Powerex Corp. v. Dep’t of Rev., No. S060859 (Or. Mar. 26, 2015).
Does electricity qualify as “tangible personal property” or “intangible personal property” under Oregon tax law? The answer to this question has financial consequences for Powerex, a company that sells natural gas and electricity in the western United States and Canada. If electricity is tangible personal property, Powerex will have to pay more taxes than it would if electricity is intangible personal property.
This case comes to the Oregon Supreme Court from the Oregon Tax Court, which decided that electricity is intangible. It based this decision not on the language or purpose of the tax statute, but (remarkably enough) on expert testimony.
Dueling expert witnesses testified about whether electricity is tangible. Powerex called Peter Fisher, a particle physicist at MIT, who testified that electricity is propagated through an electron’s emission of a “virtual photon.” Since a virtual photon has no mass, electricity is intangible. QED. The Department of Revenue called Joel Fajans, a Berkeley physics professor, who testified that virtual photons shouldn’t be viewed as distinct from the electrons that emit them. And since electrons have mass, electricity is tangible. QED. The Tax Court found Dr. Fisher’s testimony more persuasive than Dr. Fajans’, and so ruled that electricity is intangible.
Sensibly, the Oregon Supreme Court says that “the scientific debate about the subatomic properties of electricity—as fascinating as it is—seems beside the point.” Looking at the text and context of the relevant statute, the court holds that whether property is tangible depends on whether it’s perceptible to the senses, can be located physically, and can be delivered or shipped. Since electricity is perceptible to the senses, can be located physically, and can be delivered via electric lines, it’s tangible property. So the court remands the case to the Tax Court for it to recalculate Powerex’s tax liability based on the tangibility of the electricity that Powerex has sold.