Opinion ID: 1908051
Heading Depth: 2
Heading Rank: 2

Heading: The Gross Receipts Tax.

Text: The working capital allowance found by the commission in the first proceeding was determined on appeal to be without evidentiary support. The only part of the commission's redetermination to which the company here objects is the exclusion of the gross receipts tax provided by G.L. 1956 (1970 Reenactment) § 44-13-1. The company's objection can best be understood if the history of the tax is discussed first. Initially, the tax was payable in full on March 1 of each year, based on the gross receipts of the utility company for the prior year. In 1968 the payments were accelerated by chapter 26 of title 44. [8] After 1968, the tax formerly due on the first day of March in year two was thereafter to be paid during year one; i. e., the tax was paid in the same year as the receipts upon which it was based were received. As a consequence, the company paid a double tax in 1968. The commission took the position that, as the system is presently structured, the tax payments coincide with the collection of revenues to pay the tax and that as a result the company did not require working capital to make the payments. The company argues that this is not the case. Its position is that the tax as first enacted was an expense of year two, the year in which it was paid, and not of year one, the year in which the receipts on which it was based were collected. Thus, when the tax was accelerated in 1968, it became a pre-payment; i. e., a payment in year one of the taxes due in year two. The company did not charge the accelerated tax to expenses in 1968, even though it did in fact pay the tax to the state in that year. Instead, it recorded the payment as prepaid taxes. As a result, the company says, the money to pay the taxes had to come from the investors. This payment of taxes with investors' funds continues each year, the company says, and the investors are entitied to earn a return on this money. Thus, the amount of the tax should be included in its working capital requirements. After studying the tax as it was originally enacted and as it has been amended, we conclude that the statutory scheme is ambiguous. It does not clearly indicate to which year the tax applies. However, the commission relying on the testimony given at the original proceeding by Mr. Robert Towers, an expert called by the Rhode Island Consumers' Council, found as a matter of fact that the tax was not prepaid. According to Towers, test year data is adjusted to reflect the taxes due to current gross receipts when the company's rates are determined. As a result, a part of every dollar of revenue collected by the company includes an allowance for the gross receipts tax liability which is thereby incurred. The testimony of Dr. John Wilson, the commission's expert, was substantially the same. The commission therefore adopted the working capital requirement proposed by Towers at the original hearings, which was $3,449,000. We cannot say that this conclusion was unreasonable or lacking in evidentiary support, and we therefore will not disturb it. We note that the result reached by the commission seems proper to us. The company clearly could not claim a right to a return on the payment of a current tax. This tax in operation looks exactly like a current tax. It would be strange if a historical bookkeeping technique could alter this situation and enable the company to earn a return on the amount of the tax every year, indefinitely into the future. [9]