—was probably the least favored:

“Apportionment of sales to the state or country where title 

passes is hit or miss. The effect of the apportionment will 

depend wholly upon legal conclusions based upon construction of contracts, terms of waybills, customs in the business, evidence as to the intention of the parties, and other 

considerations having little or no relation to the problem of 

determining where income is earned.”

George T. Altman and Frank M. Keesling, Allocation of 

Income in State Taxation 127 (2d ed 1950). See also Frank M. 

Keesling and John S. Warren, California’s Uniform Division 

of Income for Tax Purposes Act Part I, 15 UCLA L Rev 156, 

161 (1967) (“Most states consider the place where title passes 

irrelevant in determining the source of income.”).

The comment to section 16 of the Uniform Act, on 

which Oregon modeled ORS 314.665, suggests, as do the 

text and context of that section, that the drafters of the 

Uniform Act did not intend to allocate sales based on where 

title passed; rather, they intended to adopt the ultimatedestination theory of allocating sales. We note that the comment does not explain how the general rule—that sales are 

allocated to the place where tangible personal property is 

shipped or delivered to the purchaser—works. Instead, the 

comment identifies two variations on that general rule and 

explains how the Uniform Act would allocate sales in those 

situations. The comment also discusses an exception to the 

general rule and the reason for the exception. In doing so, 

the comment sheds light, albeit indirectly, on the meaning 

of the general rule.

Regarding the first variation, the comment states: 

“The phrase ‘delivered or shipped to a purchaser’ in this state 

includes shipments, at the designation of the purchaser, to a 
50 Powerex Corp. v. Dept. of Rev.

person in this state such as designating, while a shipment 

is en route, the ultimate recipient.” Uniform Act, § 16, comment. Although its syntax leaves something to be desired, 

that part of the comment recognizes that tangible personal 

property will be shipped or delivered to a purchaser within 

this state when the purchaser designates a person in this 

state as the “ultimate recipient” of the property. The comment thus clarifies that, in determining the place where tangible personal property is shipped or delivered to the purchaser, the identity of the “ultimate recipient” can matter.

The comment also discusses why the Uniform Act 

excepts shipments to the United States government from 

the general rule. It explains:

“Sales to the United States are treated separately. It is 

thought that this is justified because sales to the United 

States are not necessarily attributable to a market existing 

in the state to which the goods are originally shipped. This 

different treatment may also be justified because, if the 

goods are defense or war materials, it may be impossible to 

determine whether the goods ever came to rest in the state 

due to use of coded delivery instructions.”

Uniform Act, § 16, comment. As the comment notes, one reason for excepting goods sold to the United States from the 

general rule is that, for some categories of goods, “it may 

be impossible to determine whether the goods [sold to the 

United States] ever came to rest in the state” to which they 

were delivered or shipped. Implicit in that explanation is 

that ordinarily what matters in determining where property was shipped or delivered to the purchaser is where the 

property “came to rest.”9

9 The other reason the comment notes for excepting sales to the United 

States points in the same direction. By providing that sales are allocated to the 

state where the goods are shipped or delivered to the purchaser, the Uniform 

Act recognizes the contribution that “the state of destination, which provides 

the market, [makes] to the generation of income.” Lynn, The Uniform Division of 

Income for Tax Purposes Act, 19 Ohio St LJ at 51; see also Keesling and Warren, 

California’s Uniform Division of Income for Tax Purposes Act Part I, 15 UCLA L 

Rev at 161 (same). As the comment explains, however, sales of goods to the United 

States “are not necessarily attributable to the market existing in the state to 

which the goods are originally shipped.” Uniform Act, § 16, comment. As a consequence, sales to the United States are not attributed to the state where the goods 

are shipped or delivered but instead are allocated to the state from which the 

goods are shipped. See ORS 314.665(2)(b) (so providing).
Cite as 357 Or 40 (2015) 51

Given the text, context, and history of the Uniform 

Act, most legal authorities have acknowledged that section 16(a) of the Uniform Act is best read as embodying 

an ultimate-destination theory of sales apportionment. 

Professors Keesling and Warren understood the Uniform 

Act to adopt the destination theory. “The Act provides that 

sales of tangible personal property should be apportioned 

to the state or country of destination, provided the taxpayer is subject to tax in such state or country.” Frank M. 

Keesling and John S. Warren, California’s Uniform Division 

of Income for Tax Purposes Act Part II, 15 UCLA L Rev 655, 

671 (1968); see also Lynn, The Uniform Division of Income 

for Tax Purposes Act, 19 Ohio St LJ at 50 (describing Section 

16(a) of [the Uniform Act] as “assign[ing] sales to the sales 

factor numerator of the state of delivery,” that is, “customer 

location”) (emphasis added). So, too, has almost every jurisdiction that has interpreted the text. See, e.g., Olympia 

Brewing Co. v. Comm’r of Revenue, 326 NW2d 642, 648 

(Minn 1982); McDonnell Douglas Corp. v. Franchise Tax Bd.,

26 Cal App 4th 1789, 1794, 33 Cal Rptr 2d 129 (1994) (collecting cases); Hellerstein et al., 1 State Taxation § 9.18[1][a]

(“[M]ost courts that have considered the issue have adopted 

the ultimate-destination rule rather than the place-ofdelivery rule.”).

We recognize that asking where property was 

shipped or delivered to the purchaser does not always lead 

to a clear answer. One issue has arisen when a seller ships 

goods to a loading dock in one state where the purchaser 

picks them up and then transports them to their “ultimate 

destination” in another state. See Department of Revenue 

v. Parker Banana, 391 So 2d 762 (Fla Dist Ct App 1980); 

Hellerstein et al., 1 State Taxation ¶ 9.18[1][a] (discussing 

issue). The question in that situation is whether the goods 

were shipped to the purchaser in the first state or the second. In analyzing that question, the seminal case started 

from the proposition that, if the seller had shipped the goods 

to the loading dock in the first state and a common carrier 

had picked the goods up and delivered them to the purchaser 

in the second state, then the goods would have been “delivered or shipped to [the] purchaser” in the second state for the 
52 Powerex Corp. v. Dept. of Rev.

purposes of UDITPA. See Parker Banana, 391 So 2d at 763. 

The court held that the result should be no different if the 

purchaser picked up the goods at the loading dock in the first 

state and transported them itself to their ultimate destination in the second state rather than having a common carrier 

do so. See id. at 764. Agreement is not universal, however. 

See Hellerstein et al., 1 State Taxation ¶ 9.18[1][a] (recognizing general agreement with Parker Banana but noting that 

asking where the goods were shipped rather than ultimately 

received would be a more administratively convenient test).

Although the parties urge us to take a position on 

that issue, the Tax Court’s opinion obviates the need to do 

so. As we read the Tax Court’s opinion, it found that Malin 

was simply the point at which the natural gas that Powerex 

sold went from one pipeline to another pipeline on its way 

to its ultimate destination outside of Oregon. More importantly, the Tax Court analogized the role that the pipelines 

played to that of common carriers. It explained that “it 

appears that the gas in question is being transmitted over 

interstate pipelines that are, or function as, common carriers.” Given the Tax Court’s findings, we conclude that this 

case does not require us to decide what the rule should be 

when the purchaser takes physical possession of the goods 

at a loading dock in one state and transports them itself to 

their ultimate destination in another state. Rather, this is 

a case in which the natural gas merely went from one “common carrier” to another at Malin on the gas’s way to the purchaser in California. The department identifies no case in 

which any court has held that such a transfer constitutes a 

“delivery” to the purchaser within the meaning of UDITPA 

or its analogues in other states.

The department argues, however, that we should 

reach a different conclusion for three reasons. First, as noted 

above, the department argues that “the contractual points 

of delivery for Powerex’s natural gas transactions were in 

Oregon.” It also notes that “title to the [natural gas] passe[d] 

from Powerex to its purchasers at the delivery point specified in their contracts”—namely, in Malin. The department 

concludes from those facts that Powerex delivered the natural gas to the purchasers in Malin, not in California.
Cite as 357 Or 40 (2015) 53

The department never explains what the phrase 

“contractual point of delivery” means.10 The record, however, 

contains two standard form contracts that Powerex incorporated by reference in selling natural gas.11 One form sets 

out the general terms and conditions for “Base Contracts 

for Sale and Purchase of Natural Gas.” The other sets 

out general terms and conditions for a “Base Contract for 

Short-Term Sale and Purchase of Natural Gas.”12 Section 

One of the Base Contract for Sale and Purchase of Natural 

Gas defines “Delivery Point(s)” as “mean[ing] such point(s) 

as are agreed to by the parties in a transaction.” Section 

Four provides that “[s]eller shall have the sole responsibility for transporting the Gas to the Delivery Point(s). Buyer 

shall have the sole responsibility for transporting the Gas 

from the Delivery Point(s).” Section Eight of the agreement 

provides:

“Unless otherwise specified, title to the Gas shall pass from 

Seller to Buyer at the Delivery Point(s). Seller shall have 

responsibility for and assume any liability with respect 

to the Gas prior to its delivery to Buyer at the specified 

Delivery Point(s). Buyer shall have responsibility for and 

any liability with respect to said Gas after its delivery to 

Buyer at the Delivery Point(s).”

It appears from those contract provisions that the 

“contractual point of delivery,” on which the department 

relies, serves the same function as an f.o.b. point. The 

contractual point of delivery specifies the point to which 

Powerex was responsible for delivering the natural gas, the 

point at which title to the gas passed from Powerex to the 

purchaser, and the point at which responsibility for any loss 

passed from Powerex to the purchaser.

10 The department cites one exhibit to demonstrate that Powerex sold natural gas with contractual points of delivery in Oregon. That exhibit is a response 

to the department’s request for production of natural gas sales in the 2003 tax 

year “with a contractual delivery point within Oregon.” The exhibit consists of a 

list of gas sales that Powerex compiled in response to the department’s request 

for production. However, neither the request nor the response contains any explanation of what “contractual point of delivery” means.

11 In selling natural gas, Powerex entered into confirmation agreements 

with the purchasers, which incorporated by reference the terms of the standard 

contracts.

12 The terms in the two standard form contracts are similar but not identical.
54 Powerex Corp. v. Dept. of Rev.

The department identifies no evidence that would 

suggest some different meaning for those contractual terms, 

and we conclude that the “contractual points of delivery” on 

which the department bases its argument are “other conditions of the sale” that are effectively the same as “the 

f.o.b. point.” Put differently, the department’s argument is 

based on “other conditions of the sale” that ORS 314.665(2)

(a) directs us to disregard in deciding where the natural gas 

was delivered or shipped to the purchaser. The conditions 

of sale on which the department relies provide no reason 

to reject the Tax Court’s conclusion that the natural gas 

merely passed from one pipeline to another at Malin on its 

way to purchasers in other states.

The department also relies on two rules that it promulgated to implement ORS 314.665(2)(a). The first rule 

was in effect when the transactions at issue here occurred. 

The second rule did not become effective until 2011, several 

years after the 2003 gas sales at issue here. The first rule 

provides:

“Property is delivered or shipped to a purchaser within this 

state if the shipment terminates in this state, even though 

the property is subsequently transferred by the purchaser 

to another state.”

OAR 150-314.665(2)-(A)(4). That rule includes the following 

example to illustrate its application:

“The taxpayer makes a sale to a purchaser who maintains 

a central warehouse in Oregon at which all merchandise 

purchases are received. The purchaser reships the goods to 

its branch stores in other states for sale. All of taxpayer’s 

products shipped to the purchaser’s warehouse in Oregon 

[are] property ‘delivered or shipped to a purchaser within 

this state.’”

Id.

We defer to an agency’s interpretation of its own 

rule “as long as its interpretation is a plausible one and not 

inconsistent with the rule, its context, or any other source 

of law.” Crystal Communications, 353 Or at 311. In our view, 

the difficulty with the department’s reliance on OAR 150-

314.665(2)-(A)(4) lies in its application to the facts of this 
Cite as 357 Or 40 (2015) 55

case. Given the Tax Court’s decision, it is difficult to see how 

the department can say that Powerex’s shipments of natural 

gas “terminate[d]” in Malin. Rather, as the Tax Court concluded, all that occurred at Malin was that the natural gas 

went from one interstate pipeline to another on its way to 

purchasers in other states. The department points to nothing in the record that contradicts the Tax Court’s conclusion 

or that suggests that this transaction fell within the example 

that illustrates how OAR 150-314.665(2)-(A)(4) applies.

The department relies on a second rule, which provides that “[a] sale of tangible personal property, ** * which 

is delivered or shipped to a purchaser with a contracted 

point of delivery in Oregon is a sale in this state.” OAR 150-

314.665(2)-(C)(1). The phrase “contracted point of delivery” 

can have more than one meaning. It can mean (1) the ultimate destination to which the goods are shipped or delivered to the purchaser by either the seller or by one or more 

common carriers; (2) the point at which the purchaser takes 

possession of the goods but not the goods’ ultimate destination, as in the loading dock example noted above; or (3) the

f.o.b. point or other conditions of the sale. As explained above, 

in applying OAR 150-314.665(2)-(C)(1) to the gas sales at 

issue here, the department equates the phrase in the rule 

“contracted point of delivery” with the f.o.b. point or other 

conditions of the sale.

The rule, applied to these gas sales, is squarely 

inconsistent with the statute. That is, the rule, as the department applies it to these gas sales, gives dispositive effect to 

“conditions of the sale” that ORS 314.665(2)(a) directs us to 

disregard in deciding where tangible personal property was 

shipped or delivered to the purchaser. We need not decide 

whether the department’s rule validly can be applied to the 

second situation identified above (the loading dock example). As the Tax Court concluded, Malin simply served as a 

transfer point from one “common carrier” to another on the 

gas’s way to the purchaser in another state.13 The Tax Court

13 The Tax Court ruled that OAR 150-314.665(2)-(C)(1) did not apply to the 

natural gas sales at issue here because the department adopted that rule after 

the period in which Powerex’s return for the 2003 tax year was “open for examination.” See OAR 150-305.100-(B) (“Administrative rules adopted by the department, unless specified otherwise by statute or by rule, shall be applicable for 
56 Powerex Corp. v. Dept. of Rev.

correctly held that Powerex’s natural gas sales were not “in 

this state.” See ORS 314.665(1).

II. ELECTRICITY

Electricity—whatever its physical properties—is 

sold. Wholesale traders or brokers buy and sell megawatt 

hours of electricity for specific days or hours.14 Retailers, and 

eventually end-users, receive electricity through transmission lines reticulated into a massive network, which is subdivided into regions. The region comprising British Columbia, 

Washington, Oregon, California, and several other western 

states is governed by the Western Electricity Coordination 

Council (WECC). The part of the WECC region that is at 

issue here is a grid called the Pacific-Northwest PacificSouthwest Intertie (the Pacific Intertie). The Pacific Intertie 

consists of alternating-current and direct-current transmission lines, which pass through Oregon on their way from 

and to other states.

Only a few parties own the transmission lines 

that make up the Pacific Intertie. Other entities, such as 

Powerex, purchase the right to use them. In the balancing 

area in which Oregon is situated, a wholesale trader typically will buy transmission rights from Bonneville Power 

Administration (BPA), the primary transmission service 

provider in Oregon.15

Situated along the transmission lines are various 

hubs. The two hubs at issue in this case are referred to as 

all periods open to examination.”). We need not decide whether that procedural 

ruling provides another basis for affirming the Tax Court’s conclusion that the 

natural gas Powerex sold was delivered or shipped to purchasers in other states. 

It is sufficient to hold that, even if OAR 150-314.665(2)-(C)(1) applied to the 2003 

tax year, applying it to the natural gas sales in this case is inconsistent with ORS 

314.665(2)(a). 

14 Because the Tax Court concluded that electricity is not tangible personal 

property, it did not decide where the electricity that Powerex sold was delivered 

to the purchasers. In stating the facts, we have set out undisputed facts to put the 

parties’ arguments on that issue in perspective.

15 A “balancing area” is the area for which a balancing authority—in Oregon, 

Bonneville Power Administration—“maintains load-resource balance.” See N 

Am Elec Reliability Corp, Glossary of Terms in NERC Reliability Standards 10 

(last updated June 14, 2014) available at http://www.nerc.com/files/Glossary_of_

Terms.pdf. Generally, it is coextensive with a federally regulated transmission 

provider’s service area.
Cite as 357 Or 40 (2015) 57

the California-Oregon Border (COB) and the Nevada-Oregon 

Border (NOB). COB consists of four different substations, two 

of which are in Oregon (Malin and Captain Jack). NOB, by 

contrast, consists of “[s]ome grass and some dirt” and three 

wires “cross[ing] over the Nevada-Oregon border.” NOB is not 

a substation but “just a spot in the line at the Nevada-Oregon 

border where BPA * * * hands off responsibility or ownership 

of the transmission lines to the southern entities.”

COB and NOB mark two points on the Pacific 

Intertie where electricity goes from one transmission system 

to another. They also play an additional role in this case. 

The agreements for Powerex’s electricity sales at issue here 

specify a “point of delivery” at either COB or NOB. There 

was evidence in the record from which the Tax Court could 

find that the “point of delivery” for the electricity sales was 

functionally the same as the contractual point of delivery 

for the natural gas sales; that is, the Tax Court could find 

that COB and NOB were the points on the Pacific Intertie 

to which Powerex agreed to deliver electricity, the points 

at which title to the electricity passed, and also the points 

where electricity passed from BPA’s transmission system to 

another entity’s transmission system on its way somewhere 

else.

The Tax Court did not decide whether the electricity that Powerex sold was shipped or delivered to purchasers 

in Oregon or elsewhere.16 Rather, the Tax Court allocated 

Powerex’s electricity sales a different way. It concluded that 

electricity is not tangible personal property for the purposes 

of ORS 314.665(2)(a), which the Tax Court found meant 

that all of Powerex’s electricity sales should be allocated 

to British Columbia.17 Given the Tax Court’s ruling, we 

16 The parties agree that the ultimate destination for a small part of the 

electricity that Powerex sold was Oregon and thus was “delivered or shipped to a 

purchaser *** within this state.” See ORS 314.665(2)(a). They disagree whether 

the remainder of the electricity was delivered or shipped to purchasers in this 

state or other states.

17 Because the Tax Court concluded that electricity is not tangible personal 

property, it allocated Powerex’s electricity sales to the state where the greater 

part of the income-producing activity occurred. See ORS 314.665(4) (specifying 

that rule for allocating “[s]ales, other than sales of tangible personal property”). 

The court found that the greater part of the income-producing activity occurred 

in British Columbia.
58 Powerex Corp. v. Dept. of Rev.

describe briefly the competing expert testimony on whether 

electricity is tangible personal property.

Peter Fisher is the head of the department of experimental particle and nuclear physics at MIT. Powerex called 

Fisher in support of its argument that electricity is not tangible personal property. Fisher testified that “electricity” 

is attributed to the behavior of subatomic particles, which 

he identified as “virtual photons.”18 He explained that, as 

electrons orbit around the nucleus of an atom, the electrons 

emit virtual photons, which “propagat[e] through space to 

[another] point,” where the virtual photon is absorbed by a 

second electron and extinguished. The life of a virtual photon 

is fleeting; it lasts only for the “time it takes for something 

to cross an atom at the speed of light.” Fisher explained that 

virtual photons are an electromagnetic field, and electricity 

is one manifestation of an electromagnetic field. According 

to quantum physics, virtual photons have no mass. Only 

electrons, protons, and neutrons (and perhaps related particles) have mass.19 Because virtual photons have no mass, 

Fisher concluded that that they are not “material” and that 

electricity is not “tangible personal property.”

Joel Fajans is a professor of physics at the University 

of California at Berkeley. The department called Fajans to 

testify in support of its position that electricity is tangible 

personal property. Fajans testified that an electric current 

consists of the flow and “pressure” of electrons, which both he 

and Fisher agreed have mass. He also explained, and Fisher 

did not dispute, that electricity is perceptible to the senses. It 

can be felt, smelled, tasted, weighed, measured, and stored 

(as well as seen by certain kinds of fish). Fajans did not dispute that electromagnetic fields result from photons and 

18 We say “attributed” because Fisher was careful to say that virtual photons are “unobservable in any way.” Quantum physics postulates the existence 

of virtual photons to explain other phenomena that can be observed and measured. To date, the observable phenomena have been consistent with the idea 

both that virtual photons exist and that they have certain characteristics that 

can be deduced.

19 Fisher identified several other related particles, which he described using 

kinship terms: the electron’s “silent cousin,” the neutrino; the electron’s experimental sisters, the muon and the tau (and their related neutrinos); and the 

apparently unnamed brothers of the up and down quarks, which are found in the 

nucleus of the atom. Fisher’s testimony suggests that some or perhaps all those 

related particles have mass.
Cite as 357 Or 40 (2015) 59

that virtual photons have no mass. However, he explained 

that, in describing electrical power that is sold and delivered over transmission lines, virtual photons should not be 

viewed separately from the flow of electrons that constitute 

electric current. Because electrons have mass and because 

electricity is perceptible, Fajans testified that electricity is 

tangible as that word is ordinarily understood.

The Tax Court found Fisher’s opinion more persuasive than Fajans’, and it concluded, based on Fisher’s testimony, that electricity is not “tangible personal property” 

within the meaning of ORS 314.665. The Tax Court then 

found that the greater part of the activity that produced the 

income from Powerex’s electricity sales occurred in British 

Columbia. See ORS 314.665(4) (providing that “[s]ales, other 

than sales of tangible personal property” should be allocated 

to the state where the greater part of the income-producing

activity occurred). As a result, the Tax Court held that the 

department should not have included any of Powerex’s electricity sales in the numerator of the Oregon sales factor. 

Having found that electricity is not tangible personal property, the Tax Court did not decide whether the electricity 

that Powerex sold was shipped or delivered to purchasers in 

this state. See ORS 314.665(2)(a).

In considering the Tax Court’s ruling, we begin 

with the question whether electricity is tangible personal 

property.20 On that issue, the United States Supreme Court 

recently has reminded us that whether an object is “tangible” does not necessarily turn on physics or even the object’s 

physical properties; rather, it can depend on the context in 

which the legislature used the word “tangible.” See Yates v. 

United States, ___ US ___, 135 S Ct 1074, 191 L Ed 2d 64 

(2015) (plurality opinion) (“any *** tangible object,” as that 

20 We start with that question for two reasons. First, the Tax Court did not 

resolve any of the factual issues related to where the electricity that Powerex sold 

was shipped or delivered. Second, the parties agree that, if electricity is tangible 

personal property, a small amount of the electricity that Powerex sold during 

the tax years at issue here was shipped or delivered to purchasers in Oregon. It 

follows that, even if we could say that the remainder of the electricity was shipped 

or delivered elsewhere and thus should not be included in the numerator of the 

sales factor, we still would have to decide whether the small amount of electricity 

shipped or delivered to Oregon was tangible personal property and thus attributable to Oregon.
60 Powerex Corp. v. Dept. of Rev.

phrase is used in 18 USC § 1519, does not include fish); 135 

S Ct at 1089 (Alito, J., concurring in the judgment) (same). 

We accordingly look to the text, context, and history of ORS 

314.665 before deciding what bearing, if any, the subatomic 

properties of electricity have on the meaning of the phrase 

“tangible personal property” in our statute.

As noted above, UDITPA uses the “sales factor” to 

apportion a multistate company’s business income among 

states. ORS 314.650 (providing that business income shall 

be apportioned by multiplying a company’s business income 

by the sales factor); ORS 314.610(1) (defining “business 

income”).21 Specifically, UDITPA compares the company’s 

sales within Oregon to the company’s total sales to determine a fraction, which is then used to determine the amount 

of the company’s total income that Oregon may tax. ORS 

314.665 (specifying how the sales factor is calculated); ORS 

314.650 (apportioning a company’s business income by multiplying the company’s total income by the sales factor).

ORS 314.665 divides a company’s sales into two categories: “sales of tangible personal property” and “[s]ales, other 

than sales of tangible personal property.” ORS 314.665(2),(4).22

It follows from that text that “[s]ales, other than sales of 

tangible personal property” may include not only sales of 

21 ORS 314.625 to ORS 314.645 specify how certain types of nonbusiness 

income shall be allocated.

22 ORS 314.665 provides, in part:

“(1) As used in ORS 314.650, the sales factor is a fraction, the numerator 

of which is the total sales of the taxpayer in this state during the tax period, 

and the denominator of which is the total sales of the taxpayer everywhere 

during the tax period.

“(2) Sales of tangible personal property are in this state if:

“(a) The property is delivered or shipped to a purchaser, other than the 

United States Government, within this state regardless of the f.o.b. point or 

other conditions of the sale; or

“(b) The property is shipped from an office, store, warehouse, factory, or 

other place of storage in this state and the purchaser is the United States 

Government or the taxpayer is not taxable in the state of the purchaser. 

“*****

“(4) Sales, other than sales of tangible personal property, are in this 

state if (a) the income-producing activity is performed in this state; or (b) the 

income-producing activity is performed both in and outside this state and a 

greater proportion of the income-producing activity is performed in this state 

than in any other state, based on costs of performance.”
Cite as 357 Or 40 (2015) 61

intangible property but also other types of sales, such as 

the sale of services. See Hellerstein et al., 1 State Taxation

¶ 8.06[3][b] (discussing those two types of “[s]ales, other 

than sales of tangible personal property”). In this case, 

Powerex does not dispute that the electricity it sells is “personal property”; that is, it does not argue that, in selling 

electricity, it was selling a service or something other than 

personal property. Rather, Powerex’s argument turns on the 

proposition that the electricity it sells is not “tangible” personal property.

UDITPA does not define the phrase “tangible personal property.” When the legislature has not defined a word 

or a phrase, we assume, at least initially, that the word or 

phrase has its ordinary meaning, except when the words are 

“‘terms of art’ ** * drawn from a specialized trade or field.” 

Comcast Corp. v. Dept. of Rev., 356 Or 282, 296, 337 P3d 768 

(2014). “[W]hen a term [of art] is a legal one, we look to its 

‘established legal meaning’ as revealed by, for starters at 

least, legal dictionaries.” Id. “Tangible personal property” 

is a term of art in the field of taxation, and we look initially 

to the way that legal dictionaries have defined that phrase 

as well as intangible property. See Tektronix, Inc. v. Dept. 

of Rev., 354 Or 531, 543, 316 P3d 276 (2013) (finding a welldefined legal meaning for “intangible assets”).

One tax law dictionary defines “tangible personal 

property” as “[p]roperty with physical form, capable of being 

touched and seen.” West’s Tax Law Dictionary 1064 (2013). It 

also includes an entry comparing “tangible and intangible 

property”:

“Tangible property is property that can be felt or touched. 

Its physical features are what make it useful to a taxpayer.

Intangible property is property that is not tangible. 

Documents that are merely representations of value (such 

as stock certificates) or evidence of rights (such as patents) 

are intangible property.”

Id. (emphasis added).

Ordinarily, we look to dictionaries that were contemporaneous with the statute being interpreted. West’s Tax 

Law Dictionary did not exist in 1957 when the Commissioners 
62 Powerex Corp. v. Dept. of Rev.

on Uniform State Laws adopted the Uniform Act or in 1965 

when the Oregon Legislature enacted UDITPA. However, 

the definitions in that dictionary and its comparison 

between tangible and intangible property parallel the definitions of those terms in the fourth edition of Black’s Law 

Dictionary, which was published in 1951. That dictionary 

defined “tangible property” as follows: “That which may be 

felt or touched, and is necessarily corporeal, although it may 

be real or personal.” Black’s Law Dictionary 1627 (4th ed 

1951).23 It defined “intangible property” as follows:

“Used chiefly in the law of taxation, this term means such 

property as has no intrinsic and marketable value, but is 

merely the representative or evidence of value, such as certificates of stock, bonds, promissory notes, and franchises.”

Id. at 946.

Reading those definitions together, we conclude 

that tangible personal property is perceptible to the senses 

and that its physical features make it useful. Conversely, 

intangible property lacks “intrinsic or marketable value.” 

Thus, even though a bond—a common example of intangible property—physically evidences a debt, the value of the 

bond does not lie in the physical features of the bond but in 

the legal obligation that the bond embodies. See Blodgett v. 

Silberman, 277 US 1, 15, 48 S Ct 410, 72 L Ed 2d 749 (1928) 

(A “bond, wherever actually held or deposited, is only evidence of the debt, and if destroyed, the debt—the right to 

demand payment of the money loaned, with the stipulated 

interest—remains.”) (internal quotations omitted).

We also look to the statute’s context. Cf. Stevens, 

336 Or at 401 (explaining that the context for interpreting 

a statute’s text includes the preexisting common law and 

the statutory framework within which the law was enacted). 

The distinction between tangible and intangible property 

was a common feature of tax law before the adoption of the 

Uniform Act in 1957. See James M. Gray, Limitations of 

the Taxing Power 57-100 (1906) (discussing the situs of real 

23 The fourth edition of Black’s Law Dictionary defined “corporeal property” 

as follows: “Such as affects the senses, and may be seen and handled, as opposed 

to incorporeal property, which cannot be seen or handled, and exists only in contemplation.” Black’s Law Dictionary 412.
Cite as 357 Or 40 (2015) 63

property, tangible personal property, and intangible property). Initially, courts sought to assign a real or fictional 

“situs” to all property, and a state’s authority to tax property depended on that situs. The situs of real property was 

the state in which it was located, as was generally the situs 

of tangible personal property, unless the tangible personal 

property was transitory. See Curry v. McCanless, 307 US 

357, 364-65, 59 S Ct 900, 83 L Ed 1339 (1939) (real property); 

Frick v. Pennsylvania, 268 US 473, 45 S Ct 603, 69 L Ed

1058 (1925) (tangible personal property).24

Intangible property posed a greater dilemma. Initially, courts sought to classify different types of intangible property and assign a situs or situses to that property. 

See Gray, Limitation on the Taxing Power, 66-95 (discussing 

situses for, among other things, credits employed in businesses, choses in action that residents owed to nonresidents, 

and partnership property). For example, a mortgage, bond, 

or promissory note could be taxed either by the state where 

the physical evidence of the obligation was situated or by the 

state in which the owner of the intangible property resided. 

Curry, 307 US at 366-71. The former was justified by the 

idea that the document evidencing the underlying obligation 

was physically in the taxing state; the latter, by the idea 

that personal property follows the owner (at least as long as 

the personal property was not tangible personal property 

that had a situs elsewhere). Id.

In 1939, the United States Supreme Court recast 

the constitutional bases on which a state may tax intangible property. Curry, 307 US at 363-66. The Court started 

from the proposition that the rights created by intangible 

property “are but relationships between persons, natural or 

corporate, which the law recognizes by attaching to them 

certain sanctions enforceable in court.” Id. at 366. Even 

when a document evidencing those rights existed, a state’s 

constitutional authority to tax that intangible property did 

not necessarily turn on where that document physically 

was located. Rather, a state’s authority to tax intangible 

24 Tangible personal property is movable, and the courts held that tangible 

personal property that was merely “passing through” a state would not acquire a 

situs in that state but would be taxable at its owner’s domicile. Thomas M. Cooley, 

1 Treatise on the Law of Taxation 88-89 (3d ed 1903).
64 Powerex Corp. v. Dept. of Rev.

property derived from the protection and benefits that the 

state extended to the owner of the intangible property, which 

can result, as matter of federal constitutional law, in more 

than one jurisdiction having authority to tax intangible 

property. Id. at 369-71 (both Alabama and Kentucky could 

impose a transfer tax on the value of intangible trust assets 

held by a trustee in Alabama and over which the decedent 

in Kentucky exercised a power of appointment); Greenough 

v. Tax Assessors of Newport, 331 US 486, 67 S Ct 1400, 91 L 

Ed 1621 (1947) (Rhode Island could tax a resident trustee’s

proportionate share of trust intangibles located in New York 

and held on behalf of a testamentary trust in New York 

because the benefit and protection of Rhode Island’s laws 

were available to the trustee if the trustee sued or were sued 

by third parties in Rhode Island).

We draw two conclusions from those cases. First, 

tangible personal property is property that can be located 

physically within a state. As the Oregon legislature recognized in UDITPA, tangible personal property can be delivered or shipped from one place to another. Second, intangible property represents or symbolizes obligations and 

relationships to which the law gives effect. Intangible property rights may be embodied in a physical document, as a 

promise to pay may be embodied in a bond. However, the 

value reflected in the bond derives from the promise to pay 

that the bond embodies; it does not derive from the physical features of the document. See Blodgett, 277 US at 15 

(so stating). Accordingly, bonds are not considered tangible 

personal property, even though the bonds—the documents 

embodying the obligation—can be seen, touched, weighed, 

and perhaps smelled.

We also look to the legislative history, which does 

not shed any light on the issue. In enacting UDITPA, the 

Oregon legislature did not address this issue. Similarly, the 

comments to the Uniform Act shed no light on the issue. To 

be sure, as noted above, the comment to section 16 of the 

Uniform Act and the contemporaneous academic commentary explain that, in defining the sales factor, the Uniform 

Act sought to give effect to the contribution that “the state 

of destination, which provides the market, [makes] to the 

generation of income.” Lynn, The Uniform Division of Income 
Cite as 357 Or 40 (2015) 65

for Tax Purposes Act, 19 Ohio St LJ at 51; see also Keesling 

and Warren, California’s Uniform Division of Income for Tax 

Purposes Act Part I, 15 UCLA L Rev at 161 (same). The sales 

factor, however, includes both sales of tangible personal 

property and “[s]ales, other than the sale of tangible personal property.” The existence of a market in a state thus 

provides no basis for distinguishing one category of sales 

from another. Put differently, the fact that there may be a 

market for a service does not mean that the sale of that service is the sale of tangible personal property.

With the text and context of ORS 314.665 in mind, 

we turn to the question whether electricity is tangible 

personal property for the purposes of that section. In our 

view, the scientific debate about the subatomic properties of

electricity—as fascinating as it is—seems beside the point. 

For instance, if we applied Professor Fisher’s approach to 

defining tangible personal property (or Professor Fajans’ 

approach for that matter) to instruments that customarily 

are regarded as intangible property, such as bonds or stock 

certificates, we would focus on the wrong concepts and conclude wrongly that those instruments are tangible personal 

property because the subatomic particles of which they are 

composed have mass. As that counterexample suggests, 

Fisher’s and Fajans’ approach to defining tangible personal 

property focuses on qualities that matter to physicists but 

not necessarily to lawyers and legislators.

Our examination of the text and context of UDITPA 

points us in a different direction. It reveals that the qualities that mattered to the drafters of the Uniform Act and 

the Oregon legislature that enacted UDITPA were whether 

the property sold was perceptible to the senses, could be 

located physically within a state, and could be delivered or 

shipped to a place. A related quality was that the physical 

properties of tangible personal property were what made it 

useful while the physical properties of intangible property 

had little or no relation to that property’s value or usefulness. Rather, the value of intangible property derives from 

the rights and obligations it represents.

We also note that, when the Oregon legislature 

enacted UDITPA in 1965, tangible personal property and 
66 Powerex Corp. v. Dept. of Rev.

intangible property generally divided into familiar groups. 

For example, in another section of the tax code, the Oregon 

legislature had provided the following examples to define 

tangible and intangible personal property:

“‘Intangible personal property’ or ‘intangibles’ means and 

includes money at interest, bonds, notes, claims, demands 

and all other evidences of indebtedness, secured or unsecured, including notes, bonds or certificates secured by 

mortgages, and all shares of stock in corporations, joint 

stock companies or associations.”

ORS 307.020(1) (1959). By contrast,

“‘Tangible personal property’ means and includes all chattels and movables, such as boats, vessels, merchandise and 

stock in trade, furniture and personal effects, goods, livestock, vehicles, farming implements, movable machinery, 

movable tools and movable equipment.”

ORS 307.020(3) (1959).

Electricity does not fall neatly into either of those 

two groups. However, as the issue is presented to us, electricity is either “tangible” personal property or it is “intangible” property. Faced with that choice, we conclude that electricity is tangible personal property for the purposes of ORS 

314.665. It is perceptible to the senses, most significantly 

to the sense of touch. It can be physically located within a 

state and shipped from one state to another. For example, 

Powerex sells electricity and delivers a specified quantity 

of electricity from one state to another. If Powerex fails to 

deliver a specified quantity of electricity to the purchaser, 

as it agreed to do, it presumably will be liable for breach of 

contract. And the physical properties of electricity are what 

make it valuable to a purchaser, unlike intangible property, 

the value of which derives from the obligations and rights 

that the intangible property represents. We accordingly conclude that electricity is tangible personal property for the 

purposes of ORS 314.665(2)(a).25

Powerex argues, however, that two considerations 

should persuade us to reach a different result. First, Powerex 

25 In light of that conclusion, we need not decide whether a department rule 

defining electricity as tangible personal property applies to the tax years at issue 

here.
Cite as 357 Or 40 (2015) 67

notes that ORS 314.605(2) provides that UDITPA “shall be 

so construed as to effectuate its general purpose to make 

uniform the law of those states which enact it.” Powerex 

observes that, in interpreting their state counterparts to 

ORS 314.665, two state tax commissions have concluded that 

electricity is not tangible personal property. Powerex reasons that, to achieve uniformity, we should reach the same 

result that those two administrative decisions did. In considering Powerex’s argument, we first describe the administrative decisions it cites. We then explain why uniformity, 

although an important consideration, does not cause us to 

depart from our conclusion based on the text and context of 

ORS 314.665.

The California Board of Equalization issued one of 

the two administrative decisions on which Powerex relies. 

See In re Appeal of PacifiCorp, 2002 WL 31153476 (Cal St 

Bd Eq). Most of the board’s decision consists of a recitation of 

the parties’ competing arguments. Id. at *3-*6. The board’s 

ruling turns on its conclusion that the sale of electricity is 

the sale of a service—a conclusion that the board based primarily on an Ohio Supreme Court decision holding that a 

distribution system for electricity was a service, not a product, for the purposes of Ohio’s products liability law. Id. at 

*7-*8 (quoting and following Otte v. Dayton Power & Light 

Co., 523 NE2d 835 (Ohio 1988)).

In our opinion, the board’s administrative decision 

provides little support for Powerex’s position for three reasons. First, the board’s decision rests on a rationale—that 

electricity is a service—that Powerex does not advance 

here.26 Second, the board based its rationale on a case that 

seems inapposite. In Otte, the Ohio case on which the board 

relied, the plaintiffs alleged that an improper electrical 

26 Powerex correctly notes that, at the end of its decision, the board states: 

“Therefore, based upon the foregoing discussion, we conclude that, for purposes 

of California tax law, electricity is intangible.” In re Appeal of PacifiCorp, 2002 

WL 31153476 at *8. The “foregoing discussion,” however, consists of the board’s 

explanation that electricity is a service. Id. at *7-*8. It is certainly true that, for 

purposes of California’s analogue to ORS 314.665, the sale of “tangible personal 

property” does not include either the sale of a service or the sale of intangible 

property. However, the sale of a service differs from the sale of intangible property, and the board’s conclusion that electricity is a service does not imply that it 

is intangible property. 
68 Powerex Corp. v. Dept. of Rev.

ground had adversely affected their cows’ milk production 

and that the improper ground was a defective product for the 

purposes of products liability law. 523 NE2d at 838.27 The 

Ohio Supreme Court held in Otte that the “purported defect” 

that caused the plaintiffs’ cows not to produce milk was “a 

defect in the distribution system [for grounding electricity]. 

Such a system is, in our view, a service.” Id. Whether a distribution system for electricity is a service for the purposes 

of products liability law would seem to have little, if any, 

bearing on whether electricity is tangible personal property 

or intangible property for the purposes of apportioning the 

income of a multistate corporation. Finally, as the amicus 

notes, to the extent that Otte holds that electricity is not a 

product for the purposes of product liability law, Otte does 

not reflect the majority view on that issue. See Bryant v. 

Tri-County Elec. Membership Corp., 844 F Supp 347, 350 n 6 

(WD Ky 1994) (collecting cases).

The Massachusetts Appellate Tax Board issued the 

other administrative decision on which Powerex relies. See

Eua Ocean State Corp. v. Comm’r of Revenue, 2006 Mass Tax 

LEXIS 35 (Mass Tax 2006). That decision seems more to the 

point than the California Board of Equalization’s opinion in 

PacifiCorp. In Eua, the board concluded that electricity has 

some physical features, but “lacks physical form and a precise geographic location” and makes “concepts such as title, 

possession, and delivery, which are the lynchpins of apportionment for sales of tangible personal property” difficult to 

analyze in the sales factor context. Id. at *45. Additionally, 

the board was persuaded by the fact that the physical properties of electricity differ from the physical properties of 

other tangible personal property, such as “furniture, a cooking utensil, or a book.” Id. at *41.

Although we appreciate the reasons that the board 

advanced in support of its holding in Eua, we come to a different conclusion for the reasons that we previously have 

stated. We find that the “concepts of title, possession, and 

27 Specifically, the plaintiffs had alleged in Otte that, as a result of “small 

amounts of stray neutral-to-earth voltage [that] had been released on their property,” their cows had reacted adversely to the milking machines, with the result 

that the cows “were ‘dancing in the [milk] parlor, *** kicking the [milk] unit off 

the cow, [and] coming into the parlor nervous * **.’” 523 NE2d at 836.
Cite as 357 Or 40 (2015) 69

delivery” can and do apply to sales of electricity. Indeed, contracts for the sale of electricity routinely define and embody 

agreements on those terms. Moreover, we find it less relevant that electricity is the product of excited electrons that 

are fungible than that electricity can be measured and identified by a well-recognized unit of sale and delivered, for commercial purposes, to purchasers to service their load within 

a particular state. It is certainly true that electricity differs 

from furniture, but it also differs from bonds, stock certificates, and other intangible property. As explained above, 

the qualities that distinguish tangible personal property 

from intangible property lead us to conclude that electricity 

should be classified as tangible rather than intangible property for the purposes of ORS 314.665.

We are left, however, with Powerex’s argument that,

even if we are unpersuaded by the reasoning in Eua and 

even if the reasoning in PacifiCorp is inapposite, we should 

nonetheless follow those two administrative decisions to 

achieve uniformity among the states that have adopted 

their own analogues to UDITPA. Amicus Portland General 

Electric counters that, in the context of income tax determinations, two state courts have held that electricity is tangible personal property. See Exelon v. Dep’t of Rev., 917 NE2d 

899, 911 (Ill 2009) (joining the “several courts that have 

expressly held in varying contexts that electricity constitutes ‘tangible personal property’”); Tucson Electric Power 

Co. v. Arizona Dep’t of Rev., 822 P2d 498, 502 (Ariz Ct App 

1991) (“Electricity is personal property that may be measured; it thus constitutes ‘tangible personal property.’”). The 

amicus recognizes that those courts were not interpreting 

UDITPA but reasons that their conclusions regarding the 

tangible nature of electricity apply equally to UDITPA.

We might doubt the persuasiveness of the courts’ 

reasoning in Exelon and Tucson Electric Power, even though 

we agree with the result that those courts reached.28 The 

28 The Illinois Supreme Court’s holding in Exelon turns primarily on 

Professor Fajans’ explanation of electricity and the fact that electrons have mass. 

As explained above, we are not persuaded that the meaning of the phrase “tangible personal property” in UDITPA turns on how quantum physicists explain 

the subatomic workings of electricity. The holding in Tucson Electric is brief. The 

parenthetical set out above contains the court’s reasoning on the issue.
70 Powerex Corp. v. Dept. of Rev.

more telling question, however, is the extent to which the goal 

of uniformity should inform our interpretation of Oregon’s 

statute. We addressed that question in Atlantic Richfield Co. 

v. Dept. of Rev., 300 Or 637, 646, 717 P2d 613, adh’d to on 

recons, 301 Or 242, 722 P2d 727 (1986), and we turn to that 

opinion. The issue in Atlantic Richfield was whether the 

Oregon Department of Revenue reasonably had interpreted 

its own rule. 300 Or at 644-46. The court observed that the 

department’s interpretation of its own rule was legally permissible but not persuasive. See id. at 646 (explaining that 

the two rationales that supported the department’s interpretation of its rule “seem[ed] suspect” while the four rationales 

that supported a different interpretation had “validity”).

The court explained that, if no other state had 

addressed the issue, it would defer to the department’s interpretation of its rule despite any misgivings the court may 

have had. Id. However, because the three other states that 

had addressed the issue had all reached the same result, 

which differed from the department’s conclusion, this court 

did not defer to the department. Id. at 646-50. Put differently, given the department’s doubtful interpretation of its 

own rule, this court opted for a small but uniform consensus 

among the states that had considered the issue. On reconsideration, the court adhered to its earlier conclusion after 

engaging in a more comprehensive survey of other states’ 

positions on the issue. 301 Or at 246-47. The court noted 

that 19 of the 30 UDITPA states that had considered the 

issue had disagreed with the department’s interpretation 

and that 10 of the 13 Multistate Tax Compact states that 

had taken a position on the issue disagreed with the department’s interpretation. Id. at 245.

As we read the original decision in Atlantic Richfield

and the decision on reconsideration, we conclude that the 

weight that should be given to the uniform application of 

UDITPA is a function of two variables. The first involves our 

degree of certainty regarding the meaning of the statute or 

rule we are interpreting. The second involves the degree of 

consensus that other states considering the same issue have 

reached. For example, if a statute may be interpreted in two 

equally plausible ways and if there is a general consensus 
Cite as 357 Or 40 (2015) 71

among the other UDITPA states that one of those interpretations is correct, then uniformity weighs in favor of interpreting the statute the same way that the other UDITPA states 

have. Conversely, if we are confident that the text, context, 

and legislative history of a statute lead to a single conclusion, one or two stray decisions going the other way will be 

unlikely to cause us to follow those states’ interpretations.

In this case, our examination of the text, context, 

and history of ORS 314.665 persuades us that the phrase 

“tangible personal property” includes electricity. Although 

no conclusion is free from doubt, we are persuaded that our 

interpretation more accurately reflects the meaning of ORS 

314.665. The consensus on which Powerex relies to support 

a different conclusion consists of two administrative decisions, each of which rests on a different rationale. Moreover, 

other states have reached a contrary result. See Exelon, 917 

NE2d at 911 (listing the “several courts” that had concluded 

that electricity is tangible personal property). If we were less 

certain about our interpretation and if there were a greater 

consensus among the states reaching a different result, the 

goal of achieving a uniform interpretation might lead to a 

different answer. That is not the case here, however.

Powerex advances another consideration in support 

of the conclusion it urges. It argues that we should defer to 

the version of the Multistate Tax Commission (MTC) audit 

manual that was in effect for the three tax years at issue 

here. Powerex argues that it is “highly significant that the 

MTC treats electricity as an intangible for the purposes of 

the UDITPA sales factor.” (Emphasis in original.) Powerex, 

however, never explains why that is so, and we turn to the 

audit manual on which Powerex relies.

The section of the audit manual on which Powerex 

relies states:

“The rules set forth in Index 1720 [for allocating sales of 

tangible personal property] do not apply to sales of real 

estate, services, or intangibles. Tangible [personal] property is defined as commodities that are perceptible to the 

senses and movable. It is usually discernible from intangible

property. However, some property is borderline and difficult 

to identify as to type. For example, water and gasoline are 
72 Powerex Corp. v. Dept. of Rev.

considered to be tangible property, while electricity and 

money are considered to be intangible property.”

The audit manual states a position regarding electricity but 

does not explain the basis for that position. That is, having 

defined “tangible property” as “commodities that are perceptible to the senses and movable,” the audit manual does 

not explain why electricity does not come within that definition. Rather, the manual notes that the issue is “difficult” 

and posits, without further explanation, that electricity is 

“intangible property.”

In our view, the audit manual is not as significant as 

Powerex perceives. It is certainly not significant for its persuasive value. The audit manual does not explain its conclusion; it states it. Nor is the audit manual significant because 

it preexisted Oregon’s enactment of UDITPA in 1965 and 

thus might have informed the Oregon legislature’s understanding of what was and was not “tangible personal property.” The MTC did not come into existence until 1967, two 

years after Oregon enacted UDITPA, and the MTC did not 

begin any audits until 1971, six years after Oregon enacted 

UDITPA.29 We recognize that the audit manual seeks to 

promote consistency among the states that have signed on 

to the Multistate Tax Compact. However, UDITPA states 

that, if any of its provisions conflict with the provisions of 

the Multistate Tax Compact, which Oregon has adopted, 

then the provisions of UDITPA control. ORS 314.606.30

The same principle applies with greater force to conflicts 

between UDITPA and the various sections of MTC’s audit 

manual. To the extent that the audit manual differs from 

our interpretation of ORS 314.665(2)(a), our interpretation 

of UDITPA controls.

29 See First Annual Report of the Multistate Tax Commission (1967-68) 

(explaining that the report “includes the activities of the Commission during 

the partial first year of its existence in 1967”); Fourth Annual Report of the 

Multistate Tax Commission 8-9 (1971-72) (explaining that, in 1971, the MTC 

opened audit offices in two cities). Although the MTC provided audits for companies, the report does not suggest that an “audit manual” also existed in 1971.

30 ORS 314.606 provides: “In any case in which the provisions of ORS 314.605 

to ORS 314.675 are inconsistent with the provisions of ORS 305.653, the provisions of ORS 314.605 to ORS 314.675 shall control.” ORS 314.605 to ORS 314.675 

comprise UDITPA while ORS 305.653 is the statute by which Oregon enacted 

the Multistate Tax Compact into law and entered into that compact with other 

states.
Cite as 357 Or 40 (2015) 73

The arguments that Powerex has advanced do not 

persuade us to depart from our conclusion that electricity is tangible personal property for the purposes of ORS 

314.665(2)(a). It follows that the remaining question is 

whether Powerex delivered or shipped the electricity it sold 

to purchasers in Oregon or in other states. As noted, the Tax 

Court did not decide that issue. As also noted, the parties 

agree that Oregon was the ultimate destination for a small 

part of the electricity that Powerex sold during the three tax 

years at issue here. They disagree whether the remainder 

of the electricity that Powerex sold during those years was 

shipped or delivered to purchasers outside of Oregon.

In arguing that issue, the department does not distinguish between Powerex’s sales of electricity and its sales 

of natural gas, and it may be that the department’s arguments regarding Powerex’s sales of electricity fail for the 

same reason that its arguments regarding Powerex’s sales 

of natural gas failed. However, the Tax Court did not find 

whether the transmission systems that carried the electricity that Powerex sold functioned the same way that natural 

gas pipelines did. That is, the Tax Court did not find whether 

those transmission systems were the functional equivalent 

of common carriers. If the Tax Court makes that finding 

on remand, then our conclusion regarding Powerex’s natural gas sales presumably will control how most of Powerex’s 

electricity sales will be allocated. However, if the Tax Court 

finds that COB and NOB functioned more like a loading 

dock, then it will have to decide whether, under UDITPA, 

Oregon will follow the majority or the minority position on 

that issue. We accordingly affirm the Tax Court’s judgment 

regarding Powerex’s natural gas sales, reverse its judgment 

regarding Powerex’s electricity sales, and remand for further proceedings.

The judgment of the Tax Court is affirmed in part 

and reversed in part. The case is remanded for proceedings 

consistent with this opinion.