Powerex Corp. v. Dept. of Rev.
Annotate this CasePowerex Corporation wholesales natural gas and electricity to purchasers throughout the western part of North America. The issue on appeal was how much of Powerex's income was taxable in Oregon. This case turned on whether Powerex’s sales of electricity and natural gas occurred "in this state." The rules for making that determination differed depending on whether the sales are sales of "tangible personal property" or other types of sales. Generally, sales of tangible personal property are "in this state" if "[t]he property is delivered or shipped to a purchaser * * * within this state regardless of the f.o.b. point or other conditions of the sale." In the Tax Court, the parties agreed that natural gas was tangible personal property. They disagreed whether, in selling natural gas, Powerex shipped or delivered natural gas to purchasers "within this state." The Tax Court found that Powerex shipped gas to purchasers in other states through a hub in Malin where two pipelines intersected. It concluded that, in doing so, Powerex had not shipped or delivered gas to purchasers within Oregon. Regarding Powerex’s sales of electricity, the parties disagreed whether electricity is tangible personal property. The Tax Court ruled that electricity is not tangible personal property and that, because the greater part of the activity that produced the income from Powerex’s electricity sales occurred in British Columbia, those sales were not attributable to Oregon. The Tax Court accordingly concluded that, for the tax years at issue here, neither Powerex’s sales of electricity nor its sales of natural gas were "in this state." The Department of Revenue appealed that decision. Upon review, the Supreme Court concluded the Tax Court correctly held that Powerex's natural gas sales were not "in this state." With regard to electricity, the Court reversed the Tax Court, and remanded the case to that court for consideration of whether electric transmission systems functioned in the same way that natural gas pipelines did: "[i]f the Tax Court makes that finding on remand, then our conclusion regarding Powerex’s natural gas sales presumably will control how most of Powerex’s electricity sales will be allocated."
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