Legal Document

336 U.S. 176 69 Supreme Court Reporter 492 93 L.Ed. 591 WISCONSIN ELECTRIC POWER CO.v.UNITED STATES. Number 237. Argued Jan. 7, 1949. Decided Feb. 14, Mr. Van baron Wake, of Milwaukee, Wis., for petitioner. William L. Ransom, New York City, Consolidated Edison company N.Y., as amicus curiae, by special leave Court. Lee Atlantic Jackson, Washington, D.C., respondent. Justice REED delivered the opinion 1 Petitioner, engaged in business supplying electric energy to public, seeks refund taxes paid it pursuant § 3411 Internal Revenue Code. That section, pertinent part, provides a tax '* * upon electrical sold domestic or commercial consumption equivalent 3 per centum1 price which so sold, be vendor under such rules and regulations Commissioner, with approval Secretary, shall prescribe.'2 2 Note that statute consumption. There is no provision taxation used industrial purposes.3 The purchasers power here involved are 27 dairy plants primarily collection, pasteurization, distribution fresh milk. sole question presented case whether use electricity these dairies within meaning consumption, not covered statute. 4 functions sufficiently similar they can treated one purpose describing their methods operation. buildings equipped milk-handling machinery facilities located either off farms, on farm itself an activity apart from milk production. Contracts purchase raw negotiated nearby farms.4 This trucks producers plant, may be, plant where received, weighed, tested butterfat content, cooled, mixed standardized achieve proper content. Next pasteurized. Pasteurization consists heating 143 -145 F., maintaining at level about thirty minutes, then subjecting sudden cooling point between 38 40 F.5 process designed kill pathogenic bacteria without destroying natural creaming properties taste Then drawn into bottles cans have been washed, sterilized, cooled. Finally stored refrigerated rooms permit cream line form await delivery.6 Most customers plant's wagons. In some instances small proportion itself. 5 Electric employed purchasing number ways. It light plants, including garage space collecting distributing trucks. drives motors pump refrigerants, deliver pasteurizer boltling machines, operate homogenizer, bottling machine, separator, washing sterilizing conveying bottles. measured through single meter, others two more meters, but meters connected incoming enable supplied differentiated another. We do before us situation pasteurization utilizes meter exclusively pasteurization. 6 accomplished equipment purpose. attributable devoted ice machines perform rapid after initial heating. Since same units necessary however, consume alone cannot ascertained. equipment, increased therefor, accounts 15 20 percent total cost excluding other vehicles. About one-tenth operation, costs distribution, 7 Petitioner during period April, 1940, July, 1943, brought suit recover ground was United States District Eastern Wisconsin held sales were statute, therefore valid. F.Supp. 743. Appeals Seventh Circuit affirmed. 168 Federal Reporter, 2nd Series 285. summarized its views follows: 8 'We agree (District) Judge Duffy wording legislative history Act make clear predominant character carried consumer what determines has 'commercial consumption'; hence we content adopt his this court.' 286. 9 Tenth had versus Public Service Colorado, 79, operating substantially rather than consequently taxable 3411. granted certiorari order resolve apparent conflict circuits settle applies general type plant. 335 842, 67. 10 now embodied originally imposed 1932, 47 Statutes-at-Large 169, 266. amended 1933 burden fall directly vendor. 48 254, 256. No change any significance our purposes occurred since original enactment provision. 11 Although language section does include word 'industrial,' 'commercial' contradistinction 'industrial.'7 While taxed, not. Thus task resolves determination category should classified. undertake difficult needless definition differentiates statutory clause lines activity. problem administrators knowledge specific varying facts. 12 legislativ indicates term meant apply nature consumed, each measurable unit devoted.8 Where location, utilized sewing minor manufacturing unit, e.g., shirts, department store, would deemed although might if who did nothing manufacture shirts. interpretation entail almost insurmountable administrative difficulty classifying all according operations consumer, conclusion controlling factor location accords given words Congress express 13 interpret history. U.S.Treas.Reg. 46 (1940 ed.) 316.190 (as Treasury Decision 5099), presently applicable, part: 14 'Scope tax.—The 3411(a) Code, amended, applies, except provided hereinafter, resale. 'The 'electrical consumption' (1) manufacturing, mining, refining, shipbuilding, building construction, irrigation, etc., (2) uses likewise classed commercial, gas companies, waterworks, telegraph, telephone, radio communication railroads, common carriers, educational institutions operated private profit, churches, charitable such. However, subject phases businesses, office buildings, display rooms, retail stores, phases, dormitories living quarters maintained institutions, others. 16 'Where purposes, separate i.e., use, determine status. consumed furnished classification tax.'9 17 last sentence regulation makes predominantly establishment portions which, considered separately, classified industrial.10 deal point, think obvious quoted paragraph various none them shown carry current uses, rule applied. adds qualification, directs attention, necessarily whole, whole activities 'at location.' 18 accept statute.11 As applied petitioner 'sold properly taxed. Admittedly consumers pasteurize prior sale. Such accurately called butter extraction appears incidental. dealing 'creamery' sense cheese factory. courts below addition described above plants' cooking food sale restaurant, cleaning products found 'pasteurization plays part dairies,' 'the is, was, fluid dealers distributors.'12 19 argues test Appeals, 'whether enterprise commercial', erroneous contrary attention location. susceptible criticism, variation harmless because focal relevant electricity. occur tested, homogenized, separated bottled. when purchased, distributed customers. fact most deliveries premises alter essential pivot around Thus, though pasteurizing, assume, processing separately viewed conceded industrial,13 conclude conducted essentially commercial. reached Cir., ascribed there court apparently looked location.14 21 Rulings Bureau support conclusion. S.T. 518 stated that, 22 'Electrical works, creameries milk, butter, buttermilk, chocolate cottage cheese, *.'15 23 Apparently, intended ruling only those whose by-products, 637, issued following year, contained statement: 24 'A obtains converts character. Electrical will tax.'16 25 clarification rulings explained: 26 merely produces purchases bulk pasteurizes bottled quantities, consist principally handling, also tax. 'It direct pasteurizing processes production products, open market article commerce, tax.'17 28 hold differentiation 29 Affirmed. Amended 1941, chapter 412, 55 687, 707, 521(a) (19), three one-third percent. Code KF62 3411, Annotated KF65 U5 See, infra, Page 4, et seq. A few produce own One so-called 'flash method,' 161° KF105 F3 seconds rapidly 32° purchased manufactured by-products. An undisclosed amount contains; homogenized. Haw. Hawai‘i Reports KFH45 A2 Conference Rep.No.1492, 72d Cong., 1st Sess., 22; Senator Harrison, 77 Cong.Rec. 3212—14, 3215. explanations treat differentiate units. Chairman Senate Finance Committee, reported bill, said: 'I am telling Senators new & N Dec. Immigration Nationality Decisions remind fight 1932 over imposition 3-percent electric-energy tax, finally adopted, collected energy. energy; stores dwellings domestic. act industry.' 3212—13. Couzens, member subcommittee constituted consider mean eliminated feature tax; left commercially, *.' 3218. earlier versions. 42, Article (1932); 4342, XI—2 Cum.Bull. 495 4393, XII-2 322 (1933). version, omitted 'processing,' formerly included list exemplifying deletion significant oCum.Bull. XII Cf. St. Louis Refrigerating Cold Storage States, 43 476, 95 Ct.Cl. 694; Fulton Market Ct.Cl., 485. intend limitation approve disapprove provisions. ambiguities regulation. second paragraph, reference holds taxable. reverse seem follow business. Yet third allows avoidance employment meters. For state cases effect see e.g. City Louisville Ewing Von-Allmen Dairy Co., 268 Ky. 652, 105 South Western 801; People ex rel. Empire State Sohmer, 218 N.Y. 199, 112 Northeastern KF135 N59 755, L.R.A.1917A, 48; Richmond 156 Va. 63, 157 Southeastern S6 728. But Michigan Allied Association Board Tax Administration, 302 Mich. 643, North 516. See note 9, supra. phase dairying enterprise, enterprise.' 82. 498 (1932). XII—1 409, 410 Letter, dated May 13, (symbols MT: ST: BHF) (333 C.C.H. 6266), C.C.H.Tax Serv. 2633G. 175 (1949).

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