Norwich bulletin., 1915-11-19
CORPORATIONS MAY
Not Willing to Accept Rulings of the
 Board of Equalization.
TEST TAX LAW

Disagreement over definitions of the l term gross earnings" as in part 2 of | the corporation tax law passed at the l last session of the general assembly | is expected to lead some of the larger public utilities companies in this state
 to contest payment of the taxes as- I sessed against them recently by the
 board of equalization and to test the term in the superior court. The taxes
 became payable Monday, and if they are not paid by Thanksgiving day Attorney General George D. Hin7nan will bring suit for the collection of the tax. Up to the present time no utilities company has definitely an- nounced it's intention to contest the tax law, but statements made at hear ings before the equalization board have led state officials to believe that con- tests will be made and that Thanks taxes being paid. In which case the tax law will go automatically before the courts for decision.
 Part 2 of chapter 292 of the public acts of 1915 provides that water, gas, electric and power companies shall pay an annual tax upon gross earn ings from operations in this state at the rate of 1 1-2 per cent" The com panies must make sworn. reports to their gross earnings and shall be as sessed by the board of equalization on the basis of this statement and if it is not paid within ten days from the date it becomes payable, Nov. Is, the attorney general shall apply to a judge of the superior court for an order for its payment. The assessments have already been made. The total assess ments for the public utilities con- panieS of Connecticut amount to $1,- 7S5, ,S46.18.
 The only definitions of the direct basis of the tax contained in the stat ute is in the claim quoted above and in the following clause: Gross earn ings for the purpose of assessment and taxation, shall be as follows: Tn case of a company carrying on bus. mess entirely within this state, the amount of gross earnings from opera tions, in case of company carrying on business, a part of which is out side of this state, such earnings from operations determined under the pro- visions of section II as is represented by the ratio of the number of miles of water pipes, gas mains, or electric wires operated by such company with in this state. to the number of miles of water pipes, gas mains or electric wires operated by such com <oany." These definitions are amend ed by the provision, mo deductions shall be allowed for such gross earn ings for any commission, rebate or other payment, except a refund result ing from an error or overcharge."
 In spite of this restriction in regard to reductions, most of the objections to the law are based on alterations that certain reductions from gross earnings should have been allowed by the board of equalization. At the equalization board hearings, a num- Der of deductions were asked, one of which: was the deduction from gross earnings of all the expenses of oper- ations. This would make the tax prac- ticafly a tax upon net :income instead of gross income. Another deduction asked was the deduction of the cost of raw material when this cost was paid out of the company's capital. A third deduction asked was the deduction from the gross earnings of the amount of earnings derived from operations incidental to the main activities or business in the company. An illus tratfon cited was the income of a city gas company from the sale of gas stoves and other equipment. It is ar gueds that the main business of a gas company and the only business which is in the nature of public utility is the supplying of gas to consumers, that the sale of gas stoves is a dis tinct business in which there Is com petition, and that a tax which may be equitable against a public utilities cor poration as such cannot equitably be laid against business done by that company which is not of public ser vice nature.
 The opposition to the payment of the tax, so far as 1t has yet been re- vealed, comes only from public utili- ties companies. The other companies taxed under the corporation tax law of the last legislature are taxed in different ways. The railroad and street railway companies are taxed upon the market value of their capital stock and miscellaneous corporations are
 taxed upon their net incomes