*1 COR TRANSMISSION TEXAS EASTERN
PORATION, Appellee-Complainant, Revenue, Commissioner Thomas BENSON, Appellant-Defendant. Supreme Court of Tennessee.
April Denied June Petition Rehear Gilbert, Whalley, Harris A. D. John
Nashville, appellee-complainant. Pack, Gen., Atty. David M. Milton P. Gen., Rice, Deputy Atty. of Tennes- Nashville, see, appellant-defendant. OPINION
DYER, Chief Justice. appeal us on before County. Chancery Court of Davidson entitled appellee was chancellor held pro- paid under monies recover certain as- of a sales tax satisfaction test appellant. sessed opinion parties will they appeared ferred to as court; Transmis- Texas Eastern complainant, and Corporation as sion Benson, Revenue Commissioner of Thomas Tennessee, as defendant. the State *2 original complainant merce, In its- bill that avers and affirmatively alleges that the it is engaged operation in “electricity of natural in is never interstate commerce gas pipelines commerce; in interstate but is sold and delivered from a Tennessee in pressure vendee, order to maintain sufficient in vendor to a Tennessee with both pipelines propel points gas delivery to its sale taking wholly place with- of distribution the northeastern of addition, Tennessee.” In defendant al- States, complainant leges the United imposed maintains that the tax sale stations; compressor electricity that these which was a “local event” integral stations are an part of the inter- that since agency anas system; complain- state transmission Federal Government is immune purchases taxation, ant electricity from the Tennes- the instant case operate Valley Authority see these com- collected “from secondarily the one liable,” pressor stations; electricity and that vendee. Defendant further- more “directly was taken off . transmis- denies that . . the tax is a burden grid sion provisions lines in interstate commerce.” commerce or that the Complainant the Sales Tax further avers that defendant Act and the construction provisions complainant these against assessed a tax defendant contra- 1, 1963, process venes due period equal protection to December from June paid protest and clauses the Fourteenth which was Amendment. was in that such assessment and collection below, evidence which State, statutes violation consists testimony of witnesses and States, the Constitution of the United stipulation parties, is as follows: various reasons. Complainant is a corporation Delaware that the tax is in (1) These reasons are: qualified to do business the State of contravention of the of T.C.A. § Tennessee. operates pipelines a “direct bur- 67-3007; (2) that the tax is transport gas natural from the states den interstate commerce within of Texas and points Louisiana to of desti- I, prohibition Article Clause Section nation in the states of New York and New (the Clause) of the Constitution Commerce Jersey. Part of the pipeline is lo- .;” of the United States cated in the State of Tennessee. upon in- discriminatory is a burden gas Natural lacks an inherent capability in that “manufacturers” terstate commerce self-propulsion through pipeline taxed at within the Tennessee are State of necessitates the cent, per to- of one or are lower rate pressurize gas by of compres- series exempt their use of tally from taxation for sor stations located throughout the trans- pursuant electricity to T.C.A. system. mission The function of these ; complainant is taxed at 3003(g) while compressor stations pres- is to increase the cent, rate of three all of which sure of the natural so as to assure of the commerce violation clause and the continuous points flow to the designa- the Constitution Fourteenth Amendment of tion in the northeast. States; that defendant of the United provisions of Title has construed the Tennessee operates two Annotated, Chapter of Tennessee Code compressor stations. These are at Glade- companies” “transportation so that other ville and Mount Pleasant. Both of these a “discrimi- similarly granted situated are stations equipped centrifugal com- exemption” in violation of natory use tax pressors which pressure raise the the Consti- Amendment to the Fourteenth gas. The “energy fuel” used to tution of the States. centrifugal compressors electricity pur- Valley chased from the by deny- Authori- Defendant rebuts the averments ty. The electricity is taken from ing electricity com- TVA’s that the states, ty used a number high voltage goes transmission lines and electricity, being part of interstate “step transformer’’ to re- such down directly There transmitted voltage duce the a usable level. into the testimony transmission complainant’s the interstate one wit- furnishing pressors which are nesses that the im- consumed *3 gas in interstate mediately upon the flow of natural entering station and commerce, electricity does that it where never comes to rest within Tennes- stop ? or come to rest see. complainant this Under evidence also introduced 67-3007, upon statute lies which in interstate T.C.A. operates §
that the TVA reads as follows: electricity to used station the Mount Pleasant to chapter It is not the intention of this Alabama, Dam generated at Wheeler levy tangible per- articles County, the Glade- where while Davidson imported property sonal this state or into sup- located, primarily ville Station produced or in this manufactured state Generating Paradise electricity from plied export; nor it the intention Kentucky. Station chapter levy this to fide a tax on bona however, interstate commerce. It the' parties that stipulated by the been chapter levy on intention of this to a tax taxation is immune from state TVA retail, use, consump- the sale at make power. does sales of electrical TVA tion, distribution, storage and the to to the of taxes payments in lieu certain be used or consumed in this of tan- state 16 U.S.C. operates. it See which states gible personal property it has after come A. 8311. § in this rest state and has become part of property mass of in this opin- in his The chancellor memorandum state. be- there no difference ion felt that case and facts of the instant tween the by recognition is a provision this While in Texas Gas those our recent decision are constitution- that there Benson, 223 Corporation
Transmission power of a state al limitations How- (1969). Tenn. 137 S.W.2d interstate upon goods moving in levy a tax distinguishable on ever, the two cases commerce, presumably intended to ex- it be im- strong sought The tax facts. of Ten- taxing of the State tend the posed in case was a use tax the Texas Gas extent allowed fullest nessee pipelines “used” the Commerce Clause. propel compressors in furtherance journey. stream’s main Complainant, construing T.C.A. § be sought to the instant case the event para taxing stat- materia with electricity between the taxed is a sale 67-3003, ute, argues follows: as TVA, supplier current, amd the Legisla- it That was the intention of plainant. retail, levy at ture to tax on sale
use, distribu- consumption, or the or the tangible personal tion, storage or the first is states the in this property it come to rest had following sue to be decided in the lan after mass become a State had guage : in this That State. by electricity tax on taxa- May Tennessee assess used gas pipeline ble it into the state inter- a natural since comes where no time comes company solely in interstate and at engaged part of the state or becomes a in Louisiana rest purchases Authority state. Valley electrici- the Tennessee mass above, sight must of the fact that taxa- As 67-3003 levies not lose noted § “tangible property.” practical matter, personal T. tion is a what tax on commerce, manufacture, “tangible per- (l) constitutes C.A. 67-3002 describes § production meaning including property” as to be determined sonal seen, practical “personal property be considerations. weighed, measured, felt touched energy has Electrical characteristics definition: elec- .” Under this clearly differentiating it vari- tricity as it can be mea- would included energy, ous other forms of such as Also, sured felt. the sales tax as and/or energy, energy, chemical heat and the originally exempted enacted in Appellant here, energy falling water. section, exemption power” “electric an generators, means of what are called By Chapter now T.C.A. 67-3012. *4 energy converts the mechanical of fall- Legislature Acts of the Public ing Thus, energy. water into electrical power energy” moved “electric or skill, application of a human dis- exemption section. It clear the product brought being tinct into levy a tax intended to on elec- places of transmitted use. The
tricity use, consump- for at retail or sale transmission; merely result is not nor is tion, storage distribution or thereof. it energy transmission of the mechanical of falling water to of con- places difficulty The here arises the na- is, first, sumption; it but conversion of power. ture same of electric The difficul- else, energy something of form into ty Light Power and Utah second, and, transmission of Pfost, Co. v. 286 U.S. S.Ct. something else to the consumers. While taxpayer (1932). L.Ed. 1038 Utah conversion transmission are substan- utility operating plant was a in the State instantaneous, tially are, they we are generate, of Idaho and distrib- transmit convinced, essentially separable and dis- ute electric operations. tinct that to ordi- fact The State of Idaho a license tax on levied nary appreciable observation no there is production of and electrical en- lapse of time generation between the ergy state, within the such when product and its transmission does not sale, also, barter or made exchange; statu- are, they forbid the conclusion that nev- tory provisions measuring the electrical ertheless, and not successive simultane- energy point production, at ous acts. being produced. hours based kilowatt permissible under the commerce clause of the Constitution of identical electrical court issue or physically production was made that this in rejecting across state lines was an and transmission of this contention said: inseparable tax was process. pounds, be bought analogy at least in common meaning. [*] apparent electrical or arises [*] and sold as so so many quarts difficulty energy principally [*] is not [*] many perceiving from the fact n gallons. substance; ounces or It cannot [*] It Upon case, present breadth, facts is the length, neither nor thick- generation energy, of electrical like man- ness. But that it has actual content of production generally, proc- ufacture some clear, susceptible kind is since it is ess essentially local in character and of mechanical measurement with the itself; complete it so necessary or is linked with certainty quantita- permit it an insepa- transmission as to make tive purposes units be fixed for part barter, sale, rable a transaction and exchange. However strictly commerce? From scientific lacking it in body substance, point view, highly the subject nevertheless, tech- energy, electrical possesses nical; case, considering but in many we ordinary tokens material- secondarily laws; proceeded to from one mani- collect subject ity. to known liable; complainant. in this predictable fests characteris- definite tics; place may be from the transmitted 67, Chapter of Tennessee Code Title production of use and point to the provisions an Annotated, embodies in its many practi- there made to serve of taxation. and clear scheme obvious 165, 179, cal of life. 286 needs U.S. contemplates a of taxation levied on the sales tax to be 67-3003, complementary use tax to and a Electricity as a taxable item of privi- entirely be levied distinct personal property requires us to take importing tangible into lege of very Electricity, practicable approach. for its here, use very nature, never be- comes to rest or sys- The overall scheme envisions anything. comes a of the mass tem of taxation where the tax is due be- Electricity gener- could be described as sui cause of a sales transaction within Nevertheless, electricity is. is a commodi- state, or, where the tax is due because of ty gathered, proc- which is harnessed and importation the state for Each simultane- essed sale. act Nevertheless, use here. a theme there is ous, separable. but rather successive equality which runs the main *5 preparation We deem the for sale stream statutory provisions. of all these “step sepa- a TVA down” transformers as tax, 67-3003, Both the sales and activity; will, breaking you rate local if tax, 67-3005,provide the use T.C.A. § package, of the before a rededication the tax cannot be levied where it re- would property to interstate commerce. See duplication sult of tax. T.C.A. § Transport Eastern Air v. Carolina South 3008,in like manner allows credit for taxes 147, Commission, Tax 52 S.Ct. 285 U.S. paid in other states. This of taxa- 340, 673 (1932). 76 L.Ed. presupposes tion tangible personal that all per- an item of Here we have tax, is subject to a be sales it ei- clearly in- Legislature property the sonal ther in or in state. The another a “sale” tax there tended to where purpose of system readily per- such a is has The in Tennessee. such purchases ceived. No one who 67-3002, as “sale” defined a § Tennessee is be exempt from the sales title, possession being transfer except paid tax to the extent that he has delivered sold and TVA both. When use or Thus, sales tax somewhere. Ten- a local complainant, there electricity to complete system nessee a has of sales taxa- in Tennessee. sale taxable tion such as exists in other states. See Co., 577, Heneford v. Mason Silas 300 U.S. by com question (Wash- raised 57 S.Ct. 81 second L.Ed. 814 ington is levied on Compensatory Tax); tax and plainant that the sales Sales seller, Chicago TVA, Bridge Johnson, & Iron v. 19 seller, in this case Co. Gov (California States Cal.2d P.2d of the United 119 945 agency as an Southeastern, tax immunity Tax); from state Sales Use v. enjoys Inc. ernment, Commission, tax on TVA agree Oklahoma Tax 351 P.2d if 739 ation. We America (Okl.1960) (Oklahoma Sales Use such invalid. Pa., Tax). U.S. Allegheny, 322 County of (1944). 1209 L.Ed. 88 S.Ct. tax section the sales it is true that While 67-3003, refers law, T.C.A. § admits in its answer The State taxation, refer- reason for as a “use” 67-3003, pri- by T.C.A. sales tax event use after sale. ence is to seller, but liability upon the mary tax levied triggers the sale that being immune the seller this case due tax is under this section. has the user tax, then the fusing to collect sale, turers, solely interstate, of the may because because of whose business be intrastate, use. or both. simply means that the taxable inci- question sub-section in defines a
dent aimed at aspect this “use” of the manufacturer as follows: law is the sales transaction. there Where purpose For the provision a man- sale, has been a a tax is due payable, ufacturer is defined as princi- one whose first from the if it can be collected pal business is fabricating processing him, then, not, if from the vendee tangible personal property for resale. or the user property. of the In the lat- case, collected, ter the tax is not as a use We provision construe this to be a rea- tax, but as a sales tax. sonable classification encourage manu- facturing, and not an invidious discrimina- be tax sales The fact tion under Constitution, as all “manu- col user, be it cannot paid by the because facturers,” interstate, intrastate exempt constitutionally ven from a lected equally. treated The complainant is, by trans the nature dor does not alter admission, engaged in the business in Ten electricity was sold action. transporting petroleum products and that the in Tennessee so nessee for use therefore, ineligible preferred for the arising applies, and the statute rate. subsequent in-state sale and because constitutionally collected as use The final raised pertains legal incidence sales tax with the to an alleged “discriminatory use exemption” user. New tax the vendee or See extended to other “tran- etc., sportation Telephone Jersey companies” Bell v. State Co. similarly situated to complainant’s 463 the 74 L.Ed. position. U.S. *6 Transport, Inc. (1930); Eastern Air premised upon contention is the as- etc., supra, (Hartman, Carolina South sumption imposed that the tax in the in- Commerce, Taxation of Interstate State stant case was a holding use tax. Our that pp. 131-133). the tax assessed was a tax sales tax involved is a that the Our conclusion sales transaction occurring wholly in Ten- user, tax, sales and collectible from nessee renders this issue moot. statutory designed keeping scheme The judgment trial court is re- Assembly. our General versed and the bill is dismissed. The third raised com
plainant to be is that unless the tax were HUMPHREYS, J., JENKINS, Sp. per at a one cent rate rather than assessed J., concur. per price, three cent of the sales would an discrimination invidious CRESON, J., dissents. equal protection clause of the Constitu tions of Tennessee and United States McCANLESS, J., participating. carrier, against pipeline an since against CRESON, one cent rate is assessed oth (dissenting). Justice purchasers er similar and users of electric disagree must majority. I with the ity, “processors” un “manufacturers” instant appeal before us on der 67-3003(g). the Chancery 'County, Court of Davidson argues preferred defendant that the Part appellee I. The held Chancellor that granted by Tennessee, tax rate is in- was paid entitled to recover certain monies such, trastate as but to commerce manufac- obligation satisfaction of a as-
9H appellant. Constitution; payment sessed was that con- defendant has protest, Chapter present made under and the suit Title strued the pursuant that instituted recover the of Tennessee Annotated so same Code similarly seq. companies” “transportation T.C.A. 67-2303 et other “discriminatory use situated are granted opinion parties will be re- Four- exemption” in violation of the they appeared ferred to as in the Amendment to the Constitution of teenth court; that Texas Eastern Transmis- the United States. complainant, Corporation, sion as Benson, Defendant, meeting Thomas Commissioner of Revenue inter- averments Tennessee, him, posed against for the as defendant. State denies that the electrici- ty is in interstate but rather af- original complainant avers that In its bill firmatively “electricity alleges that the operation engaged it is of natural is sold never in interstate commerce but gas pipelines in commerce; and delivered from a Tennessee vendor pressure order to maintain sufficient vendee, and de- a Tennessee with both sale points pipelines propel to its livery place wholly within Tennes- taking part of distribution the northeastern alleges see.” In addition defendant maintains United States imposed upon the sale stations; compressor these event” and electricity which was a “local inter- integral stations an agency that since the as an complain- system; state transmission is immune from Federal Government purchases electricity ant from the Tennes- taxation, tax in the instant case Valley Authority operate see these secondarily liable”, one “from the collected pressor stations; and that the denies the vendee. Defendant furthermore . transmis- “directly was taken off upon interstate that the tax is a burden grid sion lines in interstate commerce.” provisions of the or that that defendant further avers construction of Tax Act and the Sales against for the assessed a tax contravenes provisions by these defendant 1, 1963, period to December from June Equal Protection the Due Process protest and paid under which was Fourteenth Amendment. Clauses of the was in that such assessment and collection of the statutes violation below, The evidence *7 for Constitution the States testimony of witnesses consists of the various reasons. parties, stipulation of the is as follows: in that the tax is (1) These reasons are: Complainant corporation is a Delaware provisions contravention of the of T.C.A. § qualified to do business the State 67-3007; that is “direct bur- Complainant operates pipelines Tennessee. den within the commerce transport from the states gas natural prohibition I, of Article Clause Section points desti- of Texas and Louisiana to (the Clause) Commerce of the Constitution New nation in the states of York and New ” ; . of the United States Jersey. system is lo- pipeline Part of the discriminatory is inter- burden Tennessee. cated State of in that “manufacturers” state commerce sys- at In within of Tennessee are taxed connection with this transmission the State compressor per or are total- tem maintains sta- rate of one cent lower compressor exempt use of ly taxation their tions. The function these from pressure electricity pursuant stations is to increase the of the to T.C.A. § gas propelled at a it to taxed natural that will be 3003(g), while so cent, points is in the all which of destination the northeast. rate three stations, compressor gas and the violation of the Clause Without the Commerce pressure pass the Federal would not have sufficient to Fourteenth Amendment through system. In other tax immunity transmission which be enjoyed by words, repressurization thereof, of the at the owner recipi- or who is the indispensable the stations is essential and ent of any things or services tax- operation pipeline system. able under chapter, this or who rents or any furnishes things services Tennessee, complainant operates two taxable chapter, under this or who stores compressor These are at stations. Glade- consumption use or any this state ville Mount Pleasant. Both of these item or article of personal prop- equipped centrifugal stations are erty as chapter, defined or who pressors pressure raise leases rents such property, either as gas. “energy to fuel” used lessor lessee, within the state of Ten- centrifugal compressors electricity pur- nessee.” Valley chased from the Tennessee Authori- legislative intent exempt to ty. inter- electricity is taken iron TVA’s state commerce from high voltage goes transmission lines Chapter Title 67 set forth in “step T.C. down transformer” to A. 67-3007. It is: voltage duce the to a usable There level. testimony by of complainant’s one wit- “Interstate exempt. is not electricity nesses that the im- —It is consumed the intention of chapter levy to mediately upon entering the station and articles of tangible personal
that it never comes rest within Tennes- property imported into pro- this state or see. duced or manufactured in this state for export; nor is it the intention also introduced evidence chapter levy a tax on bona fide operates the TVA inter- however, commerce. It electricity the in- used tention chapter levy Mount Pleasant station was retail, sale at use, generated Alabama, consump- at Wheeler Dam tion, distribution, storage while County, Davidson where the Glade- be used or consumed in located, ville this state Station of tan- primarily sup- gible personal plied property after it has Generating come Paradise to rest in this state and Station in Kentucky. become a part of the mass of property in this stipulated has been parties state.” TVA is immune state taxation power. electrical does TVA make of. I, Article Section Clause 3 of the certain payments in lieu of taxes the United Constitution, commonly states in operates. which it See 16 U.S.C. called Clause, the Commerce provides: §831(1). A. *8 congress. congress "Powers of —The in instant was levied the case The power regulate shall have ... to T.C.A. pursuant provisions of the § nations, foreign commerce with and is: pertinent part of statute among states, the the several and with to be tax—Rate.—It is declared “Levy tribes; Indian .” of every is legislative person intent that privilege en- exercising a taxable who The sole in this case gages selling legally is whether or the business of not state, obligated personal pur- in this property pay at retail the sales tax for the in this state chases of uses or consumes view of T.C.A. who § any tangible personal 67-3007 the decisions of the item or article of Supreme chapter, construing irre- property defined in this Court the Com- as any merce spective ownership thereof or Clause.
913
case
instant
The tax
sion that position sound simply should be sustained. will permit do to or litigations tax liabilities concerning them be in con- determined semantics; test and this Court should Smith, Jr., Thomas H. Nashville, O. not do so. appellant. judgment I would affirm the below. Jones, Nashville, Richard A. appel-
lee.
OPINION DYER, Chief Justice.
Virginia appellee, Virginia Schaeffer, Rankin SCHAEFFER, Appellee, Rankin petition filed a against absolute divorce appellant, Schaeffer, Frederick Jr., Charles Jr.,
Charles SCHAEFFER, Frederick August on 1970. Personal service of Appellant. process, including copy petition Supreme Court of Tennessee. divorce, for absolute was served appellant August June pro
A decree having confesso been tak- en, a final decree granted January divorce, awarding an custo- absolute dy of four par- minor children of the ties, alimony in amount $150.00 month, support and child amount per month. The $581.21 decree further di- appellant vested the of all household fix- tures, furnishings appliances, appellee awarded a one-half in a interest parcel unimproved adjoin- real property ing family Appellee’s attorney’s home. $3,500.00. fee was set at thirty days entry Within following decree, appellant peti- final filed pro tion to set aside the decree confesso and tendered an de- appellee answer. The petition, murred contending that a only writ error coram nobis was the proper of attacking means the decree. Upon hearing and briefs of counsel the judge appellee’s sustained demurrer. Appellant exception took to same and has