40	                                                March 26, 2015	       No. 11
11
Powerex Corp. v. Dept. of Rev.                                                           357
                                                                                  March 26,   Or
                                                                                            2015




                                        IN THE SUPREME COURT OF THE
                                              STATE OF OREGON

                                            POWEREX CORPORATION,
                                               Plaintiff-Respondent,
                                                         v.
                                           DEPARTMENT OF REVENUE,
                                                 State of Oregon,
                                               Defendant-Appellant.
                                              (TC 4800; SC S060859)

                                 En Banc
                                 On appeal from the Oregon Tax Court.*
                                 Henry C. Breithaupt, Judge.
                                 Argued and submitted May 1, 2014.
   Marilyn Harbur, Assistant Attorney General, Salem,
argued the cause and filed the briefs for appellant. With her
on the briefs was Ellen F. Rosenblum, Attorney General.
   Eric J. Coffill, Morrison & Foerster LLP, Sacramento,
California, argued the cause and filed the brief for respon-
dent. With him on the brief were Jenny Choi and Carol Vogt
Lavine, Gladstone, Oregon.
   Scott G. Seidman, Tonkon Torp LLP, Portland, filed the
briefs for amicus curiae Portland General Electric Company.
With him on the briefs was Michael J. Millender.
                                 KISTLER, J.
   The judgment of the Tax Court is affirmed in part and
reversed in part. The case is remanded for proceedings con-
sistent with this opinion.




______________
	  *  20 OTR 338 (2011).
Cite as 357 Or 40 (2015)	41

     Powerex filed for a refund of taxes on the ground that the Department of
Revenue had incorrectly applied the “sales factor” to Powerex’s natural gas and
electricity sales. The Tax Court ruled that Powerex’s natural gas sales were not
delivered or shipped to a purchaser within this state and thus should not have
been included in the numerator of the sales factor. Additionally, the Tax Court
ruled that, because electricity is not “tangible personal property” and because the
greater part of the income-producing activity had not occurred here, Powerex’s
electricity sales should be not be attributed to Oregon. Held: (1) Powerex’s sales of
natural gas occurred in Oregon if the gas was “delivered or shipped to a purchaser
* * * within this state” regardless of “the f.o.b. point and other conditions of the
sale.” In this case, the gas was shipped to a purchaser in California, not Oregon.
The contractual “points of delivery” in Malin, Oregon, on which the department
relied to show that the sales occurred here, were “other conditions of the sale”
that functioned substantially same as an “f.o.b point.” (2) Electricity constitutes
“tangible personal property” for the purposes of ORS 314.665. (3) Because the
Tax Court did not find where the electricity was shipped or delivered to the pur-
chaser, the case is remanded for the Tax Court to make the requisite findings.
    The judgment of the Tax Court is affirmed in part and reversed in part. The
case is remanded for proceedings consistent with this opinion.
42	                                   Powerex Corp. v. Dept. of Rev.

	          KISTLER, J.
	        Powerex wholesales natural gas and electricity to
purchasers throughout the western part of North America.
The question in this case is how much of Powerex’s income
may Oregon tax. Under the terms of a uniform statute that
Oregon has adopted, the answer to that question turns on
the extent to which Powerex’s sales of natural gas and elec-
tricity were “in this state.” ORS 314.665(1). For the reasons
explained below, we agree with the Tax Court that none of
Powerex’s natural gas sales occurred in Oregon. However,
we do not necessarily agree with the Tax Court that none
of Powerex’s electricity sales occurred in Oregon. The Tax
Court did not reach an issue—whether the electricity that
Powerex sold was “delivered or shipped to a purchaser * * *
within this state”—that, as we explain below, controls
whether Powerex’s electricity sales were “in this state.” See
ORS 314.665(2)(a) (stating that standard). We accordingly
affirm the Tax Court’s judgment in part, reverse it in part,
and remand the case for further proceedings.
	        Before setting out the facts in this case, we first
describe briefly the statutory framework in which this case
arises. In 1965, Oregon adopted the Uniform Division of
Income for Tax Purposes Act (UDITPA), codified at ORS
314.605 to 314.675, to apportion income earned by unitary
businesses that operate within and without Oregon. See Or
Laws 1965, ch 152; Crystal Communications, Inc. v. Dept.
of Rev., 353 Or 300, 302, 297 P3d 1256 (2013).1 Generally,
UDITPA uses the percentage of a multistate company’s sales
within Oregon (the “sales factor”) to determine the percent-
age of the company’s business income that Oregon may tax.
See ORS 314.650. Specifically, for each tax year, a company’s
sales “in this state” are divided by the company’s total sales
to arrive at the sales factor. ORS 314.665(1). Currently, the
company’s total income is multiplied by the sales factor to
	1
       ORS 314.280 governs the apportionment of income earned by public util-
ities and financial institutions. UDITPA governs the apportionment of income
earned by other types of businesses. See Crystal Communications, Inc., 353 Or
at 302. Throughout this litigation, the Oregon Department of Revenue has taken
the position that UDITPA governs the apportionment of Powerex’s income. We
accept that assumption for the purposes of deciding the department’s claims on
appeal. We express no opinion on whether ORS 314.280, if applicable, would lead
to a different result.
Cite as 357 Or 40 (2015)	43

determine the percentage of the company’s income that is
subject to taxation in Oregon. ORS 314.650.2
	         This case turns on whether Powerex’s sales of elec-
tricity and natural gas occurred “in this state.” The rules
for making that determination differ depending on whether
the sales are sales of “tangible personal property” or other
types of sales. ORS 314.665(2), (4).3 Generally, sales of tan-
gible personal property are “in this state” if “[t]he property
is delivered or shipped to a purchaser * * * within this state
regardless of the f.o.b. point or other conditions of the sale.”
ORS 314.665(2)(a). Generally, sales of something other than
tangible personal property are “in this state” if the greater
part of the activity that produced the income from those
sales occurred within Oregon. ORS 314.665(4).
	         In the Tax Court, the parties agreed that natural
gas is tangible personal property. They disagreed whether,
in selling natural gas, Powerex shipped or delivered natural
gas to purchasers “within this state.” The Tax Court found
that Powerex shipped gas to purchasers in other states
through a hub in Malin, Oregon, where two pipelines inter-
sect. It concluded that, in doing so, Powerex had not shipped
or delivered gas to purchasers within Oregon.
	         Regarding Powerex’s sales of electricity, the parties
disagreed whether electricity is tangible personal property.
The Tax Court ruled that electricity is not tangible personal
property and that, because the greater part of the activity
that produced the income from Powerex’s electricity sales
occurred in British Columbia, those sales were not attribut-
able to Oregon. The Tax Court accordingly concluded that,
	2
       Oregon law currently provides that only the sales factor is used to deter-
mine the percentage of a multistate company’s income that is taxable in Oregon.
ORS 314.650. For the tax years at issue here, a company’s income was multiplied
by a weighted average of three factors (the sales factor, the property factor, and
the payroll factor) to determine the percentage of its income that was taxable
in Oregon. See, e.g., ORS 314.650 (2001); ORS 314.650 (1999). However, only the
sales factor is at issue on this appeal, and we discuss only that factor.
	3
      UDITPA divides sales into two categories: “sales of tangible personal
property” and “[s]ales, other than sales of tangible personal property.” ORS
314.665(2), (4). The latter category is not limited to sales of intangible property
but also includes other types of sales, such as the sale of services. See Jerome R.
Hellerstein, Walter Hellerstein, and John A. Swain, 1 State Taxation ¶ 8.06[3][b]
(3d ed 2000 & Supp 2014) (discussing allocation of sales other than sales of tan-
gible personal property).
44	                                      Powerex Corp. v. Dept. of Rev.

for the tax years at issue here, neither Powerex’s sales of
electricity nor its sales of natural gas were “in this state.”
	        On appeal, the Oregon Department of Revenue (the
department) challenges both of the Tax Court’s rulings. We
begin with the Tax Court’s ruling that the natural gas that
Powerex sold was not shipped or delivered to purchasers
“within this state.” We then turn to its ruling that electric-
ity is not tangible personal property.
                           I.  NATURAL GAS
	        Natural gas is transmitted through interstate and
intrastate pipelines organized around regional “market
centers” or “hubs.”4 The concept of a market center or hub
(for our purposes, the terms are synonymous) emerged as
a result of a 1992 Federal Energy Regulatory Commission
order, which required that “interstate natural gas pipeline
companies transform themselves from buyers and sellers of
natural gas to [become] strictly gas transporters.” “Market
centers and hubs evolved to provide new gas shippers with
many of the physical capabilities and administrative sup-
port services formally handled by the interstate pipeline
company as ‘bundled’ sales services.” Among other things,
market centers and hubs provide “transportation between
and interconnections with other pipelines, and the physical
coverage of short-term receipt/delivery balancing needs.”5
	        In 2003, there were 37 market centers or hubs in the
United States and Canada. Two of those hubs, Stanfield and
Malin, were in Oregon. In 2003, Powerex sold natural gas
to retailers in California through the hub in Malin. When
Powerex filed its Oregon tax returns for the 2003 tax year,
it treated those sales as sales “in this state” for the purpose
of calculating the “sales factor”—i.e., for the purpose of cal-
culating the percentage of Powerex’s total income that was
attributable to Oregon. In 2006, Powerex filed a claim for a
refund for the 2003 tax year. In its filing, Powerex explained
	4
       The following facts regarding the shipment of natural gas are taken from a
stipulated exhibit. Neither side offered any testimony on that subject.
	5
      Depending on the market center or hub’s infrastructure, market centers
or hubs can balance the supply of and demand for natural gas by, among other
things, parking or loaning natural gas on a short-term basis, storing it on a longer
term basis, and entering into other “short-term interruptible arrangement[s].”
Cite as 357 Or 40 (2015)	45

that it had shipped the natural gas to the hub at Malin,
Oregon “where title transferred to the purchaser.” Its refund
claim stated that the gas then “entered into PG&E’s system
for transport into California.”6
	       Before the Tax Court, the department argued that,
because the contractual point of delivery was in Malin,
Oregon, Powerex “delivered or shipped [the natural gas] to
a purchaser * * * within this state.” Powerex responded that
the department’s focus on the contractual point of delivery
missed the mark. In Powerex’s view, Malin merely served
as the point at which gas was transferred from one pipeline
to another on its way to a purchaser in California. Powerex
argued that, because it shipped the gas to a purchaser in
California, it did not deliver or ship it to a purchaser within
Oregon.
	        The Tax Court agreed with Powerex. It found that
the gas was being transmitted over pipelines that functioned
as common carriers. It explained that both the majority of
cases interpreting other states’ analogues to ORS 314.665(2)
and the purpose of that rule supported the conclusion that
“where delivery by a seller is to a common carrier for fur-
ther shipment an ultimate destination approach is fol-
lowed.” Because the ultimate destination in this case was
California, the Tax Court concluded that Powerex’s natu-
ral gas sales were not sales “to a purchaser * * * within this
state.” See ORS 314.665(2)(a).
	        On appeal, the department does not dispute that the
natural gas that Powerex sold was destined for California. It
also does not question the Tax Court’s implicit finding that
two pipelines connected at the “hub” in Malin so that the
natural gas that Powerex delivered through one pipeline to
Malin flowed from that pipeline into another pipeline on its
way to the purchaser in California. The department argues,
however, that the hub at Malin was critical for two reasons:
(1) the natural gas contracts that Powerex entered into spec-
ified Malin as the “contractual point of delivery” and (2) they
	6
      The Tax Court found that the gas that Powerex sold was shipped or deliv-
ered to purchasers outside of Oregon. Powerex stated that the natural gas was
shipped or delivered to purchasers in California, and we assume that California
was the gas’s ultimate destination.
46	                                      Powerex Corp. v. Dept. of Rev.

also specified that title to the gas passed from Powerex to
the purchaser at Malin. The department reasons that, given
those two facts, we should conclude that the natural gas was
“delivered or shipped to [the] purchaser” in Malin, Oregon,
not in California.
	        In considering the department’s argument, we look
initially to the text, context, and history of ORS 314.665(2).
See State v. Gaines, 346 Or 160, 171-72, 206 P3d 1042 (2009).
We begin with the text of that statute, which provides, in
part:
    	   “Sales of tangible personal property are in this state if:
    	 “(a)  The property is delivered or shipped to a purchaser,
    other than the United States, within this state regardless
    of the f.o.b. point or other conditions of the sale[.]”
ORS 314.665(2)(a).7 The text of subsection (2)(a) divides into
two parts. The first part provides that a sale of tangible per-
sonal property is “in this state if [t]he property is delivered
or shipped to a purchaser * * * within this state.” The sec-
ond part provides that the determination where property is
shipped or delivered to the purchaser should be made with-
out regard to “the f.o.b. point or other conditions of the sale.”
	       Textually, the first part of the statute asks a sim-
ple question: Where was the property shipped or delivered
to the purchaser? See Arthur D. Lynn, Jr., The Uniform
Division of Income for Tax Purposes Act, 19 Ohio St LJ
41, 50 (1958) (noting the “conceptual simplicity” of the
Uniform Act formulation).8 In asking that question, ORS
314.665(2)(a) uses the passive voice. The question under
that statute is not who shipped or delivered the property
to the purchaser but where the property was shipped or
delivered to the purchaser.
	7
      The subsection quoted above states the general rule. ORS 314.665(2)
(b) states two exceptions to that rule. ORS 314.665(2)(b) addresses sales to the
United States and sales to purchasers in states where the taxpayer is exempt
from taxation. It provides that sales are within this state if the goods are shipped
from an office, warehouse, or other place of storage in this state and either the
purchaser is the United States Government or the taxpayer is not taxable in the
state where the goods are shipped or delivered to the purchaser.
	8
      We refer to the Oregon statute as UDITPA. We refer to the uniform act
on which Oregon based UDITPA as the Uniform Act. ORS 314.665(2)(a) tracks
essentially verbatim the corresponding section of the Uniform Act.
Cite as 357 Or 40 (2015)	47

	         The second part of the statute reinforces that con-
clusion. It provides that the determination of where prop-
erty is shipped or delivered to the purchaser should be made
“regardless of the f.o.b. point or other conditions of the sale.”
We assume that the rule of ejusdem generis applies so that
the phrase “other conditions of the sale” shares the same
qualities as the specific term that precedes it, “the f.o.b.
point.” See Baker v. City of Lakeside, 343 Or 70, 76, 164 P3d
259 (2007). That is, the phrase “other conditions of the sale”
refers to those conditions of the sale that are similar to “the
f.o.b. point.” See id. The primary conclusion that we draw,
at this point, from the second part of the text is that it rein-
forces what the first part says. The question where tangible
property was delivered or shipped to the purchaser should
not turn on legal technicalities, such as the f.o.b. point;
rather, the question calls for a more practical answer.

	        In addition to the text of ORS 314.665(2)(a), we also
consider its context. See Stevens v. Czerniak, 336 Or 392,
401, 84 P3d 140 (2004) (explaining that the context for inter-
preting a statute’s text includes the preexisting common
law and the statutory framework within which the law was
enacted). ORS 314.665 is modeled on a uniform law that the
Commissioners on Uniform State Laws proposed in 1957
and that Oregon adopted in 1965. Compare Or Laws 1965,
ch 152, § 17, with Uniform Act, § 16 (1957). In 1957 and also
in 1965, the meaning of the phrase “the f.o.b. point” was well-
established. See Samuel Williston, 2 The Law Governing the
Sale of Goods §§ 280-280b (rev ed 1948); Laurence Vold, The
Handbook of the Law of Sales § 33 (2d ed 1959).

	         The initials f.o.b. stand for the words “free on board”
and were originally used in connection with the shipment of
goods by sea. Williston, 2 The Law of Sales § 280. “[T]he pri-
mary significance of the words was that the seller [wa]s bound
to put the goods free of expense on board a vessel for trans-
portation to the buyer.” Id. The same rule also applied when
goods were shipped by rail or other forms of transportation,
although questions could arise regarding the extent of the
seller’s obligation. See id. Williston explained that, to avoid
those questions, the parties could specify more precisely the
point to which the seller was bound to deliver the goods. For
48	                             Powerex Corp. v. Dept. of Rev.

example, “[w]here the contract is for a sale f.o.b., the place of
destination, undoubtedly the seller contracts to get the goods
to that place, and this involves getting cars in which to load
the goods when transportation is to be by rail * * *.” Id. § 280a.
Williston explained that two presumptions attach to the f.o.b.
point. Id. § 280b. First, title to the goods passes at the f.o.b.
point. Id. Second, “the place where the goods are to be deliv-
ered f.o.b. is the place of delivery to the buyer.” Id.

	         That established definition of “the f.o.b. point”
informs the meaning of the first part of the statute, as an
example will illustrate. Suppose that a seller agrees to ship
goods by rail from Vancouver, Washington, to a purchaser
in Los  Angeles, California. Those goods could be shipped
f.o.b. Vancouver, f.o.b. Portland, or even f.o.b. Los  Angeles.
See id. at § 280a (explaining that even “though the expres-
sions f.o.b. the point of destination or some intermediate
point are less common [than f.o.b. the point of shipment],
such bargains are not infrequent”). Whichever f.o.b. point
the agreement specified would establish, as a condition of
the sale, the place where the seller was responsible for deliv-
ering the goods, the place where title passed to the buyer,
and the place of delivery to the buyer. See id. at §§ 280a,
280b. However, the text of ORS 314.665(2)(a), read in con-
text, makes clear that, for the purposes of determining the
“sales factor,” the place where property is shipped or deliv-
ered to the purchaser is determined without regard to “the
f.o.b. point or other conditions of the sale.” In the example
set out above, the place where the goods were shipped to the
purchaser would be Los  Angeles. That is true even if the
goods were shipped f.o.b. Portland and even if, as a result,
title passed to the buyer in Portland and the contractual
place of delivery was Portland.

	        The history of the rule leads to the same conclusion.
Before the Commissioners on Uniform State Laws adopted
the Uniform Act in 1957, sales of tangible property by multi-
state businesses were allocated among states based on the
property’s (1) destination; (2) origin; (3) the location of the
sales office; (4)  sales activity; or (5)  place of acceptance by
the purchaser. State Taxation of Interstate Commerce: Report
of the Special Subcommittee on State Taxation of Interstate
Cite as 357 Or 40 (2015)	49

Commerce, House Committee on the Judiciary, H R Rep
No 952, 89th Cong, 1st Sess, 181-83 (1965); see Jerome R.
Hellerstein, Walter Hellerstein, and John A. Swain, 1 State
Taxation ¶ 9.18(1) (3d ed 2000 & Supp 2014).
	       Each of those theories for allocating sales of tangi-
ble personal property had its disadvantages. However, one
theory—allocating sales to the state or country where title
passed—was probably the least favored:
   “Apportionment of sales to the state or country where title
   passes is hit or miss. The effect of the apportionment will
   depend wholly upon legal conclusions based upon construc-
   tion of contracts, terms of waybills, customs in the busi-
   ness, evidence as to the intention of the parties, and other
   considerations having little or no relation to the problem of
   determining where income is earned.”

George T. Altman and Frank M. Keesling, Allocation of
Income in State Taxation 127 (2d ed 1950). See also Frank M.
Keesling and John S. Warren, California’s Uniform Division
of Income for Tax Purposes Act Part I, 15 UCLA L Rev 156,
161 (1967) (“Most states consider the place where title passes
irrelevant in determining the source of income.”).
	        The comment to section 16 of the Uniform Act, on
which Oregon modeled ORS 314.665, suggests, as do the
text and context of that section, that the drafters of the
Uniform Act did not intend to allocate sales based on where
title passed; rather, they intended to adopt the ultimate-
destination theory of allocating sales. We note that the com-
ment does not explain how the general rule—that sales are
allocated to the place where tangible personal property is
shipped or delivered to the purchaser—works. Instead, the
comment identifies two variations on that general rule and
explains how the Uniform Act would allocate sales in those
situations. The comment also discusses an exception to the
general rule and the reason for the exception. In doing so,
the comment sheds light, albeit indirectly, on the meaning
of the general rule.
	       Regarding the first variation, the comment states:
“The phrase ‘delivered or shipped to a purchaser’ in this state
includes shipments, at the designation of the purchaser, to a
50	                                     Powerex Corp. v. Dept. of Rev.

person in this state such as designating, while a shipment
is en route, the ultimate recipient.” Uniform Act, § 16, com-
ment. Although its syntax leaves something to be desired,
that part of the comment recognizes that tangible personal
property will be shipped or delivered to a purchaser within
this state when the purchaser designates a person in this
state as the “ultimate recipient” of the property. The com-
ment thus clarifies that, in determining the place where tan-
gible personal property is shipped or delivered to the pur-
chaser, the identity of the “ultimate recipient” can matter.
	       The comment also discusses why the Uniform Act
excepts shipments to the United States government from
the general rule. It explains:
    “Sales to the United States are treated separately. It is
    thought that this is justified because sales to the United
    States are not necessarily attributable to a market existing
    in the state to which the goods are originally shipped. This
    different treatment may also be justified because, if the
    goods are defense or war materials, it may be impossible to
    determine whether the goods ever came to rest in the state
    due to use of coded delivery instructions.”
Uniform Act, § 16, comment. As the comment notes, one rea-
son for excepting goods sold to the United States from the
general rule is that, for some categories of goods, “it may
be impossible to determine whether the goods [sold to the
United States] ever came to rest in the state” to which they
were delivered or shipped. Implicit in that explanation is
that ordinarily what matters in determining where prop-
erty was shipped or delivered to the purchaser is where the
property “came to rest.”9

	9
      The other reason the comment notes for excepting sales to the United
States points in the same direction. By providing that sales are allocated to the
state where the goods are shipped or delivered to the purchaser, the Uniform
Act recognizes the contribution that “the state of destination, which provides
the market, [makes] to the generation of income.” Lynn, The Uniform Division of
Income for Tax Purposes Act, 19 Ohio St LJ at 51; see also Keesling and Warren,
California’s Uniform Division of Income for Tax Purposes Act Part I, 15 UCLA L
Rev at 161 (same). As the comment explains, however, sales of goods to the United
States “are not necessarily attributable to the market existing in the state to
which the goods are originally shipped.” Uniform Act, § 16, comment. As a conse-
quence, sales to the United States are not attributed to the state where the goods
are shipped or delivered but instead are allocated to the state from which the
goods are shipped. See ORS 314.665(2)(b) (so providing).
Cite as 357 Or 40 (2015)	51

	        Given the text, context, and history of the Uniform
Act, most legal authorities have acknowledged that sec-
tion 16(a) of the Uniform Act is best read as embodying
an ultimate-destination theory of sales apportionment.
Professors Keesling and Warren understood the Uniform
Act to adopt the destination theory. “The Act provides that
sales of tangible personal property should be apportioned
to the state or country of destination, provided the tax-
payer is subject to tax in such state or country.” Frank M.
Keesling and John S. Warren, California’s Uniform Division
of Income for Tax Purposes Act Part II, 15 UCLA L Rev 655,
671 (1968); see also Lynn, The Uniform Division of Income
for Tax Purposes Act, 19 Ohio St LJ at 50 (describing Section
16(a) of [the Uniform Act] as “assign[ing] sales to the sales
factor numerator of the state of delivery,” that is, “customer
location”) (emphasis added). So, too, has almost every juris-
diction that has interpreted the text. See, e.g., Olympia
Brewing Co. v. Comm’r of Revenue, 326 NW2d 642, 648
(Minn 1982); McDonnell Douglas Corp. v. Franchise Tax Bd.,
26 Cal App 4th 1789, 1794, 33 Cal Rptr 2d 129 (1994) (col-
lecting cases); Hellerstein et al., 1 State Taxation § 9.18[1][a]
(“[M]ost courts that have considered the issue have adopted
the ultimate-destination rule rather than the place-of-
delivery rule.”).

	        We recognize that asking where property was
shipped or delivered to the purchaser does not always lead
to a clear answer. One issue has arisen when a seller ships
goods to a loading dock in one state where the purchaser
picks them up and then transports them to their “ultimate
destination” in another state. See Department of Revenue
v. Parker Banana, 391 So 2d 762 (Fla Dist Ct App 1980);
Hellerstein et al., 1 State Taxation ¶ 9.18[1][a] (discussing
issue). The question in that situation is whether the goods
were shipped to the purchaser in the first state or the sec-
ond. In analyzing that question, the seminal case started
from the proposition that, if the seller had shipped the goods
to the loading dock in the first state and a common carrier
had picked the goods up and delivered them to the purchaser
in the second state, then the goods would have been “deliv-
ered or shipped to [the] purchaser” in the second state for the
52	                            Powerex Corp. v. Dept. of Rev.

purposes of UDITPA. See Parker Banana, 391 So 2d at 763.
The court held that the result should be no different if the
purchaser picked up the goods at the loading dock in the first
state and transported them itself to their ultimate destina-
tion in the second state rather than having a common carrier
do so. See id. at 764. Agreement is not universal, however.
See Hellerstein et al., 1 State Taxation ¶ 9.18[1][a] (recogniz-
ing general agreement with Parker Banana but noting that
asking where the goods were shipped rather than ultimately
received would be a more administratively convenient test).

	        Although the parties urge us to take a position on
that issue, the Tax Court’s opinion obviates the need to do
so. As we read the Tax Court’s opinion, it found that Malin
was simply the point at which the natural gas that Powerex
sold went from one pipeline to another pipeline on its way
to its ultimate destination outside of Oregon. More impor-
tantly, the Tax Court analogized the role that the pipelines
played to that of common carriers. It explained that “it
appears that the gas in question is being transmitted over
interstate pipelines that are, or function as, common carri-
ers.” Given the Tax Court’s findings, we conclude that this
case does not require us to decide what the rule should be
when the purchaser takes physical possession of the goods
at a loading dock in one state and transports them itself to
their ultimate destination in another state. Rather, this is
a case in which the natural gas merely went from one “com-
mon carrier” to another at Malin on the gas’s way to the pur-
chaser in California. The department identifies no case in
which any court has held that such a transfer constitutes a
“delivery” to the purchaser within the meaning of UDITPA
or its analogues in other states.

	        The department argues, however, that we should
reach a different conclusion for three reasons. First, as noted
above, the department argues that “the contractual points
of delivery for Powerex’s natural gas transactions were in
Oregon.” It also notes that “title to the [natural gas] passe[d]
from Powerex to its purchasers at the delivery point speci-
fied in their contracts”—namely, in Malin. The department
concludes from those facts that Powerex delivered the natu-
ral gas to the purchasers in Malin, not in California.
Cite as 357 Or 40 (2015)	53

	         The department never explains what the phrase
“contractual point of delivery” means.10 The record, however,
contains two standard form contracts that Powerex incor-
porated by reference in selling natural gas.11 One form sets
out the general terms and conditions for “Base Contracts
for Sale and Purchase of Natural Gas.” The other sets
out general terms and conditions for a “Base Contract for
Short-Term Sale and Purchase of Natural Gas.”12 Section
One of the Base Contract for Sale and Purchase of Natural
Gas defines “Delivery Point(s)” as “mean[ing] such point(s)
as are agreed to by the parties in a transaction.” Section
Four provides that “[s]eller shall have the sole responsibil-
ity for transporting the Gas to the Delivery Point(s). Buyer
shall have the sole responsibility for transporting the Gas
from the Delivery Point(s).” Section Eight of the agreement
provides:
    “Unless otherwise specified, title to the Gas shall pass from
    Seller to Buyer at the Delivery Point(s). Seller shall have
    responsibility for and assume any liability with respect
    to the Gas prior to its delivery to Buyer at the specified
    Delivery Point(s). Buyer shall have responsibility for and
    any liability with respect to said Gas after its delivery to
    Buyer at the Delivery Point(s).”
	        It appears from those contract provisions that the
“contractual point of delivery,” on which the department
relies, serves the same function as an f.o.b. point. The
contractual point of delivery specifies the point to which
Powerex was responsible for delivering the natural gas, the
point at which title to the gas passed from Powerex to the
purchaser, and the point at which responsibility for any loss
passed from Powerex to the purchaser.

	10
        The department cites one exhibit to demonstrate that Powerex sold natu-
ral gas with contractual points of delivery in Oregon. That exhibit is a response
to the department’s request for production of natural gas sales in the 2003 tax
year “with a contractual delivery point within Oregon.” The exhibit consists of a
list of gas sales that Powerex compiled in response to the department’s request
for production. However, neither the request nor the response contains any expla-
nation of what “contractual point of delivery” means.
	11
        In selling natural gas, Powerex entered into confirmation agreements
with the purchasers, which incorporated by reference the terms of the standard
contracts.
	12
         The terms in the two standard form contracts are similar but not identical.
54	                                 Powerex Corp. v. Dept. of Rev.

	         The department identifies no evidence that would
suggest some different meaning for those contractual terms,
and we conclude that the “contractual points of delivery” on
which the department bases its argument are “other con-
ditions of the sale” that are effectively the same as “the
f.o.b. point.” Put differently, the department’s argument is
based on “other conditions of the sale” that ORS 314.665(2)
(a) directs us to disregard in deciding where the natural gas
was delivered or shipped to the purchaser. The conditions
of sale on which the department relies provide no reason
to reject the Tax Court’s conclusion that the natural gas
merely passed from one pipeline to another at Malin on its
way to purchasers in other states.
	       The department also relies on two rules that it pro-
mulgated to implement ORS 314.665(2)(a). The first rule
was in effect when the transactions at issue here occurred.
The second rule did not become effective until 2011, several
years after the 2003 gas sales at issue here. The first rule
provides:
      “Property is delivered or shipped to a purchaser within this
      state if the shipment terminates in this state, even though
      the property is subsequently transferred by the purchaser
      to another state.”
OAR 150-314.665(2)-(A)(4). That rule includes the following
example to illustrate its application:
      “The taxpayer makes a sale to a purchaser who maintains
      a central warehouse in Oregon at which all merchandise
      purchases are received. The purchaser reships the goods to
      its branch stores in other states for sale. All of taxpayer’s
      products shipped to the purchaser’s warehouse in Oregon
      [are] property ‘delivered or shipped to a purchaser within
      this state.’ ”
Id.
	        We defer to an agency’s interpretation of its own
rule “as long as its interpretation is a plausible one and not
inconsistent with the rule, its context, or any other source
of law.” Crystal Communications, 353 Or at 311. In our view,
the difficulty with the department’s reliance on OAR 150-
314.665(2)-(A)(4) lies in its application to the facts of this
Cite as 357 Or 40 (2015)	55

case. Given the Tax Court’s decision, it is difficult to see how
the department can say that Powerex’s shipments of natural
gas “terminate[d]” in Malin. Rather, as the Tax Court con-
cluded, all that occurred at Malin was that the natural gas
went from one interstate pipeline to another on its way to
purchasers in other states. The department points to noth-
ing in the record that contradicts the Tax Court’s conclusion
or that suggests that this transaction fell within the example
that illustrates how OAR 150-314.665(2)-(A)(4) applies.
	         The department relies on a second rule, which pro-
vides that “[a] sale of tangible personal property, * * * which
is delivered or shipped to a purchaser with a contracted
point of delivery in Oregon is a sale in this state.” OAR 150-
314.665(2)-(C)(1). The phrase “contracted point of delivery”
can have more than one meaning. It can mean (1) the ulti-
mate destination to which the goods are shipped or deliv-
ered to the purchaser by either the seller or by one or more
common carriers; (2) the point at which the purchaser takes
possession of the goods but not the goods’ ultimate destina-
tion, as in the loading dock example noted above; or (3) the
f.o.b. point or other conditions of the sale. As explained above,
in applying OAR 150-314.665(2)-(C)(1) to the gas sales at
issue here, the department equates the phrase in the rule
“contracted point of delivery” with the f.o.b. point or other
conditions of the sale.
	        The rule, applied to these gas sales, is squarely
inconsistent with the statute. That is, the rule, as the depart-
ment applies it to these gas sales, gives dispositive effect to
“conditions of the sale” that ORS 314.665(2)(a) directs us to
disregard in deciding where tangible personal property was
shipped or delivered to the purchaser. We need not decide
whether the department’s rule validly can be applied to the
second situation identified above (the loading dock exam-
ple). As the Tax Court concluded, Malin simply served as a
transfer point from one “common carrier” to another on the
gas’s way to the purchaser in another state.13 The Tax Court
	13
        The Tax Court ruled that OAR 150-314.665(2)-(C)(1) did not apply to the
natural gas sales at issue here because the department adopted that rule after
the period in which Powerex’s return for the 2003 tax year was “open for exam-
ination.” See OAR 150-305.100-(B) (“Administrative rules adopted by the depart-
ment, unless specified otherwise by statute or by rule, shall be applicable for
56	                                      Powerex Corp. v. Dept. of Rev.

correctly held that Powerex’s natural gas sales were not “in
this state.” See ORS 314.665(1).
                           II.  ELECTRICITY
	        Electricity—whatever its physical properties—is
sold. Wholesale traders or brokers buy and sell megawatt
hours of electricity for specific days or hours.14 Retailers, and
eventually end-users, receive electricity through transmis-
sion lines reticulated into a massive network, which is subdi-
vided into regions. The region comprising British Columbia,
Washington, Oregon, California, and several other western
states is governed by the Western Electricity Coordination
Council (WECC). The part of the WECC region that is at
issue here is a grid called the Pacific-Northwest Pacific-
Southwest Intertie (the Pacific Intertie). The Pacific Intertie
consists of alternating-current and direct-current transmis-
sion lines, which pass through Oregon on their way from
and to other states.
	       Only a few parties own the transmission lines
that make up the Pacific Intertie. Other entities, such as
Powerex, purchase the right to use them. In the balancing
area in which Oregon is situated, a wholesale trader typi-
cally will buy transmission rights from Bonneville Power
Administration (BPA), the primary transmission service
provider in Oregon.15
	       Situated along the transmission lines are various
hubs. The two hubs at issue in this case are referred to as

all periods open to examination.”). We need not decide whether that procedural
ruling provides another basis for affirming the Tax Court’s conclusion that the
natural gas Powerex sold was delivered or shipped to purchasers in other states.
It is sufficient to hold that, even if OAR 150-314.665(2)-(C)(1) applied to the 2003
tax year, applying it to the natural gas sales in this case is inconsistent with ORS
314.665(2)(a).
	14
         Because the Tax Court concluded that electricity is not tangible personal
property, it did not decide where the electricity that Powerex sold was delivered
to the purchasers. In stating the facts, we have set out undisputed facts to put the
parties’ arguments on that issue in perspective.
	15
         A “balancing area” is the area for which a balancing authority—in Oregon,
Bonneville Power Administration—“maintains load-resource balance.” See N
Am Elec Reliability Corp, Glossary of Terms in NERC Reliability Standards 10
(last updated June 14, 2014) available at http://www.nerc.com/files/Glossary_of_
Terms.pdf. Generally, it is coextensive with a federally regulated transmission
provider’s service area.
Cite as 357 Or 40 (2015)	57

the California-Oregon Border (COB) and the Nevada-Oregon
Border (NOB). COB consists of four different substations, two
of which are in Oregon (Malin and Captain Jack). NOB, by
contrast, consists of “[s]ome grass and some dirt” and three
wires “cross[ing] over the Nevada-Oregon border.” NOB is not
a substation but “just a spot in the line at the Nevada-Oregon
border where BPA * * * hands off responsibility or ownership
of the transmission lines to the southern entities.”
	        COB and NOB mark two points on the Pacific
Intertie where electricity goes from one transmission system
to another. They also play an additional role in this case.
The agreements for Powerex’s electricity sales at issue here
specify a “point of delivery” at either COB or NOB. There
was evidence in the record from which the Tax Court could
find that the “point of delivery” for the electricity sales was
functionally the same as the contractual point of delivery
for the natural gas sales; that is, the Tax Court could find
that COB and NOB were the points on the Pacific Intertie
to which Powerex agreed to deliver electricity, the points
at which title to the electricity passed, and also the points
where electricity passed from BPA’s transmission system to
another entity’s transmission system on its way somewhere
else.
	        The Tax Court did not decide whether the electric-
ity that Powerex sold was shipped or delivered to purchasers
in Oregon or elsewhere.16 Rather, the Tax Court allocated
Powerex’s electricity sales a different way. It concluded that
electricity is not tangible personal property for the purposes
of ORS 314.665(2)(a), which the Tax Court found meant
that all of Powerex’s electricity sales should be allocated
to British Columbia.17 Given the Tax Court’s ruling, we

	16
       The parties agree that the ultimate destination for a small part of the
electricity that Powerex sold was Oregon and thus was “delivered or shipped to a
purchaser * * * within this state.” See ORS 314.665(2)(a). They disagree whether
the remainder of the electricity was delivered or shipped to purchasers in this
state or other states.
	17
        Because the Tax Court concluded that electricity is not tangible personal
property, it allocated Powerex’s electricity sales to the state where the greater
part of the income-producing activity occurred. See ORS 314.665(4) (specifying
that rule for allocating “[s]ales, other than sales of tangible personal property”).
The court found that the greater part of the income-producing activity occurred
in British Columbia.
58	                                     Powerex Corp. v. Dept. of Rev.

describe briefly the competing expert testimony on whether
electricity is tangible personal property.
	         Peter Fisher is the head of the department of exper-
imental particle and nuclear physics at MIT. Powerex called
Fisher in support of its argument that electricity is not tan-
gible personal property. Fisher testified that “electricity”
is attributed to the behavior of subatomic particles, which
he identified as “virtual photons.”18 He explained that, as
electrons orbit around the nucleus of an atom, the electrons
emit virtual photons, which “propagat[e] through space to
[another] point,” where the virtual photon is absorbed by a
second electron and extinguished. The life of a virtual photon
is fleeting; it lasts only for the “time it takes for something
to cross an atom at the speed of light.” Fisher explained that
virtual photons are an electromagnetic field, and electricity
is one manifestation of an electromagnetic field. According
to quantum physics, virtual photons have no mass. Only
electrons, protons, and neutrons (and perhaps related par-
ticles) have mass.19 Because virtual photons have no mass,
Fisher concluded that that they are not “material” and that
electricity is not “tangible personal property.”
	         Joel Fajans is a professor of physics at the University
of California at Berkeley. The department called Fajans to
testify in support of its position that electricity is tangible
personal property. Fajans testified that an electric current
consists of the flow and “pressure” of electrons, which both he
and Fisher agreed have mass. He also explained, and Fisher
did not dispute, that electricity is perceptible to the senses. It
can be felt, smelled, tasted, weighed, measured, and stored
(as well as seen by certain kinds of fish). Fajans did not dis-
pute that electromagnetic fields result from photons and
	18
        We say “attributed” because Fisher was careful to say that virtual pho-
tons are “unobservable in any way.” Quantum physics postulates the existence
of virtual photons to explain other phenomena that can be observed and mea-
sured. To date, the observable phenomena have been consistent with the idea
both that virtual photons exist and that they have certain characteristics that
can be deduced.
	19
        Fisher identified several other related particles, which he described using
kinship terms: the electron’s “silent cousin,” the neutrino; the electron’s exper-
imental sisters, the muon and the tau (and their related neutrinos); and the
apparently unnamed brothers of the up and down quarks, which are found in the
nucleus of the atom. Fisher’s testimony suggests that some or perhaps all those
related particles have mass.
Cite as 357 Or 40 (2015)	59

that virtual photons have no mass. However, he explained
that, in describing electrical power that is sold and deliv-
ered over transmission lines, virtual photons should not be
viewed separately from the flow of electrons that constitute
electric current. Because electrons have mass and because
electricity is perceptible, Fajans testified that electricity is
tangible as that word is ordinarily understood.
	        The Tax Court found Fisher’s opinion more persua-
sive than Fajans’, and it concluded, based on Fisher’s tes-
timony, that electricity is not “tangible personal property”
within the meaning of ORS 314.665. The Tax Court then
found that the greater part of the activity that produced the
income from Powerex’s electricity sales occurred in British
Columbia. See ORS 314.665(4) (providing that “[s]ales, other
than sales of tangible personal property” should be allocated
to the state where the greater part of the income-producing
activity occurred). As a result, the Tax Court held that the
department should not have included any of Powerex’s elec-
tricity sales in the numerator of the Oregon sales factor.
Having found that electricity is not tangible personal prop-
erty, the Tax Court did not decide whether the electricity
that Powerex sold was shipped or delivered to purchasers in
this state. See ORS 314.665(2)(a).
	        In considering the Tax Court’s ruling, we begin
with the question whether electricity is tangible personal
property.20 On that issue, the United States Supreme Court
recently has reminded us that whether an object is “tangi-
ble” does not necessarily turn on physics or even the object’s
physical properties; rather, it can depend on the context in
which the legislature used the word “tangible.” See Yates v.
United States, ___ US ___, 135 S Ct 1074, 191 L Ed 2d 64
(2015) (plurality opinion) (“any * * * tangible object,” as that

	20
        We start with that question for two reasons. First, the Tax Court did not
resolve any of the factual issues related to where the electricity that Powerex sold
was shipped or delivered. Second, the parties agree that, if electricity is tangible
personal property, a small amount of the electricity that Powerex sold during
the tax years at issue here was shipped or delivered to purchasers in Oregon. It
follows that, even if we could say that the remainder of the electricity was shipped
or delivered elsewhere and thus should not be included in the numerator of the
sales factor, we still would have to decide whether the small amount of electricity
shipped or delivered to Oregon was tangible personal property and thus attribut-
able to Oregon.
60	                                      Powerex Corp. v. Dept. of Rev.

phrase is used in 18 USC § 1519, does not include fish); 135
S Ct at 1089 (Alito, J., concurring in the judgment) (same).
We accordingly look to the text, context, and history of ORS
314.665 before deciding what bearing, if any, the subatomic
properties of electricity have on the meaning of the phrase
“tangible personal property” in our statute.
	        As noted above, UDITPA uses the “sales factor” to
apportion a multistate company’s business income among
states. ORS 314.650 (providing that business income shall
be apportioned by multiplying a company’s business income
by the sales factor); ORS 314.610(1) (defining “business
income”).21 Specifically, UDITPA compares the company’s
sales within Oregon to the company’s total sales to deter-
mine a fraction, which is then used to determine the amount
of the company’s total income that Oregon may tax. ORS
314.665 (specifying how the sales factor is calculated); ORS
314.650 (apportioning a company’s business income by mul-
tiplying the company’s total income by the sales factor).
	         ORS 314.665 divides a company’s sales into two cate-
gories: “sales of tangible personal property” and “[s]ales, other
than sales of tangible personal property.” ORS 314.665(2),(4).22
It follows from that text that “[s]ales, other than sales of
tangible personal property” may include not only sales of
	21
       ORS 314.625 to ORS 314.645 specify how certain types of nonbusiness
income shall be allocated.
	22
        ORS 314.665 provides, in part:
    	    “(1)  As used in ORS 314.650, the sales factor is a fraction, the numerator
    of which is the total sales of the taxpayer in this state during the tax period,
    and the denominator of which is the total sales of the taxpayer everywhere
    during the tax period.
    	    “(2)  Sales of tangible personal property are in this state if:
    	    “(a)  The property is delivered or shipped to a purchaser, other than the
    United States Government, within this state regardless of the f.o.b. point or
    other conditions of the sale; or
    	    “(b)  The property is shipped from an office, store, warehouse, factory, or
    other place of storage in this state and the purchaser is the United States
    Government or the taxpayer is not taxable in the state of the purchaser.
    	    “* * * * *
    	 “(4) Sales, other than sales of tangible personal property, are in this
    state if (a) the income-producing activity is performed in this state; or (b) the
    income-producing activity is performed both in and outside this state and a
    greater proportion of the income-producing activity is performed in this state
    than in any other state, based on costs of performance.”
Cite as 357 Or 40 (2015)	61

intangible property but also other types of sales, such as
the sale of services. See Hellerstein et al., 1 State Taxation
¶ 8.06[3][b] (discussing those two types of “[s]ales, other
than sales of tangible personal property”). In this case,
Powerex does not dispute that the electricity it sells is “per-
sonal property”; that is, it does not argue that, in selling
electricity, it was selling a service or something other than
personal property. Rather, Powerex’s argument turns on the
proposition that the electricity it sells is not “tangible” per-
sonal property.
	        UDITPA does not define the phrase “tangible per-
sonal property.” When the legislature has not defined a word
or a phrase, we assume, at least initially, that the word or
phrase has its ordinary meaning, except when the words are
“ ‘terms of art’ * * * drawn from a specialized trade or field.”
Comcast Corp. v. Dept. of Rev., 356 Or 282, 296, 337 P3d 768
(2014). “[W]hen a term [of art] is a legal one, we look to its
‘established legal meaning’ as revealed by, for starters at
least, legal dictionaries.” Id. “Tangible personal property”
is a term of art in the field of taxation, and we look initially
to the way that legal dictionaries have defined that phrase
as well as intangible property. See Tektronix, Inc. v. Dept.
of Rev., 354 Or 531, 543, 316 P3d 276 (2013) (finding a well-
defined legal meaning for “intangible assets”).
	        One tax law dictionary defines “tangible personal
property” as “[p]roperty with physical form, capable of being
touched and seen.” West’s Tax Law Dictionary 1064 (2013). It
also includes an entry comparing “tangible and intangible
property”:
   “Tangible property is property that can be felt or touched.
   Its physical features are what make it useful to a taxpayer.
   Intangible property is property that is not tangible.
   Documents that are merely representations of value (such
   as stock certificates) or evidence of rights (such as patents)
   are intangible property.”
Id. (emphasis added).
	      Ordinarily, we look to dictionaries that were con-
temporaneous with the statute being interpreted. West’s Tax
Law Dictionary did not exist in 1957 when the Commissioners
62	                                    Powerex Corp. v. Dept. of Rev.

on Uniform State Laws adopted the Uniform Act or in 1965
when the Oregon Legislature enacted UDITPA. However,
the definitions in that dictionary and its comparison
between tangible and intangible property parallel the defi-
nitions of those terms in the fourth edition of Black’s Law
Dictionary, which was published in 1951. That dictionary
defined “tangible property” as follows: “That which may be
felt or touched, and is necessarily corporeal, although it may
be real or personal.” Black’s Law Dictionary 1627 (4th ed
1951).23 It defined “intangible property” as follows:
    “Used chiefly in the law of taxation, this term means such
    property as has no intrinsic and marketable value, but is
    merely the representative or evidence of value, such as cer-
    tificates of stock, bonds, promissory notes, and franchises.”
Id. at 946.
	       Reading those definitions together, we conclude
that tangible personal property is perceptible to the senses
and that its physical features make it useful. Conversely,
intangible property lacks “intrinsic or marketable value.”
Thus, even though a bond—a common example of intangi-
ble property—physically evidences a debt, the value of the
bond does not lie in the physical features of the bond but in
the legal obligation that the bond embodies. See Blodgett v.
Silberman, 277 US 1, 15, 48 S Ct 410, 72 L Ed 2d 749 (1928)
(A “bond, wherever actually held or deposited, is only evi-
dence of the debt, and if destroyed, the debt—the right to
demand payment of the money loaned, with the stipulated
interest—remains.”) (internal quotations omitted).
	        We also look to the statute’s context. Cf. Stevens,
336 Or at 401 (explaining that the context for interpreting
a statute’s text includes the preexisting common law and
the statutory framework within which the law was enacted).
The distinction between tangible and intangible property
was a common feature of tax law before the adoption of the
Uniform Act in 1957. See James M. Gray, Limitations of
the Taxing Power 57-100 (1906) (discussing the situs of real
	23
        The fourth edition of Black’s Law Dictionary defined “corporeal property”
as follows: “Such as affects the senses, and may be seen and handled, as opposed
to incorporeal property, which cannot be seen or handled, and exists only in con-
templation.” Black’s Law Dictionary 412.
Cite as 357 Or 40 (2015)	63

property, tangible personal property, and intangible prop-
erty). Initially, courts sought to assign a real or fictional
“situs” to all property, and a state’s authority to tax prop-
erty depended on that situs. The situs of real property was
the state in which it was located, as was generally the situs
of tangible personal property, unless the tangible personal
property was transitory. See Curry v. McCanless, 307 US
357, 364-65, 59 S Ct 900, 83 L Ed 1339 (1939) (real property);
Frick v. Pennsylvania, 268 US 473, 45 S Ct 603, 69 L Ed
1058 (1925) (tangible personal property).24
	         Intangible property posed a greater dilemma. Ini-
tially, courts sought to classify different types of intangi-
ble property and assign a situs or situses to that property.
See Gray, Limitation on the Taxing Power, 66-95 (discussing
situses for, among other things, credits employed in busi-
nesses, choses in action that residents owed to nonresidents,
and partnership property). For example, a mortgage, bond,
or promissory note could be taxed either by the state where
the physical evidence of the obligation was situated or by the
state in which the owner of the intangible property resided.
Curry, 307 US at 366-71. The former was justified by the
idea that the document evidencing the underlying obligation
was physically in the taxing state; the latter, by the idea
that personal property follows the owner (at least as long as
the personal property was not tangible personal property
that had a situs elsewhere). Id.
	       In 1939, the United States Supreme Court recast
the constitutional bases on which a state may tax intangi-
ble property. Curry, 307 US at 363-66. The Court started
from the proposition that the rights created by intangible
property “are but relationships between persons, natural or
corporate, which the law recognizes by attaching to them
certain sanctions enforceable in court.” Id. at 366. Even
when a document evidencing those rights existed, a state’s
constitutional authority to tax that intangible property did
not necessarily turn on where that document physically
was located. Rather, a state’s authority to tax intangible
	24
        Tangible personal property is movable, and the courts held that tangible
personal property that was merely “passing through” a state would not acquire a
situs in that state but would be taxable at its owner’s domicile. Thomas M. Cooley,
1 Treatise on the Law of Taxation 88-89 (3d ed 1903).
64	                           Powerex Corp. v. Dept. of Rev.

property derived from the protection and benefits that the
state extended to the owner of the intangible property, which
can result, as matter of federal constitutional law, in more
than one jurisdiction having authority to tax intangible
property. Id. at 369-71 (both Alabama and Kentucky could
impose a transfer tax on the value of intangible trust assets
held by a trustee in Alabama and over which the decedent
in Kentucky exercised a power of appointment); Greenough
v. Tax Assessors of Newport, 331 US 486, 67 S Ct 1400, 91 L
Ed 1621 (1947) (Rhode Island could tax a resident trustee’s
proportionate share of trust intangibles located in New York
and held on behalf of a testamentary trust in New York
because the benefit and protection of Rhode Island’s laws
were available to the trustee if the trustee sued or were sued
by third parties in Rhode Island).
	        We draw two conclusions from those cases. First,
tangible personal property is property that can be located
physically within a state. As the Oregon legislature recog-
nized in UDITPA, tangible personal property can be deliv-
ered or shipped from one place to another. Second, intan-
gible property represents or symbolizes obligations and
relationships to which the law gives effect. Intangible prop-
erty rights may be embodied in a physical document, as a
promise to pay may be embodied in a bond. However, the
value reflected in the bond derives from the promise to pay
that the bond embodies; it does not derive from the phys-
ical features of the document. See Blodgett, 277 US at 15
(so stating). Accordingly, bonds are not considered tangible
personal property, even though the bonds—the documents
embodying the obligation—can be seen, touched, weighed,
and perhaps smelled.
	        We also look to the legislative history, which does
not shed any light on the issue. In enacting UDITPA, the
Oregon legislature did not address this issue. Similarly, the
comments to the Uniform Act shed no light on the issue. To
be sure, as noted above, the comment to section 16 of the
Uniform Act and the contemporaneous academic commen-
tary explain that, in defining the sales factor, the Uniform
Act sought to give effect to the contribution that “the state
of destination, which provides the market, [makes] to the
generation of income.” Lynn, The Uniform Division of Income
Cite as 357 Or 40 (2015)	65

for Tax Purposes Act, 19 Ohio St LJ at 51; see also Keesling
and Warren, California’s Uniform Division of Income for Tax
Purposes Act Part I, 15 UCLA L Rev at 161 (same). The sales
factor, however, includes both sales of tangible personal
property and “[s]ales, other than the sale of tangible per-
sonal property.” The existence of a market in a state thus
provides no basis for distinguishing one category of sales
from another. Put differently, the fact that there may be a
market for a service does not mean that the sale of that ser-
vice is the sale of tangible personal property.
	        With the text and context of ORS 314.665 in mind,
we turn to the question whether electricity is tangible
personal property for the purposes of that section. In our
view, the scientific debate about the subatomic properties of
electricity—as fascinating as it is—seems beside the point.
For instance, if we applied Professor Fisher’s approach to
defining tangible personal property (or Professor Fajans’
approach for that matter) to instruments that customarily
are regarded as intangible property, such as bonds or stock
certificates, we would focus on the wrong concepts and con-
clude wrongly that those instruments are tangible personal
property because the subatomic particles of which they are
composed have mass. As that counterexample suggests,
Fisher’s and Fajans’ approach to defining tangible personal
property focuses on qualities that matter to physicists but
not necessarily to lawyers and legislators.
	        Our examination of the text and context of UDITPA
points us in a different direction. It reveals that the quali-
ties that mattered to the drafters of the Uniform Act and
the Oregon legislature that enacted UDITPA were whether
the property sold was perceptible to the senses, could be
located physically within a state, and could be delivered or
shipped to a place. A related quality was that the physical
properties of tangible personal property were what made it
useful while the physical properties of intangible property
had little or no relation to that property’s value or useful-
ness. Rather, the value of intangible property derives from
the rights and obligations it represents.
	       We also note that, when the Oregon legislature
enacted UDITPA in 1965, tangible personal property and
66	                                      Powerex Corp. v. Dept. of Rev.

intangible property generally divided into familiar groups.
For example, in another section of the tax code, the Oregon
legislature had provided the following examples to define
tangible and intangible personal property:
    “ ‘Intangible personal property’ or ‘intangibles’ means and
    includes money at interest, bonds, notes, claims, demands
    and all other evidences of indebtedness, secured or unse-
    cured, including notes, bonds or certificates secured by
    mortgages, and all shares of stock in corporations, joint
    stock companies or associations.”
ORS 307.020(1) (1959). By contrast,
    “ ‘Tangible personal property’ means and includes all chat-
    tels and movables, such as boats, vessels, merchandise and
    stock in trade, furniture and personal effects, goods, live-
    stock, vehicles, farming implements, movable machinery,
    movable tools and movable equipment.”
ORS 307.020(3) (1959).
	         Electricity does not fall neatly into either of those
two groups. However, as the issue is presented to us, elec-
tricity is either “tangible” personal property or it is “intangi-
ble” property. Faced with that choice, we conclude that elec-
tricity is tangible personal property for the purposes of ORS
314.665. It is perceptible to the senses, most significantly
to the sense of touch. It can be physically located within a
state and shipped from one state to another. For example,
Powerex sells electricity and delivers a specified quantity
of electricity from one state to another. If Powerex fails to
deliver a specified quantity of electricity to the purchaser,
as it agreed to do, it presumably will be liable for breach of
contract. And the physical properties of electricity are what
make it valuable to a purchaser, unlike intangible property,
the value of which derives from the obligations and rights
that the intangible property represents. We accordingly con-
clude that electricity is tangible personal property for the
purposes of ORS 314.665(2)(a).25
	       Powerex argues, however, that two considerations
should persuade us to reach a different result. First, Powerex
	25
        In light of that conclusion, we need not decide whether a department rule
defining electricity as tangible personal property applies to the tax years at issue
here.
Cite as 357 Or 40 (2015)	67

notes that ORS 314.605(2) provides that UDITPA “shall be
so construed as to effectuate its general purpose to make
uniform the law of those states which enact it.” Powerex
observes that, in interpreting their state counterparts to
ORS 314.665, two state tax commissions have concluded that
electricity is not tangible personal property. Powerex rea-
sons that, to achieve uniformity, we should reach the same
result that those two administrative decisions did. In con-
sidering Powerex’s argument, we first describe the admin-
istrative decisions it cites. We then explain why uniformity,
although an important consideration, does not cause us to
depart from our conclusion based on the text and context of
ORS 314.665.
	        The California Board of Equalization issued one of
the two administrative decisions on which Powerex relies.
See In re Appeal of PacifiCorp, 2002 WL 31153476 (Cal St
Bd Eq). Most of the board’s decision consists of a recitation of
the parties’ competing arguments. Id. at *3-*6. The board’s
ruling turns on its conclusion that the sale of electricity is
the sale of a service—a conclusion that the board based pri-
marily on an Ohio Supreme Court decision holding that a
distribution system for electricity was a service, not a prod-
uct, for the purposes of Ohio’s products liability law. Id. at
*7-*8 (quoting and following Otte v. Dayton Power & Light
Co., 523 NE2d 835 (Ohio 1988)).
	        In our opinion, the board’s administrative decision
provides little support for Powerex’s position for three rea-
sons. First, the board’s decision rests on a rationale—that
electricity is a service—that Powerex does not advance
here.26 Second, the board based its rationale on a case that
seems inapposite. In Otte, the Ohio case on which the board
relied, the plaintiffs alleged that an improper electrical

	26
        Powerex correctly notes that, at the end of its decision, the board states:
“Therefore, based upon the foregoing discussion, we conclude that, for purposes
of California tax law, electricity is intangible.” In re Appeal of PacifiCorp, 2002
WL 31153476 at *8. The “foregoing discussion,” however, consists of the board’s
explanation that electricity is a service. Id. at *7-*8. It is certainly true that, for
purposes of California’s analogue to ORS 314.665, the sale of “tangible personal
property” does not include either the sale of a service or the sale of intangible
property. However, the sale of a service differs from the sale of intangible prop-
erty, and the board’s conclusion that electricity is a service does not imply that it
is intangible property.
68	                                      Powerex Corp. v. Dept. of Rev.

ground had adversely affected their cows’ milk production
and that the improper ground was a defective product for the
purposes of products liability law. 523 NE2d at 838.27 The
Ohio Supreme Court held in Otte that the “purported defect”
that caused the plaintiffs’ cows not to produce milk was “a
defect in the distribution system [for grounding electricity].
Such a system is, in our view, a service.” Id. Whether a dis-
tribution system for electricity is a service for the purposes
of products liability law would seem to have little, if any,
bearing on whether electricity is tangible personal property
or intangible property for the purposes of apportioning the
income of a multistate corporation. Finally, as the amicus
notes, to the extent that Otte holds that electricity is not a
product for the purposes of product liability law, Otte does
not reflect the majority view on that issue. See Bryant v.
Tri-County Elec. Membership Corp., 844 F Supp 347, 350 n 6
(WD Ky 1994) (collecting cases).
	        The Massachusetts Appellate Tax Board issued the
other administrative decision on which Powerex relies. See
Eua Ocean State Corp. v. Comm’r of Revenue, 2006 Mass Tax
LEXIS 35 (Mass Tax 2006). That decision seems more to the
point than the California Board of Equalization’s opinion in
PacifiCorp. In Eua, the board concluded that electricity has
some physical features, but “lacks physical form and a pre-
cise geographic location” and makes “concepts such as title,
possession, and delivery, which are the lynchpins of appor-
tionment for sales of tangible personal property” difficult to
analyze in the sales factor context. Id. at *45. Additionally,
the board was persuaded by the fact that the physical prop-
erties of electricity differ from the physical properties of
other tangible personal property, such as “furniture, a cook-
ing utensil, or a book.” Id. at *41.
	       Although we appreciate the reasons that the board
advanced in support of its holding in Eua, we come to a dif-
ferent conclusion for the reasons that we previously have
stated. We find that the “concepts of title, possession, and
	27
        Specifically, the plaintiffs had alleged in Otte that, as a result of “small
amounts of stray neutral-to-earth voltage [that] had been released on their prop-
erty,” their cows had reacted adversely to the milking machines, with the result
that the cows “were ‘dancing in the [milk] parlor, * * * kicking the [milk] unit off
the cow, [and] coming into the parlor nervous * * *.’ ” 523 NE2d at 836.
Cite as 357 Or 40 (2015)	69

delivery” can and do apply to sales of electricity. Indeed, con-
tracts for the sale of electricity routinely define and embody
agreements on those terms. Moreover, we find it less rele-
vant that electricity is the product of excited electrons that
are fungible than that electricity can be measured and iden-
tified by a well-recognized unit of sale and delivered, for com-
mercial purposes, to purchasers to service their load within
a particular state. It is certainly true that electricity differs
from furniture, but it also differs from bonds, stock certif-
icates, and other intangible property. As explained above,
the qualities that distinguish tangible personal property
from intangible property lead us to conclude that electricity
should be classified as tangible rather than intangible prop-
erty for the purposes of ORS 314.665.
	        We are left, however, with Powerex’s argument that,
even if we are unpersuaded by the reasoning in Eua and
even if the reasoning in PacifiCorp is inapposite, we should
nonetheless follow those two administrative decisions to
achieve uniformity among the states that have adopted
their own analogues to UDITPA. Amicus Portland General
Electric counters that, in the context of income tax determi-
nations, two state courts have held that electricity is tangi-
ble personal property. See Exelon v. Dep’t of Rev., 917 NE2d
899, 911 (Ill 2009) (joining the “several courts that have
expressly held in varying contexts that electricity consti-
tutes ‘tangible personal property’ ”); Tucson Electric Power
Co. v. Arizona Dep’t of Rev., 822 P2d 498, 502 (Ariz Ct App
1991) (“Electricity is personal property that may be mea-
sured; it thus constitutes ‘tangible personal property.’ ”). The
amicus recognizes that those courts were not interpreting
UDITPA but reasons that their conclusions regarding the
tangible nature of electricity apply equally to UDITPA.
	       We might doubt the persuasiveness of the courts’
reasoning in Exelon and Tucson Electric Power, even though
we agree with the result that those courts reached.28 The

	28
       The Illinois Supreme Court’s holding in Exelon turns primarily on
Professor Fajans’ explanation of electricity and the fact that electrons have mass.
As explained above, we are not persuaded that the meaning of the phrase “tan-
gible personal property” in UDITPA turns on how quantum physicists explain
the subatomic workings of electricity. The holding in Tucson Electric is brief. The
parenthetical set out above contains the court’s reasoning on the issue.
70	                            Powerex Corp. v. Dept. of Rev.

more telling question, however, is the extent to which the goal
of uniformity should inform our interpretation of Oregon’s
statute. We addressed that question in Atlantic Richfield Co.
v. Dept. of Rev., 300 Or 637, 646, 717 P2d 613, adh’d to on
recons, 301 Or 242, 722 P2d 727 (1986), and we turn to that
opinion. The issue in Atlantic Richfield was whether the
Oregon Department of Revenue reasonably had interpreted
its own rule. 300 Or at 644-46. The court observed that the
department’s interpretation of its own rule was legally per-
missible but not persuasive. See id. at 646 (explaining that
the two rationales that supported the department’s interpre-
tation of its rule “seem[ed] suspect” while the four rationales
that supported a different interpretation had “validity”).

	        The court explained that, if no other state had
addressed the issue, it would defer to the department’s inter-
pretation of its rule despite any misgivings the court may
have had. Id. However, because the three other states that
had addressed the issue had all reached the same result,
which differed from the department’s conclusion, this court
did not defer to the department. Id. at 646-50. Put differ-
ently, given the department’s doubtful interpretation of its
own rule, this court opted for a small but uniform consensus
among the states that had considered the issue. On recon-
sideration, the court adhered to its earlier conclusion after
engaging in a more comprehensive survey of other states’
positions on the issue. 301 Or at 246-47. The court noted
that 19 of the 30 UDITPA states that had considered the
issue had disagreed with the department’s interpretation
and that 10 of the 13 Multistate Tax Compact states that
had taken a position on the issue disagreed with the depart-
ment’s interpretation. Id. at 245.

	       As we read the original decision in Atlantic Richfield
and the decision on reconsideration, we conclude that the
weight that should be given to the uniform application of
UDITPA is a function of two variables. The first involves our
degree of certainty regarding the meaning of the statute or
rule we are interpreting. The second involves the degree of
consensus that other states considering the same issue have
reached. For example, if a statute may be interpreted in two
equally plausible ways and if there is a general consensus
Cite as 357 Or 40 (2015)	71

among the other UDITPA states that one of those interpreta-
tions is correct, then uniformity weighs in favor of interpret-
ing the statute the same way that the other UDITPA states
have. Conversely, if we are confident that the text, context,
and legislative history of a statute lead to a single conclu-
sion, one or two stray decisions going the other way will be
unlikely to cause us to follow those states’ interpretations.
	        In this case, our examination of the text, context,
and history of ORS 314.665 persuades us that the phrase
“tangible personal property” includes electricity. Although
no conclusion is free from doubt, we are persuaded that our
interpretation more accurately reflects the meaning of ORS
314.665. The consensus on which Powerex relies to support
a different conclusion consists of two administrative deci-
sions, each of which rests on a different rationale. Moreover,
other states have reached a contrary result. See Exelon, 917
NE2d at 911 (listing the “several courts” that had concluded
that electricity is tangible personal property). If we were less
certain about our interpretation and if there were a greater
consensus among the states reaching a different result, the
goal of achieving a uniform interpretation might lead to a
different answer. That is not the case here, however.
	        Powerex advances another consideration in support
of the conclusion it urges. It argues that we should defer to
the version of the Multistate Tax Commission (MTC) audit
manual that was in effect for the three tax years at issue
here. Powerex argues that it is “highly significant that the
MTC treats electricity as an intangible for the purposes of
the UDITPA sales factor.” (Emphasis in original.) Powerex,
however, never explains why that is so, and we turn to the
audit manual on which Powerex relies.
	        The section of the audit manual on which Powerex
relies states:
   “The rules set forth in Index 1720 [for allocating sales of
   tangible personal property] do not apply to sales of real
   estate, services, or intangibles. Tangible [personal] prop-
   erty is defined as commodities that are perceptible to the
   senses and movable. It is usually discernible from intangible
   property. However, some property is borderline and difficult
   to identify as to type. For example, water and gasoline are
72	                                    Powerex Corp. v. Dept. of Rev.

    considered to be tangible property, while electricity and
    money are considered to be intangible property.”
The audit manual states a position regarding electricity but
does not explain the basis for that position. That is, having
defined “tangible property” as “commodities that are per-
ceptible to the senses and movable,” the audit manual does
not explain why electricity does not come within that defi-
nition. Rather, the manual notes that the issue is “difficult”
and posits, without further explanation, that electricity is
“intangible property.”
	         In our view, the audit manual is not as significant as
Powerex perceives. It is certainly not significant for its per-
suasive value. The audit manual does not explain its conclu-
sion; it states it. Nor is the audit manual significant because
it preexisted Oregon’s enactment of UDITPA in 1965 and
thus might have informed the Oregon legislature’s under-
standing of what was and was not “tangible personal prop-
erty.” The MTC did not come into existence until 1967, two
years after Oregon enacted UDITPA, and the MTC did not
begin any audits until 1971, six years after Oregon enacted
UDITPA.29 We recognize that the audit manual seeks to
promote consistency among the states that have signed on
to the Multistate Tax Compact. However, UDITPA states
that, if any of its provisions conflict with the provisions of
the Multistate Tax Compact, which Oregon has adopted,
then the provisions of UDITPA control. ORS 314.606.30
The same principle applies with greater force to conflicts
between UDITPA and the various sections of MTC’s audit
manual. To the extent that the audit manual differs from
our interpretation of ORS 314.665(2)(a), our interpretation
of UDITPA controls.
	29
        See First Annual Report of the Multistate Tax Commission (1967-68)
(explaining that the report “includes the activities of the Commission during
the partial first year of its existence in 1967”); Fourth Annual Report of the
Multistate Tax Commission 8-9 (1971-72) (explaining that, in 1971, the MTC
opened audit offices in two cities). Although the MTC provided audits for compa-
nies, the report does not suggest that an “audit manual” also existed in 1971.
	30
        ORS 314.606 provides: “In any case in which the provisions of ORS 314.605
to ORS 314.675 are inconsistent with the provisions of ORS 305.653, the provi-
sions of ORS 314.605 to ORS 314.675 shall control.” ORS 314.605 to ORS 314.675
comprise UDITPA while ORS 305.653 is the statute by which Oregon enacted
the Multistate Tax Compact into law and entered into that compact with other
states.
Cite as 357 Or 40 (2015)	73

	        The arguments that Powerex has advanced do not
persuade us to depart from our conclusion that electric-
ity is tangible personal property for the purposes of ORS
314.665(2)(a). It follows that the remaining question is
whether Powerex delivered or shipped the electricity it sold
to purchasers in Oregon or in other states. As noted, the Tax
Court did not decide that issue. As also noted, the parties
agree that Oregon was the ultimate destination for a small
part of the electricity that Powerex sold during the three tax
years at issue here. They disagree whether the remainder
of the electricity that Powerex sold during those years was
shipped or delivered to purchasers outside of Oregon.
	        In arguing that issue, the department does not dis-
tinguish between Powerex’s sales of electricity and its sales
of natural gas, and it may be that the department’s argu-
ments regarding Powerex’s sales of electricity fail for the
same reason that its arguments regarding Powerex’s sales
of natural gas failed. However, the Tax Court did not find
whether the transmission systems that carried the electric-
ity that Powerex sold functioned the same way that natural
gas pipelines did. That is, the Tax Court did not find whether
those transmission systems were the functional equivalent
of common carriers. If the Tax Court makes that finding
on remand, then our conclusion regarding Powerex’s natu-
ral gas sales presumably will control how most of Powerex’s
electricity sales will be allocated. However, if the Tax Court
finds that COB and NOB functioned more like a loading
dock, then it will have to decide whether, under UDITPA,
Oregon will follow the majority or the minority position on
that issue. We accordingly affirm the Tax Court’s judgment
regarding Powerex’s natural gas sales, reverse its judgment
regarding Powerex’s electricity sales, and remand for fur-
ther proceedings.
	       The judgment of the Tax Court is affirmed in part
and reversed in part. The case is remanded for proceedings
consistent with this opinion.
