Appalachian Elec. Power Co. v. Koontz, 798

• Decision Date: 30 July 1953
• Docket Number: No. 798,798
• Citation: 138 W.Va. 84,76 S.E.2d 863
• Court: West Virginia Supreme Court
• Parties: APPALACHIAN ELECTRIC POWER CO. v. KOONTZ, State Tax Com'r. C. C.

Page 863

76 S.E.2d 863

138 W.Va. 84

APPALACHIAN ELECTRIC POWER CO. v. KOONTZ, State Tax Com'r.

C. C. No. 798.

Supreme Court of Appeals of West Virginia.

Submitted Jan. 28, 1953.

Decided March 17, 1953.

Dissenting Opinion July 30, 1953.

Syllabus by the Court.

1. A statute is to be applied as written, not construed, where the intention thereof is made clear by the language used when considered in its proper context and as it relates to the subject matter dealt with.

2. The tax levied against an electric light and power company under Code, 11-13-2d, as amended, is determined solely by the amount of income received by the company from sales and demand charges.

3. Delayed payment charges collected by an electric light and power company constitute part of the income of such company included within the term sales and demand charges.

4. Income from an electric light and power company derived from an activity or business merely incidental to and in furtherance of the public service business, is not part of the income included within sales and demand charges; and such income is not included as part of the base for determining the tax levied by Code, 11-13-2d, as amended.

5. Income of an electric light and power company derived from an activity or business operated only as incidental to and in furtherance of the public service business, cannot be included in the base for determining the amount of any tax levied by any section of Article 13 of Chapter 11 of the Code, as amended.

6. 'The legislature has power to prescribe the method by which the valuation of any class of property may be ascertained, and, where the value of the same class of property is ascertained throughout the state in the same manner, such valuation cannot be regarded as unconstitutional for lack of uniformity or equality.' Point 2, syllabus, Charleston & Southside Bridge Co. v. [Kanawha] County Court, 41 W.Va. 658 .

Campbell, McClintic, James & Wise, Charleston, Ernest K. James and E. Glenn Robinson, Charleston, for plaintiff.

John G. Fox, Atty. Gen., Joseph E. Hodgson, Asst. Atty. Gen., and George W. Stokes, Asst. Atty. Gen., for defendant.

GIVEN, Judge.

Plaintiff, Appalachian Electric Power Company, an electric public service corporation, instituted its declaratory judgment proceeding in the Circuit Court of Kanawha County, for the purpose of having determined its liability as to a deficiency business and occupation tax assessment, covering the years 1945, 1946, 1947, 1948 and 1949, made by the state tax commissioner, as the result of an audit of the accounts of the company. The tax commissioner demurred to the petition, the circuit court overruled the demurrer and, upon joint motion of the parties, certified to this Court the following questions:

'1. Does Section 2(d), Article 13, Chapter 11, of the Official Code of West Virginia of 1931, as amended, impose the sole tax upon the privilege of engaging in the business of an electric light and power company within this state?

'2. May income of an electric light and power company arising from Delayed Payment Charges be lawfully included within the measure of the privilege tax provided in Section 2(d), Article 13, Chapter 11, of the Official Code of West Virginia of 1931, as amended, namely, 'sales and demand charges'?

'3. May income of an electric light and power company arising from merchandising activities be lawfully levied upon under the provisions of Section 2(c) of said article?

'4. May income of an electric light and power company arising from Sales of Water, activities producing income classified as Miscellaneous Electric Revenues, Servicing of Customers' Installations and activities producing income classified as Other Miscellaneous Non-Operating Income be lawfully subjected to the privilege tax provided in Section 2(h) of said article?

'5. May the privilege tax provided in Section 2(i) of said article be lawfully imposed upon the income of an electric light and power company arising from the renting of electric properties and from leasing of non-operating physical properties?'

Code, 11-13-2d, as amended, around which the principal controversy revolves, in so far as material here, reads: 'Upon any person engaging or continuing within this State in any public service or utility business, * * * there is likewise hereby levied and shall be collected taxes on account of the business engaged in equal to the gross income of the business multiplied by the respective rates as follows: * * *; electric light and power companies, four per cent on sales and demand charges for domestic purposes and commercial lighting and three per cent on sales and demand charges for all other purposes, * * *.'

Section 2c of the same article provides that every person engaging or continuing within this State in the business of selling any tangible property whatsoever, shall pay 'a tax equivalent to one-half of one per cent of the gross income of the business, * * *.' Section 2h of that article reads: 'Upon every person engaging or continuing within this State in any service business or calling not otherwise specifically taxed under this law, there is likewise hereby levied and shall be collected a tax equal to one per cent of the gross income of any such business.' By Section 2i of that article, a tax of one per cent is levied 'Upon every corporation or association engaging or continuing within this State in the business of collecting incomes from the use of real or personal property or of any interest therein, * * *.'

The principal income of the company is from sales of electric energy. It also receives certain income from what may be described as delayed payment charges, which are additional charges collected from its customers who fail to pay the charges for electric energy within a fixed time. Other income is received by the company from sources such as sales of tangible property, rent of properties of the company not continuously used or immediately required in its utility business, sales of water, servicing of customers' installations, and certain other non-utility businesses. For the years material, the company reported and paid the tax assessed, under Section 2d, on sales of electric energy, as 'sales and demand charges'. It reported and paid the tax on that part of its income designated as 'delayed payment charges', not as 'sales and demand charges', but as income taxable only under Section 2h, as a 'service business or calling not otherwise specifically taxed', at the lower rate. It reported and paid the tax on its other income at the rates provided either in Section 2c, 2h, or 2i.

For each of the years involved, the company's income from delayed payments amounted to $27,108.06, $13,277.73, $17,299.53, $21,373.05 and $28,913.24, respectively. From the audit made by the tax commissioner, after certain justifiable adjustments as to the respective amounts, there was found to be due the State the amount of $5,517.92, which sum included penalties amounting to $1,436.60. The amount alleged to be owing was determined by taxing the company, as to such 'delayed payment charges', at the rate provided in Section 2d, or as being included within 'sales and demand charges', and deducting from the amount of tax so found to be due the amounts paid by the company, at the lower rates, for the respective years.

The income reported by the company for each of the years involved as having been received from sales of tangible property, upon which it paid the tax provided by Section 2c, less justifiable deductions, was $4,088.12, $50,617.43, $107,614.28, $158,880.13 and $164,693.02, respectively. The 1949 income derived from sales of tangible property was approximately five one-thousandths of one per cent of the total income of petitioner for that year. The volume of each of the other types of business mentioned in the questions certified, which hereinafter may be referred to as incidental businesses, as compared with the entire volume of business done by petitioner, may very well be visualized from the approximate percentage of income of each of the particular businesses with the entire income of the business of petitioner for the year 1949: Rent electric properties (associates), five ten-thousandths of one per cent; rent electric properties (other than associates), three one-thousandths of one per cent; sales of water and water power, three one hundred-thousandths of one per cent; servicing customers' installations, six ten-thousandths of one per cent; lease of physical properties, four one hundred-thousandths of one per cent; miscellaneous, two one-hundredths of one per cent.

The Public Service Commission of West Virginia, being the public body having statutory powers to supervise and regulate public utilities within the State, with respect to certain of their affairs, and especially with reference to the rates to be charged by them, has promulgated certain rules and regulations governing the manner of keeping the accounts of electric utility companies. Petitioner in the instant proceeding strongly contends that the manner in which it is required, by such regulations, to keep its accounts and report its income with reference to the delayed payment charges, and with reference to each of the incidental businesses mentioned, indicates very strongly that the 'Public Service Commission of this State recognizes each of the activities of the plaintiff to be part of the normal and customary business of an electric light and power company * * *.' The purpose of the Public Service Commission in requiring that the income accounts of the public service company be kept in a certain manner is primarily, if not solely, for the purpose of assisting that commission in its duty to determine fair and just rates to be charged by the utility company, and can be of little, if any, assistance in the construction or application of taxing statutes.

Our attention is directed to principles usually applied in aid of...