East Ohio Gas Co. v. Tax Commission

delivered the opinion of the Court.

Appellees, acting under the tax laws of Ohio, assessed against appellant additional excise taxes for 1927, 1928 and 1929. The latter brought this suit to restrain collection on the ground that, when construed to cover the amounts demanded, the state legislation is repugnant to the commerce clause of the Federal Constitution. Plaintiff applied to the court consisting of three judges for a temporary injunction; and, pursuant to stipulation made at the hearing, the case was submitted for final determination upon an agreed statement of facts. The court announced an opinion, 43 F. (2d) 170 , sustaining the state enactments and entered its decree dismissing the complaint.

Under the Ohio Code every corporation engaged in the business of supplying to consumers within the State natural gas for light, heat or power is a natural gas company, § 5416, and is required to report to the tax commission, § 5470. The latter is directed annually to determine the entire gross receipts of such company, for the year ending on the then next preceding first day of May, excluding

Appellant, an Ohio corporation, is engaged as a public utility in the business of furnishing natural gas to consumers in more than 50 municipalities in that State; During the years in question it obtained approximately 25 per cent, of its supply from its own Ohio wells, 72 per cent, from the Hope Natural Gas Company of West Virginia and 3 per cent, from the Peoples Natural Gas Company of Pennsylvania. The West Virginia gas is gathered to a station in that State, there freed from gasoline vapors and pumped at a pressure of from 200 to 300 pounds per square inch into transmission lines which connect, at the boundary between the States, with appellant’s high pressure transmission lines. By means of these the gas is transmitted to a station in Stark county whence it is taken by other lines to pressure reducing stations. The lines there connect with distribution lines in which is maintained pressure of from 30 to 50 pounds per square inch and which are a part of the distribution system in each.municipality served. From the latter the gas enters the local supply mains wherein pressure is reduced to that necessary—a few ounces per square inch—to carry the gas through the service pipes extending to the' premises of consumers and suitably to supply their burners. The consumers control the flow of gas on their premises. The Pennsylvania gas is collected, treated, compressed for transmission, delivered to appellant at the state line

In accordance with the statute, as then construed by the attorney general, appellant in its reports to the tax commission for the years in question returned as receipts from interstate business all sums collected from-customers receiving only gas from wells outside Ohio, treated as intrastate earnings the receipts from those using only Ohio gas, and apportioned between intrastate and interstate business, on the relation of the quantity of each to the total, receipts from those served by a mixture of Ohio and other gas. The commission accepted that classification, and the taxes were computed and paid' on that basis. In 1930 appellees, construing the laws to require the inclusion of all receipts, without regard to the source of the gas furnished, applied the prescribed rate to the amounts theretofore treated as receipts from interstate business, and demanded from appellant payment of the sums so arrived at together with ’ penalties prescribed for failure to pay excise taxes when due.

The question is whether the state statute, construed to include the amounts reported as receipts from interstate business, operates directly to regulate or burden interstate commerce.

The transportation of gas from wells outside Ohio by the lines of the producing companies to the state line and thence by means of appellant’s high pressure transmission lines to their connection with its local systems is essentially national—not local—in character and is interstate commerce within as well as without that State. The mere fact that the title or the custody of the gas passes while it is en route from State to State is not determinative of the question where interstate commerce ends. Public Utilities Comm. v. Landon, 249 U. S. 239 , 245. Missouri v. Kansas Gas Co., 265 U. S. 298 , 307-309. Peoples Gas Co. v. Pub. Serv. Comm., 270 U. S. 550 , 554. Public Util. Comm. v. Attleboro Co., 273 U. S. 83 , 89. But when the gas passes from the distribution lines into the supply mains, it necessarily is relieved of nearly all the pressure put upon it at the stations of the producing

Appellant relies on Pennsylvania Gas Co. v. Public Service Comm., 252 U. S. 23 . There the question was whether the New York commission had jurisdiction to prescribe the rates to be charged local consumers of gas transported to that State from Pennsylvania. This court, following the findings of the highest court of New York ( 225 N. Y. 397 , 403-404; 122 N. E. 260 ), held that the entire movement of the gas was interstate commerce and that, in the absence of contrary regulation by the Congress, the state commission had jurisdiction to prescribe such rates. The theory on which that conclusion was reached is not wholly consistent with the views expressed in Public Utilities Comm. v. Landon, supra, and in Missouri v. Kansas Gas Co., supra. In the former the court

The Ohio statute does not purport to affect interstate commerce. The specified excise taxes are laid for the privilege of carrying on intrastate business. The amounts were calculated on gross receipts derived wholly from appellant’s intrastate business notwithstanding the gas used had moved in interstate commerce.

Decree affirmed.