State Tax Comm'n of Miss. v. Interstate Natural Gas Co.
Headline: Affirmed block on Mississippi’s attempt to tax a cross-state natural gas pipeline, ruling the pipeline’s delivery and measurement work is part of interstate commerce and cannot be taxed by the state.
Holding:
- Prevents Mississippi from taxing pipeline’s interstate gas transportation.
- Protects wholesale interstate gas flows from state privilege taxes.
- Makes it harder for states to tax work done to deliver interstate gas.
Summary
Background
A pipeline company (Interstate Natural Gas Company) operates a trunk line from gas fields in Louisiana through Mississippi and back to Louisiana. Parts of the line are 72.42 miles at 22 inches, 8.11 miles at 12 inches, and 4.99 miles at 10 inches. The company sells about 70 million cubic feet daily to Louisiana distributors in summer and about 75 million in winter. Sales in Mississippi range from about 204,000 to 520,000 cubic feet by season. Distributors tap the pipes near Natchez and Woodville; the company provides the thermometer and meter and reduces pressure before delivery. Mississippi’s Tax Commission tried to apply a 1930 state privilege tax, and a three-judge federal court permanently enjoined enforcement of that tax.
Reasoning
The Court addressed whether the company’s activities in Mississippi were part of interstate commerce and therefore immune from the state tax. The opinion explains that the gas flows continuously from Louisiana and that the company’s measuring, pressure reduction, and wholesale delivery work are performed on the flowing gas to enable interstate shipment. The Court described those activities as plainly incident to interstate commerce rather than separate taxable local sales. The State relied on two New York contracts to argue intrastate sales in Mississippi, but the Court treated the main activity as transporting and wholesaling interstate gas and affirmed the injunction.
Real world impact
The decision prevents Mississippi from collecting this privilege tax on the company’s interstate pipeline operations and protects similar pipeline transport and wholesale delivery when done as part of interstate commerce. Companies that only measure, adjust pressure, and deliver gas wholesale while it moves across state lines should not be treated as taxable intrastate sellers under this ruling.
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