Wisconsin Elec. Power Co. v. United States
336 U.S. 176 (1949)

Annotate this Case

U.S. Supreme Court

Wisconsin Elec. Power Co. v. United States, 336 U.S. 176 (1949)

Wisconsin Electric Power Co. v. United States

No. 237

Argued January 7, 1949

Decided February 14, 1949

336 U.S. 176




1. Dairies, engaged primarily in the collection, pasteurization, and distribution of fresh milk, purchased and used electricity in various ways in their general operations, including an undetermined amount used in pasteurizing milk.

Held: electricity supplied to these dairies through single meters, or through more than one meter but without differentiation as to use, is sold for "commercial consumption" (and not for industrial purposes), within the meaning of § 3411 of the Internal Revenue Code, and is taxable against the vendor under that section. Pp. 336 U. S. 177-187.

2. The legislative history of this section indicates that the term "commercial" was meant to apply to the nature of the business in which the energy is consumed, and not to the specific purpose to which each measurable unit of electricity is devoted. Pp. 336 U. S. 181-182.

3. The controlling factor in determining the applicability of the tax is the general nature of the business carried on at a given location. Pp. 336 U. S. 182-184.

4. Though the process of pasteurizing, separately viewed, may be assumed to be industrial, the general nature of the business conducted by the dairy plants here involved was essentially commercial, notwithstanding the inclusion of pasteurization among their many activities. Pp. 336 U. S. 184-185.

5. The conclusion here reached as to the applicability of the tax is supported by the legislative history and the administrative interpretation. Pp. 336 U. S. 181-187.

168 F.2d 285 affirmed.

Petitioner sued in the District Court for a refund of taxes alleged to have been erroneously collected under § 3411 of the Internal Revenue Code. The District Court denied recovery. 69 F.Supp. 743. The Court of Appeals affirmed. 168 F.2d 285. This Court granted certiorari. 335 U.S. 842. Affirmed, p. 336 U. S. 187.

Page 336 U. S. 177

MR. JUSTICE REED delivered the opinion of the Court.

Petitioner, engaged in the business of supplying electric energy to the public, seeks the refund of taxes paid by it pursuant to § 3411 of the Internal Revenue Code. That section, in pertinent part, provides for a tax

". . . upon electrical energy sold for domestic or commercial consumption . . . equivalent to 3 percentum [Footnote 1] of the price for which so sold, to be paid by the vendor under such rules and regulations as the Commissioner, with the approval of the Secretary, shall prescribe. [Footnote 2]"

Note that the statute taxes energy for domestic or commercial consumption. There is no provision for taxation of electrical energy used for industrial purposes. [Footnote 3]

The purchasers of the electric power here involved are 27 dairy plants which are engaged primarily in the collection, pasteurization, and distribution of fresh milk. The sole question presented by the case is whether the use of electricity by these dairies is commercial consumption

Page 336 U. S. 178

within the meaning of the statute, or industrial consumption, a use not covered by the statute.

The functions of the dairy plants are sufficiently similar so that they can be treated as one for the purpose of describing their methods of operation. The plants are buildings equipped with milk-handling machinery and facilities located either off the dairy farms, or on the dairy farm itself as an activity apart from milk production. Contracts for the purchase of raw milk are negotiated with nearby farms. [Footnote 4] This milk is delivered in trucks of the producers or of the dairy plant, as the case may be, to the plant, where it is received, weighed, tested for butterfat content, cooled, and mixed and standardized so as to achieve the proper butterfat content. Next, it is pasteurized. Pasteurization consists of heating the milk to 143

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