283 U.S. 465 (1931), 453, East Ohio Gas Co. v. Tax Commission of Ohio

Docket Nº:No. 453
Citation:283 U.S. 465, 51 S.Ct. 499, 75 L.Ed. 1171
Party Name:East Ohio Gas Co. v. Tax Commission of Ohio
Case Date:May 18, 1931
Court:United States Supreme Court

Page 465

283 U.S. 465 (1931)

51 S.Ct. 499, 75 L.Ed. 1171

East Ohio Gas Co.


Tax Commission of Ohio

No. 453

United States Supreme Court

May 18, 1931

Argued April 22, 23, 1931




1. A state can neither lay a tax on the act of engaging in interstate commerce nor on gross receipts therefrom. P. 470.

2. While a state may require payment of an occupation tax by one engaged in both intrastate and interstate commerce, the exaction, in order to be valid, must be imposed solely on account of the intrastate business, without enhancement because of the interstate business done, and it must appear that one engaged exclusively in the interstate business would not be subject to the imposition, and that the taxpayer could discontinue the intrastate business without withdrawing also from the interstate business. Id.

3. The transportation of natural gas from wells outside of a state by the pipelines of producing companies to the state line, and thence, by means of the distributing company's high pressure transmission lines, to their connections with its local systems is essentially national -- not local -- in character, and is interstate commerce within as well as without the state. Id.

4. 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. Id.

5. Natural gas, purchased by an Ohio corporation for supply to its local consumers, was piped into, and distributed within, the state at high pressures. When it reached the company's local supply mains, the pressure was greatly reduced and the volume of the gas was greatly expanded. It there divided into many thousands of relatively tiny streams that entered the small service lines connecting the service mains with the pipes on the consumers' premises, and, so segregated in those lines and pipes, it remained in readiness, or moved forward, to serve as needed.


(1) That the treatment and division of the large compressed volume of gas is like the breaking of an original package, after shipment in interstate commerce, in order that its contents may be treated, prepared for sale, and sold at retail. P. 471.

(2) The furnishing of the gas to the consumers in this way is not interstate commerce, but a business of purely local concern exclusively

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within the jurisdiction of the state, which may constitutionally be subjected to a excise tax based on the gross receipts. Id.

6. Opinion in Pennsylvania Gas Co. v. Public Service Comm'n, 252 U.S. 23, disapproved to the extent that it is in conflict with the decision here. P. 472.

43 F.2d 170 affirmed.

Appeal from a decree of the District Court of three judges refusing a preliminary injunction and dismissing the bill, in a suit to restrain collection of a state tax.

BUTLER, J., lead opinion

MR. JUSTICE BUTLER 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 proceeding first day of May, excluding

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therefrom all receipts "derived wholly from interstate business," § 5475, and to certify the amount so determined to the auditor of state, § 5481. He is directed to charge each such company

a sum in the nature of an excise tax, for the privilege of carrying on its intrastate business, to be computed on the amount [51 S.Ct. 500] so fixed and reported by the commission as the gross receipts of such company on its intrastate business . . . by taking one and thirty-five one-hundredths percent of all such gross receipts. . . .

§ 5483.

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 percent of its supply from its own Ohio wells, 72 percent from the Hope Natural Gas Company of West Virginia, and 3 percent from the People's 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...

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