Syllabus. E. Ohio Gas Co. v. Tax Comm'n, 283 U.S. 465 (1931)

There is no logical change of interstate movement until the gas reaches consumers’ appliances. Suggested analogies that bulk is broken, and the gas stored or processed, p. 467when it passes from transmission to distribution lines of the importing company are inapplicable and contrary to facts. In re Pennsylvania Gas Co., 225 N. Y. 397.

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 preceding first day of May, excluding p. 468therefrom 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 intra-state business, to be computed on the amount so fixed and reported by the commission as the gross receipts of such company on its intra-state business ... by taking one and thirty-five one-hundredths per cent, 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 per cent, of its supply from its own Ohio wells, 72 per cent, from the Hope Natural Gas Company of West Virginia and 3 per cent, from the Peoples 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 lines. By means of these the gas is transmitted to a station in Stark county whence it is taken by other lines to pressure reducing stations. The lines there connect with distribution lines in which is maintained pressure of from 30 to 50 pounds per square inch and which are a part of the distribution system in each municipality served. From the latter the gas enters the local supply mains wherein pressure is reduced to that necessary—a few ounces per square inch—to carry the gas through the service pipes extending to the premises of consumers and suitably to supply their burners. The consumers control the flow of gas on their premises. The Pennsylvania gas is collected, treated, compressed for transmission, delivered to appellant at the state line p. 469and by it transported, relieved of pressure and conducted through such mains and service pipes to consumers’ appliances precisely as is West Virginia gas. The Ohio gas is gathered and conducted from the fields in that State to the high pressure distribution lines and thereafter treated and brought to consumers as is the gas brought from the other States. Appellant’s contracts with consumers do not specify any source from which it is to obtain gas. To an extent not disclosed by the record, appellant collects minimum charges for service and charges for readiness to serve without regard to the quantity of gas consumed. It furnishes to some communities exclusively gas from outside the State, to some only that from Ohio and to others a mixture of that from West Virginia and Ohio.

The transportation of gas from wells outside Ohio by the lines of the producing companies to the state line and thence by means of appellant’s high pressure transmission lines to their connection with its local systems is essentially national—not local—in character and is interstate commerce within as well as without that State. 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. Public Utilities Comm. n . Landon, 249 U. S. 239, 245. Missouri v. Kansas Gas Co., 265 U. S. 298, 307-309. Peoples Gas Co. v. Pub. Serv. Comm., 270 U. S. 550, 554. Public Util. Comm. v. Attleboro Co., 273 U. S. 83, 89. But when the gas passes from the distribution lines into the supply mains, it necessarily is relieved of nearly all the pressure put upon it at the stations of the producing p. 471companies, its volume thereby is expanded to many times what it was while in the high pressure interstate transmission lines, and it is divided into the many thousand relatively tiny streams that enter the small service lines connecting such mains with the pipes on the consumers’ premises. So segregated the gas in such service lines and pipes remains in readiness or moves forward to serve as needed. 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. State n . Flannelly, 96 Kan. 372, 383-384; 152 Pac. 22; W. Va. & Md. Gas Co. v. Pub. Serv. Comm., 134 Md. 137, 143-145; 106 Atl. 265. Cf. Atlantic Coast Line v. Standard Oil Co., 275 U. S. 257, 269. Brown v. Maryland, 12 Wheat. 419. Leisy v. Hardin, 135 U. S. 100. It follows that the furnishing of gas to consumers in Ohio municipalities by means of distribution plants to supply the gas suitably for the service for which it is intended is not interstate commerce but a business of purely local concern exclusively within the jurisdiction of the State.

Appellant relies on Pennsylvania Gas Co. v. Public Service Comm., 252 U. S. 23. There the question was whether the New York commission had jurisdiction to prescribe the rates to be charged local consumers of gas transported to that State from Pennsylvania. This court, following the findings of the highest court of New York (225 N. Y. 397, 403-404; 122 N. E. 260), held that the entire movement.of the gas was interstate commerce and that, in the absence of contrary regulation by the Congress, the state commission had jurisdiction to prescribe such rates. The theory on which that conclusion was reached is not wholly consistent with the views expressed in Public Utilities Comm. v. Landon, supra, and in Missouri v. Kansas Gas Co., supra. In the former the court p. 472said (p. 245): “ Interstate movement [of natural gas being transported from State to State] ended when the gas passed into local mains.” In the latter, it was said (p. 308): “ With the delivery of the gas [transported from one State to another] to the distributing companies . . . the interstate movement ends. Its subsequent sale and delivery by these companies to their customers at retail is intrastate business and subject to state regulation. ... In such case the effect on interstate commerce, if there be any, is indirect and incidental . . . [p. 309]. The business of supplying, on demand, local consumers is a local business, even though the gas be brought from another State and drawn for distribution directly from interstate mains; and this is so whether the local distribution be made by the transporting company or by independent distributing companies. In such case the local interest is paramount, and the interference with interstate commerce, if any, indirect and of minor importance.” It does not appear that there were presented, in Pennsylvania Gas Co. v. Public Serv. Comm., to the state court or here the considerations on which it is held that interstate commerce ends and intrastate business begins when gas flowing through pipe lines from outside the State passes into local distribution systems for delivery to consumers in the municipalities served. But, however that may be, the opinion in that case must be disapproved to the extent that it is in conflict with our decision here.

If the situs of the object inflicting the injury is the controlling factor and that is outside the territorial limits of the United States, why is not the matter of its abatement outside the jurisdiction of this Court. Cf. United p. 475473 Argument for Defendant.

The plaintiff failed to prove its case by clear and convincing evidence that conditions on plaintiff’s beaches and in its waters were due to defendant’s acts. Missouri v. Illinois, 200 U. S. 496; New York v. New Jersey, 256 p. 476U. S. 296, 309; North Dakota v. Minnesota, 263 U. S. 365, 374; Connecticut v. Massachusetts, 282 U. S. 660; Mississippi & M. R. Co. v. Ward, 2 Black 485.

The complaint alleges that the City of New York for many years has dumped and still is dumping noxious, offensive and injurious materials—all of which are for brevity called garbage—into the ocean; that great quantities of the same, moving on or near the surface of the water, frequently have been and are being cast upon the beaches belonging to the State, its municipalities and its citizens, thereby creating a public nuisance and causing great and irreparable injury. It prays an injunction p. 477restraining the City from dumping garbage into the ocean or waters of the United States off the coast of New Jersey and from otherwise polluting its waters and beaches.

Vast amounts of garbage are cast on the beaches by the waters of the ocean and extend in piles and windrows along them. These deposits are unsightly and noxious, constitute a menace to public health and tend to reduce property values. Prompt removal is necessary, and men are regularly employed to haul them away. At times there are 50 truckloads deposited on a single beach. When garbage is carried upon the shore the adjacent waters hold large quantities in suspension. Floating garbage makes bathing impracticable, frequently tears and damages fish pound nets and injuriously affects the business of fishing. Usually the sea along the shore clears within a few days p. 479and sometimes within a single day. The deposits generally occur when the winds are from the east or northeast, but sometimes southeast winds bring them in. The heavier deposits occur four or five times in a season and frequently throughout the year, varying in number on different beaches.

1,675,657 .91 1,517,934 1,303,119 p. 483473 Syllabus.

Petitioner, a Delaware corporation having its principal office in California, filed federal income and profits tax returns for its fiscal years 1920 and 1921 with the Collector, of Internal Revenue for its district in that state. Following a decision of the Board of Tax Appeals which upheld respondent’s determination of tax deficiencies against petitioner for both years, 14 B. T. A. 546, petitioner aijd respondent entered into an agreement, stated to be pursuant to § 10021 of the Revenue Act of 1926, 44 Stat. 110, p. 485that the decision of the Board might be reviewed by the Court of Appeals for the Second Circuit. The petition for review in that court recited that the parties had so agreed.

“(c) In the case of a corporation which had no principal place of business or principal office or agency in the United States, then by p. 486835, the Government acquiescing because of the importance of the question and the conflict of the decision below with one of the Court of Appeals for the First Circuit where, however, the point was neither discussed, Simmons Co. v. Commissioner, 33 F. (2d) 75, noy raised in the petition for certiorari, which was denied. 280 U. S. 588.2

Petitioner contends that under (d) the parties may stipulate for review in any circuit court of appeals. In view of the rule of the statutes that venue of the federal courts generally turns upon the geographical location of the parties and is never within their exclusive control, it would require plain language in this statute to support an unlimited choice. But the words of (d)—“ the Circuit Court of Appeals for the circuit ”—seem to refer, not to the court of appeals for any circuit, but to some particular circuit court of appeals previously described, necessarily that one which could have entertained the petition, under (a), (b) or (c), in the absence of an agreement under (d). Only such a construction comports with the statement of the House Committee on Ways and Means, that the provisions now in § 1002 “. . . prevent undue burden upon those circuits embracing States in which a vast number of corporations are organized.” House Reports, 69th Congress, 1st Session, Vol. 1, Report No. 1, p. 19. An unlimited choice might overburden a circuit court of appeals, whose docket was p. 487already overcrowded, with petitions for review with respect to which it could have had no venue under the other subdivisions of § 1002.

Section 900 of the Revenue Act of 1918, 40 Stat. 1057, 1122, imposed, at varying percentages, an excise tax upon p. 490the sales price of enumerated articles, most of which maybe characterized as luxuries. The enumeration of the ninth subdivision was, “ Candy, 5 per centum.” Section 900 (6) of the Revenue Act of 1921, 42 Stat. 227, 292, reenacted this provision but reduced the tax to 3%. Respondents, manufacturers of “ sweet chocolate ” and “ sweet milk chocolate,” brought suits in the District Court for Eastern Pennsylvania, to recover about $8,000,- 000 of taxes assessed under these sections for the years 1918 to 1924, on the ground that the articles sold are not “ candy,” sale of which was taxed. On written stipulation of the parties, the cases were tried by the court without a jury. Judgments for petitioners were reversed by the Court of Appeals for the Third Circuit. 42 F. (2d) 408. This Court granted certiorari, 282 U. S. 827, to resolve the conflict of the decision below with that of the Court of Appeals for the First Circuit, in Malley v. Walter Baker & Co., 281 Fed. 41.

Respondents rest their case mainly upon differences in composition of sweet chocolate from that of confectionery, made principally of sugar or molasses, with or without the addition of coloring or flavoring matter, which, it is urged, is alone described by the word “ candy.” They p. 491assert that chocolate is food and candy is not, and hence chocolate cannot be properly described as candy. But it is common knowledge that sugar, also a food, is an ingredient both of candy as thus defined and of sweet chocolate, sometimes to the extent of 50% or more of the latter, as was conceded on the argument here. We likewise know, as was conceded, that chocolate in a great variety of forms is an important ingredient of what is commonly know as candy, and that pieces of sweet chocolate of the type described by the findings are often included in packages of confectionery commonly sold as candy. These considerations at least suggest that the form and use of sugar compounds, intended for taste-gratifying consumption, are quite as important in determining whether they are candy, as their particular composition. See Malley v. Walter Baker & Co., supra, p. 46.

If it were necessary to our decision, in the absence of any controlling legislative history or any suggested plausible reason why a tax on candy, in a general revenue measure taxing luxuries, should be deemed to apply to one type of confectionery and not the other, we should hesitate to say that the word was used in its restricted sense, or to hold that a substance made of sugar and chocolate, a widely known and popular form of confectionery identified, in use and method of distribution, with other p. 492types of confectionery known as “ candy,” was not intended to be taxed. See DeGanay v. Lederer, 250 U. S. 376, 381; Van Ca/mp & Sons v. American Can Co., 278 U. S. 245, 253.

The administrative construction was upheld in 1922 by Medley v. Walter Baker & Co., supra, the only case, other than the present, which has considered it. The provision has been consistently enforced as construed, was reenacted by Congress in the 1921 Act, and remained on the statute books without amendment until its repeal. Such a construction of a doubtful or ambiguous statute by officials charged with its administration will not be judicially disturbed except for reasons of weight, which this record does not present. See Brewster v. Gage, 280 U. S. 327, 336; Universal Battery Co. N. United States, 281 U. S. 580, 583; Fawcus Machine Co. n . United States, 282 U. S. 375, 378. The reenactment of the statute by Congress, as well as the failure to amend it in the face of the consistent p. 493administrative construction, is at least persuasive of a legislative recognition and approval of the statute as construed. See National Lead Co. v. United States, 252 U. S. 140, 146. We see no reason for rejecting that construction.