EUA Ocean State Corporation, et al. v. Commissioner of Revenue (April 24, 2006)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


EUA OCEAN STATE CORPORATION, et al.   v.  	COMMISSIONER OF REVENUE


Docket Nos. C258405-406,			  	Promulgated:
C258424-425, C258882-883				April 24, 2006
C259158-159, C259653 & C262566-568					 	


	These are appeals under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39, from the refusal of the appellee Commissioner of Revenue ("Commissioner") to abate corporate excises assessed against appellants under G.L. c. 62C, § 26 and G.L. c. 63, §§ 32 and 39, for tax years ranging from 1994 through 1998.
	Commissioner Scharaffa heard these appeals and was joined in the decision for appellants by Commissioners Gorton, Egan, and Rose. Chairman Foley took no part in the deliberation or decision of these appeals.
	These findings of fact and report are promulgated at the request of both appellants and the Commissioner pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.


	John S. Brown, Esq., Joseph L. Kociubes, Esq., George P. Mair, Esq., Donald-Bruce Abrams, Esq., Darcy A. Ryding, Esq., and Matthew D. Schnall, Esq. for the appellants.

	Daniel A. Shapiro, Esq., and Thomas W. Hammond, Esq., for the appellee.

FINDINGS OF FACT AND REPORT
I.	INTRODUCTION
	On the basis of the parties' Statement of Agreed Facts, the testimony of witnesses at the two-day hearing before the Appellate Tax Board ("Board"), and documents submitted at the hearing, the Board made the following findings of fact.
	Appellants EUA Ocean State Corporation ("EUA"), National Grid USA Service Company, Inc. ("National Grid"), TCPL OSP Ltd. ("TCPL OSP"), TCPL OSL Ltd. ("TCPL OSL"), and TCPL Power Ltd. ("TCPL Power") appeal from the refusal of the Commissioner to abate approximately $1.3 million in corporate excises assessed against them for various tax periods between 1994 and 1998.  Appellants are partners in two Rhode Island general partnerships, Ocean State Power ("OSP") and Ocean State Power II ("OSP II" and, together with OSP, the "Partnerships"), that generated and sold electricity during the periods at issue.  
The principal issue raised in these appeals is whether any of the Partnerships' sales of electricity should be treated as Massachusetts sales includible in the numerator of appellants' sales factors under G.L. c. 63, § 38(f).  If, as the Commissioner maintains, electricity is tangible personal property, the sales are considered to have occurred in the state where title and possession of the electricity passed and appellants' sales factors would include their Massachusetts sales in the numerator and all electricity sales in the denominator.  If, however, electricity is not tangible personal property, the sales are attributed to the state in which appellants incurred the greatest proportion of the costs of performing their income-producing activity.  It is not disputed that under the non-tangible property attribution rule, all of the Partnerships' sales would be attributed to Rhode Island and not Massachusetts because they incurred all of their costs of performance in Rhode Island.  
	On their Massachusetts corporate excise returns, appellants did not report any of the Partnerships' sales of electricity as Massachusetts sales includible in the numerator of their sales factors.  On audit, however, the Commissioner treated more than seventy-five percent of those sales as Massachusetts sales.
IDENTIFICATION OF APPELLANTS AND JURISDICTION
EUA
EUA is a Rhode Island corporation that was formed as a special purpose subsidiary of Eastern Utility Associates for the purpose of being a partner in the Partnerships.  EUA was a general partner in the Partnerships and held a twenty-nine percent interest in each of the Partnerships throughout the period from 1994 through 1998.  EUA's sole business activity during this time was to act as a general partner in the Partnerships.
As a result of his adjustments to the Partnerships' sales factors, the Commissioner made additional assessments against EUA with respect to both the net income and the net worth components of its corporate excise for each of the tax years 1994 through 1998.  EUA is contesting approximately $355,000 of additional assessments for these periods.  On the basis of the Statement of Agreed Facts and accompanying exhibits, the Board found that EUA timely filed its returns, Applications for Abatement, and petitions for the tax years at issue.  Accordingly, the Board found and ruled that it had jurisdiction over EUA's appeals (Docket Numbers C258406, C259159, and C259653). 
TCPL OSP/NERC 
TCPL OSP is a Rhode Island corporation that was formed as a special purpose subsidiary of New England Electric System for the purpose of being a partner in the Partnerships.  TCPL OSP was a general partner in each of the Partnerships and held a twenty percent interest in each of the Partnerships during 1994 and throughout the period from 1996 through 1998.  During those periods, TCPL OSP's sole business activity was to act as a general partner of the Partnerships.  TCPL OSP was formerly known as Narragansett Energy Resources Company ("NERC").
As a result of his adjustments to the Partnerships' sales factors, the Commissioner made additional assessments against TCPL/NERC with respect to the net worth component of its corporate excise for the tax years 1994, 1996, and 1997.  In addition, the Commissioner made assessments against TCPL OSP with respect to both the net worth and net income components of its corporate excise for the portion of the 1998 taxable year for which TCPL OSP filed a separate return (September 2 through December 31, 1998).  TCPL OSP is contesting approximately $36,000 in additional assessments for these periods.  On the basis of the Statement of Agreed Facts and accompanying exhibits, the Board found that TCPL OSP/NERC timely filed its returns, Applications for Abatement, and petitions for the tax years at issue.  Accordingly, the Board found and ruled that it had jurisdiction over TCPL OSP/NERC's appeals (Docket Numbers C258424, C258882, and C262568).
NATIONAL GRID/NEPSC
During 1994 and the period from January 1, 1997 through September 1, 1998, National Grid, then known as New England Power Service Company ("NEPSC"), was the principal reporting corporation for an affiliated group that included TCPL OSP.  National Grid is a party to this appeal solely as the principal reporting corporation for this affiliated group.
For tax year 1994, TCPL OSP, then known as NERC, was part of the affiliated group for which NEPSC filed a combined return.  NERC's income was included in computing the tax assessed against NEPSC with respect to the group's combined net income pursuant to G.L. c. 63, § 32B.  As a result of his adjustments to the Partnerships' sales factors and adjustments to the income of another member of the group, the Commissioner made an additional assessment of $65,784 against NEPSC with respect to the combined net income for tax year 1994.  The parties agree that, as a result of the Board's decision in New England Power Service Co. v. Commissioner of Revenue, ATB Findings of Fact and Reports 2000-56, National Grid/NEPSC is entitled to an abatement of $65,784 for 1994, regardless of the resolution of the contested issue regarding the Partnerships' sales factors and the treatment of NERC as a business corporation rather than a utility corporation.
On the basis of the Statement of Agreed Facts and accompanying exhibits, together with the Commissioner's concession at the hearing that NEPSC had not received a Notice of Abatement Determination dated June 7, 2000 until after it had filed its petition, the Board found that NEPSC timely filed its return, Application for Abatement, and petition for tax year 1994.  Accordingly, the Board found and ruled that it had jurisdiction over NEPSC's 1994 appeal (Docket Number C258405).
During the period from January 1, 1997 through September 1, 1998, NERC was also part of the affiliated group for which NEPSC filed a combined return pursuant to § 32B for tax years 1997 and 1998.  As a result of his adjustments to the Partnerships' sales factors, the Commissioner reduced the amount of refund that he determined to be due to NEPSC for tax year 1997 and made an additional assessment against NEPSC with respect to NERC's income for tax year 1998.  
National Grid/NEPSC is contesting approximately $105,000 in additional assessments for tax years 1997 and 1998.  On the basis of the Statement of Agreed Facts and accompanying exhibits, the Board found that National Grid/NEPSC timely filed its returns, Applications for Abatement, and petitions for the tax years 1997 and 1998.  Accordingly, the Board found and ruled that it had jurisdiction over National Grid/NEPSC's 1997 and 1998 appeal (Docket Number C262566).
TCPL OSL
TCPL OSL is a Rhode Island corporation that was formed for the purpose of being a partner in the Partnerships.  TCPL OSL was a general partner in each of the Partnerships and held a ten and one-tenth percent interest in each of the Partnerships during 1994 and throughout 1997 through 1998.  During those periods, TCPL OSL's sole business activity was to act as a general partner of the Partnerships.  TCPL OSL was formerly known as JMC Ocean State Corporation.
As a result of his adjustments to the Partnerships' sales factors, the Commissioner made additional assessments against TCPL OSL with respect to the net worth component of its corporate excise for tax year 1997.  In addition, the Commissioner made assessments against TCPL OSL with respect to both the net worth and net income components of its corporate excise for the portion of the 1998 taxable year for which TCPL OSL filed a separate return (July 3 through December 31).  TCPL OSL is contesting approximately $14,500 in additional assessments for the tax years 1997 and 1998.  On the basis of the Statement of Agreed Facts and accompanying exhibits, the Board found that TCPL OSL timely filed its returns, Applications for Abatement, and petitions for tax years 1997 and 1998.  Accordingly, the Board found and ruled that it had jurisdiction over TCPL OSL's appeals (Docket Numbers C259158 and C262567).
TCPL POWER
Like EUA, TCPL OSP, and TCPL OSL, TCPL Power is a Rhode Island corporation that was formed for the purpose of being a partner in the Partnerships.  TCPL Power was a general partner in each of the Partnerships and held a forty percent interest in each of the Partnerships during the tax years 1994 through 1998.  During those years, TCPL Power's sole business activity was to act as a general partner of the Partnerships.  
As a result of his adjustments to the Partnerships' sales factors, the Commissioner made additional assessments against TCPL Power with respect to both the net worth and net income components of its corporate excise for each of the tax years 1994 through 1998.  TCPL Power is contesting approximately $670,000 in additional assessments for these periods.  On the basis of the Statement of Agreed Facts and accompanying exhibits, the Board found that TCPL Power timely filed its returns, Applications for Abatement, and petitions for the years at issue.  Accordingly, the Board found and ruled that it had jurisdiction over TCPL Power's appeals (Docket Numbers C258425 and C258883).
THE PARTNERSHIPS' BUSINESS ACTIVITIES
At all material times, each of the Partnerships owned and operated an electric generating plant in Burrillville, Rhode Island, near the Massachusetts border (the "Plants").  OSP owned and operated an approximately 249 megawatt, natural-gas fired, combined-cycle electric generating plant that included two General Electric MS-7000 EA gas turbines and one General Electric condensing steam turbine-generator ("Unit I").  OSP II owned and operated an approximately 243 megawatt, natural-gas fired, combined-cycle generating plant that, like Unit I, also included two General Electric MS-7000 EA gas turbines and one General Electric condensing steam turbine-generator ("Unit II" and, together with Unit I, the "Units").  The Partnerships derived the bulk of their revenue, roughly $100 million per year for each Partnership, from the sale of electricity generated by the Units and the sale of "capacity," the right to purchase a portion of the electricity that the Units could generate.
The Partnerships also sold excess natural gas during periods when the Units were not operating.  Revenues from these natural-gas sales ranged from $800,000 to nearly $10 million per year during the periods at issue.  The Partnerships sold no natural gas to Massachusetts customers.  
The Partnerships owned various residential properties in Massachusetts and Rhode Island that were located within a half-mile radius of the Plants.  The Partnerships purchased these properties from their prior owners under a so-called "property value stabilization program." The program was instituted as part of the process by which the Partnerships gained the necessary governmental approvals for constructing the Plants in response to objections from owners who did not want to have the Plants located near their homes.  During the periods at issue, the Partnerships either sold the residential properties to new owners or leased the properties.  The Partnerships did not use the properties in the operation of the Plants.  As the Partnerships sold the residential properties during the periods at issue, revenues decreased from $87,286 in 1994 to $25,033 in 1998.
The assessments at issue concern only the Partnerships' sale of electricity.  The Commissioner made no adjustments concerning receipts from the Partnerships' Massachusetts real estate or the sale of "capacity" and natural gas.  
IV.	COMMISSIONER'S ALLOCATION OF SALES TO MASSACHUSETTS
For the majority of the tax years at issue, the utilities purchasing electricity from the Partnerships were: Boston Edison Company ("BECO"); Montaup Electric Company ("Montaup"); and New England Power Company ("NEP") (together, "Purchasers").  TransCanada Power Marketing Ltd. ("TCPM") replaced both Montaup and NEP as a purchaser during the end of the periods at issue.   During the tax years at issue, the Purchasers were engaged in the wholesale and/or retail sale of electricity.  
	One of the Purchasers, BECO, was primarily engaged in the retail sale of electricity in Massachusetts.  However, over ten percent of BECO's sales were sales to other electricity distributors for resale.  These distributors included utilities located in other New England states and power marketing and trading companies that operated throughout the United States.
	Another purchaser, NEP, was engaged almost exclusively in the wholesale transmission and resale of electricity, including sales to affiliates based in Massachusetts (Massachusetts Electric Company), Rhode Island (The Narragansett Electric Company), and New Hampshire (Granite State Electric Company).  NEP also sold power to unaffiliated customers during the years at issue, including power companies and municipal light departments in various states, and marketing and trading companies selling power throughout the United States.  NEP also entered into system power contracts in which it sold specified quantities of power during specific periods to other wholesalers and unit power contracts in which it sold specified quantities of power.
	NEP also transferred a portion of its right and obligation to purchase electricity from the Partnerships during the periods at issue.  NEP transferred between two and eight percent of the total output of the Partnerships' Units during the period at issue to Unitil Power Corporation ("Unitil"), a New Hampshire utility. 
A third purchaser, Montaup, was engaged primarily in the wholesale transmission of power.  Montaup's customers included NEP, BECO, and Montaup's affiliates, Eastern Edison Company (based in Massachusetts), BE (based in Rhode Island), and Newport Electric Company (also based in Rhode Island).  Its other customers included utilities based in Massachusetts, Rhode Island, Connecticut, a Rhode Island municipal light district, and trading companies doing business throughout New England.
The Commissioner audited appellants' Massachusetts corporate excise returns and determined that appellants' treatment of all electricity sales as non-Massachusetts sales was in error.  The auditor initially treated all sales of electricity and capacity as sales of tangible personal property and relied on the "reverse dock sale rule" found in 830 CMR 63.38.1(9)(c) to treat these sales as Massachusetts sales because the electricity was "transshipped" from Rhode Island to Massachusetts customers via the "common carrier" of the New England electricity distribution system known as the "NEPOOL grid," which is described in Section V(B) below.  Because for most of the tax years at issue, the Purchasers were all based in Massachusetts, the auditor assumed that the destination of all the Partnerships' sales of electricity during that period was Massachusetts.
	Appellants appealed this determination to the Department of Revenue's Appeal and Review Bureau ("A&R").  A&R revised the auditor's determination and concluded that it was the location of the "residential, commercial, and industrial end-users" of the electricity, and not the location of the "intervening purchaser or supplier," that determined whether the sale was a Massachusetts sale.  Accordingly, A&R determined that sales of electricity were includible in the numerator of appellants' sales factors "to the extent that the electricity [was] consumed and used by the Purchasers' ultimate retail customers in Massachusetts."
	The auditor then prepared a revised set of workpapers based on his understanding of the A&R decision.  To determine the identity of the Purchasers' customers, the auditor reviewed certain filings made by the Purchasers to the Federal Energy Regulatory Commission ("FERC").  He then made assumptions, based on the name of the customer or other information he was told, concerning the locations of the ultimate retail consumers of the electricity.  
For example, the auditor treated all sales to Massachusetts Electric, but no sales to Narraganset Electric, as Massachusetts sales, solely based on their names.  Similarly, he treated all sales to Eastern Edison, but no sales to Granite State Electric, as Massachusetts sales, because he was told that "Eastern Edison was 100 percent Mass." and that Granite State "does business in New Hampshire."  
He did not attempt to determine the identity or location of the retail customers of those entities that purchased electricity from the Purchasers.  Rather, he used an "all-or-nothing" approach, classifying either all, or none, of the sales made by the Purchasers' customers as Massachusetts sales strictly based on the name of the Purchasers' customer or other information relayed to him.  For example, all of BECO's sales were considered to be Massachusetts sales because the auditor "assumed [BECO] was 100 percent Mass.," even though the A&R determination acknowledged that BECO "did make some wholesale sales to other utilities such as EUA's parent, Eastern Utility Associates, which conducts a substantial portion of its operations in Rhode Island."
To determine the percentage of the Partnerships' total electricity sales attributable to Massachusetts, the auditor first determined the Partnerships' total electricity sales to each purchaser, and then computed a "Massachusetts Sales Percentage" that he applied to the Partnerships' electricity sales to each purchaser.  The auditor arrived at the Massachusetts Sales Percentage by dividing what he determined to be each purchaser's sales to Massachusetts customers by the Purchasers' total sales.
Using 1994 as an example, the auditor first broke down the Partnerships' total electricity sales of $30,245,388 among Montaup ($11,009,196), NEP ($19,069,501) and BECO ($9,239,861).  For Montaup, he derived a Massachusetts Sales Percentage of 61.9012 percent from an excerpted page from Montaup's 1994 FERC filings.  He arrived at this percentage by first treating all $41,466,446 of Montaup's sales to Eastern Edison Company as Massachusetts sales.  He then added the Eastern Edison sales to $20,423,209 of sales to Blackstone Valley Electric and $5,109,429 of sales to Newport Electric to arrive at a total sales figure of $66,988,084.  The Massachusetts Sales Percentage of 61.9012 percent is equal to the Eastern Edison Sales divided by the sum of the Eastern Edison, Blackstone Valley Electric, and Newport Electric sales.  The auditor disregarded all other Montaup sales, including all sales to non-affiliates.
The auditor used a similar approach to arrive at a Massachusetts Sales Percentage of 74.4157 percent for NEP for 1994.  He treated all of NEP's sales to Massachusetts Electric, totaling $357,642,672, as Massachusetts sales.  He then treated $16,044,384 in sales to Granite State Electric and $106,914,299 in sales to Narragansett Electric as non-Massachusetts sales.  Dividing the sales to Massachusetts Electric by all NEP sales, he arrived at the 74.4157 Massachusetts Sales Percentage for NEP.
For BECO, the auditor assumed that all of BECO's electricity sales were to Massachusetts customers.  Accordingly, he used a Massachusetts Sales Percentage of one hundred percent.
The auditor then determined the Massachusetts sales for each of the Partnerships by multiplying the Partnerships' sales to each purchaser by the Massachusetts Sales Percentage that he had calculated for each of the Purchasers, adding the results together, and allocating the total between the two Partnerships.  He then adjusted the apportionment formulas for each of the partners by adding the amounts he determined to be Massachusetts sales to the numerator of the sales factor.
The auditor acknowledged that there were difficulties in applying the methodology described in the A&R Determination letter.  First, the Partnerships could not tell from their own records the location of "the ultimate retail customers" as required by the A&R Determination Letter.  Moreover, because NEP's and Montaup's customers were also engaged in the transmission, distribution and wholesaling of electricity, and were therefore not the "ultimate consumers" of the electricity purchased, the FERC filings made by NEP and Montaup could not establish the location of the ultimate consumers because these records would not show whether a transmission or distribution purchaser located outside of Massachusetts resold electricity back into Massachusetts or vice versa.  
Further, although it does not appear to be a relevant factor for applying the A&R method, the auditor also testified that the Massachusetts "headquarters" of the Purchasers also supported the assessment.  The auditor testified that because the three principal Purchasers - BECO, Montaup, and NEP - were all "headquartered" in Massachusetts and headquarters is where the "retail obligation is," the actual "possession and control" of the electricity sold to them passes in Massachusetts.
The Commissioner's allocation of electricity sales to Massachusetts and the resulting assessments against appellants are premised on his determination that sales of electricity are "sales of tangible personal property" for purposes of G.L. c. 63, § 38(f).  Accordingly, the Board found the following facts concerning the Partnerships' generation, distribution, and sale of electricity to determine whether electricity constitutes "tangible personal property."
PARTNERSHIPS' GENERATION AND SALE OF ELECTRICITY
GENERATION OF ELECTRICITY
Electricity is produced at each Unit using two 80-megawatt natural gas generators and one 90 megawatt steam generator.  The generation process begins with the activation of two natural gas turbines, which are similar to aircraft jet engines.  The combustion of natural gas causes the rotor in each turbine to rotate at very high speed.  The heat exhaust from the gas turbines is used, in conjunction with the burning of additional fuel, to heat water to produce steam.  The steam is used as the power source for the steam turbine, causing the rotor in the steam turbine to rotate.
Each generator consists of a "stator" and a "rotor."  The stator is a series of stationary coils around the periphery of the generator.  Inside the stator is the rotor winding, a coil connected to the turbine that produces a magnetic field.  The high-speed rotation of the rotor within the stator causes a changing magnetic field.  The changing magnetic field induces a flow of current, or electricity, in the stator.
No new electrons or other "particles" are created by this process.  The changing magnetic field caused by the rotation of the rotor causes electrons in the stator coils to move in alternating directions, resulting in "alternating current."  In the United States, the standard current used is 60-cycle current, in which there are 60 alternating cycles per second, referred to as "60 hertz" or "60 HZ."   In 60 hertz current, electrons change direction 120 times per second.  
The rapid oscillation of electrons caused by the rotation of the rotor within the stator results in a flow of energy within the coils of the stator.  The electrons themselves do not flow in any one direction; for example, individual electrons do not flow out of the generator, onto the transmission lines and into consumers' homes and businesses. Rather, the oscillation of the electrons within the stator of the generator causes a flow of electrical energy which, as described below, is distributed to electricity consumers.
TRANSMISSION AND DISTRIBUTION OF ELECTRICITY
The electrical energy flows out of the stator on wires to a transmission substation where the energy generated at the Units is transferred to the transmission system servicing New England, known as the New England Power Pool ("NEPOOL") transmission grid (the "grid").  The grid is a series of interconnected transmission lines throughout New England carrying power generated by the Partnerships and by other generating facilities to delivery points for distribution to New England consumers.  The grid consists of that portion of the distribution system between "transmission substations," located near generating facilities, and "power substations," located near the consumer.  NEPOOL is not involved in the delivery of power from generation facilities to the transmission substation or the distribution of the power from the power substation to the consumer.
The substation at which the electricity generated by the Units is transferred to the grid is called the "Sherman Farm Road Extra High Voltage/Pool Transmission Facility" ("EHV/PTF").  The EHV/PTF is also located in Rhode Island, a few hundred feet from the Plants.  It is owned by Blackstone Valley Electric Company.
Efficient distribution of electrical energy over wires requires a voltage, which is the measure of the energy's force, of 345 kilovolts ("KV").  The voltage of the power produced by the Units' generators is typically only 13 to 20 KV.  Therefore, the power flowing from the generators is put through a series of "transformers" before it is transferred to the grid at the EHV/PTF.  A transformer consists of two coils of wires, called "windings," that are wrapped around a magnetic core.  Current flowing through one winding at a given voltage induces a magnetic field in the core, which in turn induces a current at a different voltage in the other winding.  There is no physical connection or movement of electrons between the two windings; the only connection is through a magnetic field.
Once its voltage reaches the proper level, the electricity is "impressed" or "injected" onto the grid for distribution throughout New England.  Electricity is distributed through an integrated system of transmission and distribution facilities using interconnected transmission lines, transformers, and other equipment to bring the power generated by the Partnerships and other power generators to consumers.  Just as the voltage is stepped up at transmission substations such as the EHV/PTF to efficiently travel over wires, it must be stepped down to be usable by customers.  Generally, the voltage is first reduced to an intermediate level suitable for bringing the electricity into various distribution areas, then reduced further at power substations to an appropriate distribution voltage level, and then, at or near the customer, the voltage is further reduced to a level suitable for customer use.  The voltage reduction is achieved using transformers, which operate in the same general manner as the transformers used to increase its voltage.  
C.	CONTRACTS REGARDING THE SUPPLY OF ELECTRICITY
1.	NEPOOL
NEPOOL is an organization of electric utilities created by the NEPOOL Agreement.  NEPOOL was formed as a result of the unprecedented power blackout that occurred in New York and New England in 1965.  The goals of NEPOOL are to maintain the reliability of the bulk power system for the delivery of electricity to consumers and to produce and deliver power at the lowest cost that is consistent with prudent utility practice.  
The NEPOOL Agreement is a contractual agreement among electric utilities that is open to all electric utilities operating in New England.  During the tax years at issue, the Purchasers were members of NEPOOL, but the Partnerships were not.  The NEPOOL Agreement provides the central dispatching and primary pooling arrangement for electric utilities operating in New England.  
(a)	SCHEDULING OF POWER GENERATION 
NEPOOL does not own any generating or transmission facilities.  Rather, it or its agents schedule the operation of the generation facilities that contribute to the NEPOOL grid, including the Partnerships' Units, and account for the purchases and sales of electricity among its members.  
Although NEPOOL is not directly involved in the physical operation of the generating plants, it does determine the output levels at which the plants operate.  The output levels are based on a projection that takes into account the amount of power withdrawn from the grid by power purchasers and anticipated "line losses," the dissipation of electricity during the transmission process resulting from the inherent resistance of conductors.  During most of the periods at issue, decisions concerning the plants' output levels were made by NEPOOL's dispatch agent, the New England Power Exchange, or NEPEX.
(b) SETTLING ACCOUNTS AMONG MEMBERS
During the tax years at issue, the Partnerships sold all of the electricity they produced at the Plants to the Purchasers, who were engaged in the transmission and/or distribution of electricity.  
Each of the Purchasers entered into a Unit Power Agreement with each of the Partnerships governing the sale of electricity to that purchaser.  Under the Unit Power Agreement, the Partnerships were obligated to sell, and the Purchasers were obligated to purchase, the following percentages of the Partnership's output: BECO, twenty-three and one-half percent; Montaup, twenty-eight percent; NEP, forty-eight and one-half percent.  
NEPOOL accounted for the activity of its members in terms of "resources" and "loads." Resources are the amount of power that a NEPOOL member contributed to the grid and "loads" are the amount of power that a member withdrew from the grid.  For example, power generated and transferred to the grid by the Partnerships would be credited as resources to each of the Purchasers in proportion to the percentage of power that the purchaser was entitled and obligated to purchase.  Conversely, each of the Purchasers would be charged with loads when its wholesale or retail customer withdrew power from the grid.  A deficit in resources in effect represented a purchase by the NEPOOL member from other members, while an excess of resources over loads in effect represented a sale into the pool.
NEPOOL and its administrative agents determined on an hourly basis the net amount of each NEPOOL member's resources and loads.  The net purchases and sales were then settled on a monthly basis as a net dollar amount due to or from each member as a result of its activities during the month.

2.	PARTNERSHIPS' DELIVERY OBLIGATIONS
In addition to delineating the percentage of the Partnerships' output which each of the Purchasers was entitled, and obligated, to purchase, the Unit Power Agreements also governed the Partnerships' obligations concerning the delivery of power to the Purchasers.  
The Unit Power Agreements specified that the delivery point for the electricity was in Rhode Island at the "point of interconnection with the [EHV/PTF] facilities adjacent to" the Plants.  The Partnerships' responsibility for delivering the electricity ended at the transmission substation.  Further transmission was the responsibility of the Purchasers, including the cost of using the transmission facilities, which are owned by other NEPOOL members, and the line losses resulting from the dissipation of electricity during transmission.
VI.	BOARD'S ULTIMATE FINDINGS ON DISPUTED ISSUES
On the basis of the foregoing subsidiary findings, the Board found that electricity is not "tangible personal property" for purposes of G.L. c. 63, § 38.  Electricity is not an object that is manufactured; it is a flow of power that is generated by the manipulation of magnetic fields.  Electricity has no physical shape, form or geographic location.  It has no height, weight, volume or other dimension by which tangible property is typically measured.
Although electricity may be perceived by the senses, such as feeling a shock, it has no form or substance which can be touched.  It is of a nature similar to heat, light and sound, all of which can be sensed and even measured but, given their lack of form or substance, would not be considered "tangible."
Electricity generated and injected into the grid is indistinguishable from electricity in the transmission and distribution network.  Individual electrons are not created in Rhode Island and delivered to Massachusetts; rather, the Partnerships generate power in Rhode Island that, once injected into the grid, merges with power in the grid produced by other generators and is instantaneously available to consumers throughout the network.  One cannot trace the energy generated in Rhode Island and determine by any meaningful standard the ultimate destination of that energy.  Concepts such as title, possession and delivery, which are relevant for determining the allocation of sales of tangible personal property under § 38, make little sense in the context of the generation and sale of electric power.
Even if such concepts were applicable to electricity, the evidence of record supports a finding that title and possession of the electricity passed from the Partnerships to the Purchasers in Rhode Island.  Under the Unit Power Agreements, the Partnerships completed their performance by delivering the electricity at the EHV/PTF substation in Rhode Island.  As members of NEPOOL, it was the Purchasers, not the Partnerships, which had the right to use the transmission facilities owned by other NEPOOL members.  It was the Purchasers, not the Partnerships, which were responsible for further transmission of the electricity beyond the Rhode Island substation, including the cost of using all necessary transmission facilities.  Further, the Purchasers absorbed the line losses resulting from the dissipation of electricity during transmission beyond the Rhode Island substation.  Accordingly, even applying tangible property rules to the sale of electricity would result in the sale taking place in Rhode Island, where title and possession of the electricity was delivered to the Purchasers.
The Commissioner's various attempts to allocate a portion of the Partnerships' electricity sales based on the "reverse dock sale rule," the location of the ultimate retail consumer, or the headquarters of the Purchasers, are flawed because they fail to recognize the nature of both electricity itself and the manner of its sale by the Partnerships to the Purchasers.  Electricity is not "shipped" by a "common carrier," as required by the reverse dock sale rule.  Rather, it is made available on the grid in the amounts the Purchasers were obligated to purchase and withdrawn from the grid by the Purchasers' customers.  The sale of electricity is, in effect, determined by accounting adjustments based on a comparison between how much power a purchaser has made available on the grid and the level of consumption by its customers.  
The Partnerships could not know the location of the "ultimate consumer" of the electricity they generated because they were not privy to the records of their Purchasers and, even if they were, the consumer location would not be revealed in the Purchasers' records of the many sales to resellers of electricity.  Finally, the location of the Purchasers' headquarters is not a relevant consideration, even if electricity were tangible: it is the place where the seller's delivery obligation is completed, not the headquarters of the purchaser, which determines where a sale of tangible personal property takes place.
The Commissioner's difficulty in arriving at a reasonable apportionment approach underscores the fact that the sale of electricity does not fit the model of a sale of tangible personal property under § 38(f).  Rather, because electricity lacks a physical form and a precise geographic location, making concepts such as title, possession, and delivery somewhat illusory in this context, the standard under § 38(f) that governs all sales other than sales of tangible personal property best fits the sale of electricity.  That standard attributes a taxpayer's gross receipts from income-producing activity to the state in which the taxpayer incurs the greatest proportion of the costs of performing that activity.  
The evidence of record in these appeals clearly establishes that the Partnerships incurred all of their costs of performance in Rhode Island; the Commissioner's own witness concedes this fact and he does not attempt to argue otherwise.  Accordingly, all of their receipts from the sale of electricity are properly attributable to Rhode Island and none to Massachusetts.  Because all receipts from electricity sales are attributable to Rhode Island, no receipts are includible in the numerator of appellants' Massachusetts sales factors and, therefore, appellants' sales factors are zero.
On the basis of the foregoing, the Board issued a decision for the appellants and granted an abatement in the amount of $1,346,993.

OPINION
I.	APPORTIONMENT OF NET INCOME UNDER § 38
Pursuant to G.L. c. 63, § 38, appellants are subject to a corporate excise on that part of their net income which is derived from business carried on in Massachusetts.  Taxable income derived from Massachusetts business is determined by taking appellants' federal net income, applying the deductions enumerated in G.L. c. 63, § 38(a), and multiplying the result by the three-factor apportionment formula under G.L. c. 63, § 38(c).  The apportionment formula is based on the ratio of the corporation's property, payroll, and sales in Massachusetts to its total property, payroll, and sales everywhere.  The statutory purpose of the three-factor apportionment formula is "to obtain a fair approximation of the corporate income that is 'reasonably related to activities conducted within [Massachusetts].'"  Boston Professional Hockey Association, Inc. v. Commissioner of Revenue, 443 Mass. 276, 280, n.7 ("Boston Professional Hockey Association") (quoting Gillette Co. v. Commissioner of Revenue, 425 Mass. 670, 681 (1997), quoting Exxon Corp. v. Department of Revenue of Wisc. 447 U.S. 207, 223 (1980)).
The principal issue raised in these appeals is whether any of the Partnerships' sales of electricity should be treated as Massachusetts sales includible in the numerator of appellants' sales factors under G.L. c. 63, § 38(f) ("§ 38(f)").  Under § 38(f), the sales factor is a "fraction, the numerator of which is the total sales of the corporation in this commonwealth during the taxable year, and the denominator of which is the total sales of the corporation everywhere during the taxable year."
Appellants, whether properly taxable as business corporations or utility corporations, must include in their apportionment factors appellants' pro rata share of the Partnerships' own factors.  See 830 C.M.R. 63.38.1(1)(a) and 830 C.M.R. 63.38.1(13)(formerly 830 C.M.R. 63.38.1(11) in 1995 version of the Regulation).  Accordingly, resolution of these appeals requires the Board to determine which, if any, of the Partnerships' sales of electricity were "in this commonwealth."
Section 38(f) provides two different rules for determining whether a sale is "in this commonwealth," depending on the nature of what is sold.  In the case of tangible personal property, the general rule is that the sale takes place where the property is delivered to the purchaser.  A sale of tangible personal property is "in this commonwealth" under § 38(f) if "the property is delivered or shipped to a purchaser within this commonwealth regardless of the f.o.b. point or other conditions of sale."  
The determination of whether sales other than sales of tangible personal property are "in this commonwealth" is subject to a different standard.  A sale of property other than tangible property is a Massachusetts sale under § 38(f) if: (1) "the income-producing activity is performed in this commonwealth;" or (2) "the income-producing activity is performed both in and outside this commonwealth and a greater proportion of this income-producing activity is performed in this commonwealth than in any other state, based on cost of performance."  
Accordingly, resolution of the principal issue of whether any of the Partnerships' sales of electricity should be treated as Massachusetts sales includible in the numerator of appellants' sales factors depends on three sub-issues: 1) whether sales of electricity are sales of "tangible personal property" or sales "other than sales of tangible personal property" for purposes of § 38(f); 2) if electricity is considered tangible personal property for purposes of § 38(f), whether the electricity was delivered in Massachusetts; and 3) if electricity is not tangible personal property for purposes of § 38(f), whether the greater proportion of the Partnerships' income-producing activity is performed in Massachusetts than in any other state.  Because the Board found that all of the Partnerships' income-producing activities were performed in Rhode Island, none of the Partnerships' sales would be Massachusetts sales if electricity is not tangible personal property for purposes of § 38(f).  Accordingly, the first sub-issue to be determined is whether electricity is tangible personal property for purposes of § 38(f). 
ELECTRICITY IS NOT TANGIBLE PERSONAL PROPERTY
A.	THE COMMON AND ORDINARY MEANING OF "TANGIBLE PERSONAL PROPERTY" DOES NOT ENCOMPASS ELECTRICITY 
	
Section 38(f) does not provide a definition of "tangible personal property." Further, the regulations construing § 38(f) are silent on the issue of whether electricity is tangible personal property for purposes of the sales factor and no Massachusetts case has addressed this issue.  
Where a "dominant statutory term is undefined, 'the Legislature should be supposed to have adopted the common meaning of the word, as assisted by a consideration of the historical origins of the enactment.'" Commissioner of Revenue v. Houghton Mifflin Company, 423 Mass. 42, 45 (1996) ("Houghton Mifflin").  
In cases dealing with the issue of whether a corporation was engaged in "manufacturing," the Supreme Judicial Court has recognized that electricity is not "tangible" property.  In Westinghouse Broadcasting Company, Inc. v. Commissioner of Revenue, 382 Mass. 354 (1981) ("Westinghouse"), the taxpayer, which owned and operated a television and radio station, claimed that it should be classified as a manufacturing corporation in order to qualify for an investment tax credit under G.L. c. 63, § 31A and a property tax exemption under G.L. c. 59, § 5, cl. Sixteenth (3).  The court upheld the Board's denial of manufacturing classification, but noted that:
The Board in the present case did indeed allow a request for a ruling that "Westinghouse may not be denied manufacturing status merely because its end product is intangible."  That proposition conformed to our view that the production of electricity may entail manufacture (see Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 565 (1956); Boston & Me. R.R. v. Billerica, 262 Mass. 439, 449 (1928)).

Westinghouse, 382 Mass. at 358.  
In this same context of determining whether a corporation was engaged in manufacture, the court again used electricity as an example of an intangible product of manufacturing activity:
If it be argued that the definition [of manufacturing] contemplates corporeal or tangible input or output, the taxpayer can cite cases that may read to the contrary - those which consider the production of electricity to involve manufacture.

Houghton Mifflin, 423 Mass. at 48-9, quoting First Data Corporation v. State Tax Commission, 371 Mass. 444, 446 (1976) ("First Data Corporation").
	Courts in other jurisdictions have also recognized in a number of contexts that electricity does not constitute tangible personal property within the ordinary meaning of that term.  See, e.g., Omaha Pub. Power Dist. v. Nebraska Department of Rev., 248 Neb. 518, 524-25 (1995) ("Omaha Pub. Power Dist.") ("[E]lectricity is a physical phenomenon; it is energy, not matter, and has no mass.  Electricity can hardly be called 'tangible,' which means 'capable of being touched'"); Farrand Coal Co. v. Halpin, 10 Ill.2d 507, 512 (1957)(while recognizing electricity as personal property, Illinois Supreme Court "has at no time held electricity to be 'tangible' personal property"); People v. Menagas, 367 Ill. 330, 338 (1937)("While [electricity] is intangible, it is no less personal property and is within the larceny statute"); Elgin Airport Inn v. Commonwealth Edison Co., 88 Ill. App. 3d 477, 480 (noting that strict liability issue arises "[b]ecause electricity is intangible"); Miller v. City of Los Angeles, 185 Cal. 440, 443 (1921) ("Electricity is rather an intangible asset and the word 'property' is perhaps not the most apt word by which to describe the supply of electrical energy thus sought to be acquired for the use of the city").
	The recognition by Massachusetts and other state courts that electricity is intangible is consistent with common definitions and understanding of the phrase "tangible personal property."  For example, Black's Law Dictionary (8th Ed. 2004) ("Black's") defines "tangible personal property" as 
Corporeal personal property of any kind; personal property that can be seen, weighed, measured, felt, or touched or is any other way perceptible to the senses, such as furniture, cooking utensils, and books.

See also Houghton Mifflin, 423 Mass. at 48-9 and First Data Corporation 371 Mass. at 446 (equating "corporeal" with "tangible").  In turn, Black's defines "corporeal" to be "[a] term descriptive of such things as have an objective, material existence; perceptible by the senses of sight and touch; possessing a real body."  It cannot be reasonably argued that electricity has anything resembling a "body" or that electricity itself is perceptible to the senses of sight and touch, as one might see or touch a piece of furniture, a cooking utensil, or a book.
	For example, wind, sunlight, sound, heat, and pain are all perceptible to the senses, but cannot be touched.  The effects of electricity can be seen, as in a lightning strike, and felt, as in a shock, but electricity itself cannot be seen or touched because, like wind, sunlight, sound, heat, and pain, it has no physical form or body.  See Black's (using "light and electricity" as examples of "movable intangible property," defined as "a physical thing that can be moved but that cannot be touched in the usual sense."); Omaha Pub. Power Dist., 248 Neb. at 531 (Caporale, J. concurring)(electricity "has no such physical substance in the sense those two words are commonly understood . . . it has no readily discernible physical form in the sense that do items such as axes, books, cloth, desks, elevators, fiddles, gavels, and the like").
	Accordingly, electricity is not "tangible" as that word is commonly used and understood and therefore is not "tangible personal property" for purposes of § 38(f). 
B.	THE ONE CASE THAT HAS ADDRESSED THIS ISSUE IN THE CONTEXT OF A STATE APPORTIONMENT FORMULA HELD THAT ELECTRICITY IS NOT TANGIBLE PROPERTY

The California State Board of Equalization ("SBE"), in construing statutory provisions substantially identical to § 38(f), held that sales of electricity constitute the performance of services, not sales of tangible personal property, and that the treatment of such sales for sales factor purposes is properly determined under the cost-of-performance rule.  In Re Appeal of PacifiCorp, 2002-SBE-005 (Cal. S.B.E. Sept. 12, 2002) ("PacifiCorp").  
	The taxpayer in PacifiCorp, like the Partnerships in these appeals, owned and operated a power plant in a neighboring state.  As here, the taxpayer sold electricity under contracts providing for delivery at a substation located in the same state as the generating plant.  In rejecting an argument that the taxpayer's sales of electricity should be treated as sales of tangible personal property and that its sales should be taxed on a "destination basis," so that sales to customers located in California would be treated as California sales for apportionment purposes, the SBE held:
Like the court in Otte [v. Dayton Power & Co., 37 Ohio St. 3d 33 (1988)], we conclude that the sales of electricity here are sales of services that essentially consisted of appellant's setting and keeping in motion, through its generation and transmission facilities, electrically charged particles.  Also as in Otte, we further conclude that the basic reason the generation and transmission process employed by appellant is appropriately characterized as a service is that the process does not result in either (1) the "creation" in its generation facilities of any such arguably tangible particles or (2) the "injection" of those particles into its transmission facilities.
PacifiCorp, supra.  
The PacifiCorp analysis and holding are persuasive authority on the issue raised in these appeals.  Because electricity lacks physical form and a precise geographic location, concepts such as title, possession, and delivery, which are the lynchpins of apportionment for sales of tangible personal property, are ill-suited to the context of electricity sales.  Even the Commissioner, in the context of a sale of electricity for sales tax purposes, recognizes that "as a matter of physics, electricity is not transported in a manner similar to other tangible personal property."  See Technical Information Release 98-16.  It is only through abstractions, approximations, and assumptions that the Commissioner's auditors could fit the sale of electricity into the tangible personal property model under § 38(f).  Given the nature of electricity and the accounting function by which it is considered to be bought and sold, the use of the tangible personal property model does not effectuate the statutory purpose of the § 38(c) apportionment formula of approximating that part of corporate income which is related to Massachusetts activities.  See Boston Professional Hockey Association, 443 Mass. at 280.
Rather, the standard under § 38(f) that applies to all sales other than sales of tangible personal property is best suited to attributing income from sales of electricity to the state in which appellant performed its income-producing activities.  That standard attributes a taxpayer's gross receipts from income-producing activity to the state in which the taxpayer incurs the greatest proportion of the costs of performing that activity.  In the present case, the Partnerships incurred all of their costs of performance in Rhode Island.  Accordingly, all of their receipts from the sale of electricity are properly attributable to Rhode Island and none to Massachusetts.
THE LEGISLATIVE HISTORY OF THE SALES TAX EXEMPTION FOR ELECTRICITY AND CASES IN OTHER CONTEXTS DO NOT ESTABLISH THAT ELECTRICITY IS TANGIBLE PERSONAL PROPERTY

The Commissioner cites legislative and judicial treatment of electricity in contexts other than the corporate excise to support his argument that electricity should be considered tangible personal property for purposes of the sales factor. As described below, these authorities are neither persuasive nor determinative.



SALES TAX TREATMENT OF ELECTRICITY
G.L. c. 64H, § 1 provides that "for purposes of this chapter," the phrase "'tangible personal property' shall also include gas, electricity and steam."  The Commissioner initially asserted, in his A&R determination letter and abatement denials, that this sales tax definition supported his treatment of electricity as tangible property for purposes of the corporate excise apportionment factor.  However, the sales tax definition is of little aid in analyzing the corporate excise apportionment statute at issue here.
First, § 1 explicitly provides that the definition applies "for purposes of this chapter," that is, the sales tax under Chapter 64H.  Limited just to the sales tax context, the provision represents nothing more than a legislative determination that retail sales of electricity should be subject to the sales tax.
Further, § 1 also provides that the definition of tangible personal property for sales tax purposes "also" includes electricity.  The clear implication of the use of the word "also" is that what follows is not simply a clarification of the general definition, but rather an addition to that definition.  The need for such an addition suggests that the Legislature understood that electricity would not fall within the general definition of tangible personal property.
In his post-trial brief, the Commissioner refined his argument by suggesting that an exemption from sales tax for sales of electricity that was enacted as part of the original sales tax statute in 1966 evidenced a Legislative recognition that electricity would otherwise be considered tangible personal property.  The Commissioner essentially argued that the Legislature, by initially providing that electricity should not be treated as tangible personal property under the 1966 version of G.L. c. 64H, § 6(i), revealed that it considered electricity to be tangible personal property.
The fundamental flaw in the Commissioner's initial argument is also present here.  The Legislature's 1966 sales tax exemption for electricity under § 6(i), like the current definition of tangible personal property under § 1, is applicable for sales tax purposes.  Accordingly, the 1966 exemption, like the current sales tax definition, represents a legislative determination of how sales of electricity should be treated under the sales tax, and sheds no light on whether the Legislature considered electricity to be "tangible personal property" for any other purpose.
Moreover, the Legislature's 1990 amendments to Chapter 64H that eliminated the exemption for sales of electricity belie the notion that the Legislature understood that the meaning of tangible personal property included electricity.  If, as the Commissioner argued, electricity was so clearly understood to be tangible personal property, the Legislature could simply have repealed or limited § 6(i), leaving electricity to be taxed as other tangible personal property.  Initially, the Legislature did just that, in emergency legislation that was enacted on July 18, 1990.  See St. 1990, c. 121, § 47.
The July 18, 1990 amendment to § 6(i) was to take effect on September 1, 1990.  St. 1990, c. 121, § 110.  However, prior to that effective date, on August 1, 1990, and only weeks after the amendment to § 6(i) was enacted, the Legislature made a further change.  Despite the already broad definition of tangible personal property, which included personal property of "any nature" including any "commodities whatsoever," the Legislature amended the definition to specifically include electricity.  See St. 1990, c. 150, § 359.  The specific inclusion of electricity would be superfluous if, as the Commissioner maintained, the Legislature understood the general meaning of tangible personal property to include electricity.  See, e.g. State Tax Commission v. LaTouraine Coffee Co., Inc., 361 Mass. 773, 778 (1972) (recognizing that "[n]one of the words of . . . [the] statute is to be regarded as superfluous" in determining legislative intent).
For the foregoing reasons, the Commissioner's reliance on sales tax definitions is not persuasive on the issue of whether electricity is tangible property for purposes of the corporate excise.  
PROPERTY TAX TREATMENT OF ELECTRICITY GENERATION

The Commissioner also argued that the generation of electricity has historically been treated as a "manufacturing" operation for purposes of the local property tax exemption under G.L. c. 59, § 5, cl. Sixteenth (3) and the investment tax credit for manufacturing corporations under G.L. c. 63, § 31A.  See, e.g., Assessors of Holyoke v. State Tax Comm'n, 355 Mass. 223, 227 (1969); Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 565 (1956); Boston & Maine R.R. v. Billerica, 262 Mass. 439, 447-49 (1928).  The Commissioner therefore asserts that the fact that electricity is manufactured indicates that it is tangible personal property.
That electricity is considered to be manufactured for purposes of a local property exemption and qualification for investment tax credits does not answer the question of whether it is tangible personal property.  The issue addressed in these cases is whether "manufacturing" was taking place.  "Manufacturing" has been defined as "the process of transforming raw or finished materials by hand or machinery, and through human skill and knowledge, into something possessing a new nature and name and adapted to a new use."  Commissioner of Corps. & Tax'n v. Assessors of Boston, 321 Mass. 90, 94 (1947).  There is nothing in the definition which supports the notion that only tangible products result from manufacturing.
In fact, as discussed above, Massachusetts courts have recognized that the generation of electricity is an example of a manufacturing process that results in the production of an intangible product. See Westinghouse, 382 Mass. at 358 (holding that Board's ruling that manufacturing status cannot be denied because end product is intangible "conformed to [court's] view that the production of electricity may entail manufacturing"); Houghton Mifflin, 423 Mass. at 48-9, and First Data Corporation, 371 Mass. at 446 (recognizing that cases that consider the production of electricity to involve manufacture counter the argument that the definition of manufacturing "contemplates corporeal or tangible input or output").
Accordingly, Massachusetts manufacturing cases not only fail to advance the Commissioner's position but in fact support the Board's ruling that electricity is commonly understood to be intangible.  
CASES HOLDING THAT ELECTRICITY IS A "COMMODITY" OR A "PRODUCT" ARE INAPPOSITE

The Commissioner cites a handful of cases in non-tax contexts to support his proposition that the general meaning of "tangible personal property" includes electricity.  These cases fail to establish such a proposition and instead serve to underscore the unique nature of electricity as something quite different from tangible property.
G.E. Lothrop Theatres Co. v. Edison Elec. Illuminating Co. of Boston, 290 Mass. 189 (1935) ("Lothrop Theatres"), involved a dispute between an electric company and a building owner over the recovery of certain electric charges billed to both the owner and its tenants.  The court noted that there "may be" cases where electricity would be considered "a commodity subject to sale and delivery rather than a service furnished by the generating company."  Lothrop Theatres, 290 Mass. at 193.  At a minimum, this observation indicates that the determination of whether electricity is a commodity or a services depends on the context in which the question is asked; it also can be read to suggest that the court's general understanding of electricity is that it is a service.
The court also said that when electricity is sold, it "may be conceded" that there is "something corresponding to delivery in the sale of a tangible chattel."  Id.  The need for analogy contradicts the Commissioner's claim that electricity is itself tangible personal property.  There is nothing in Lothrop Theatres that supports the notion that electricity is so commonly understood to be tangible that it must be so characterized generally or for corporate excise purposes.
In Town of Concord, Mass. v. Boston Edison Co., 676 F.Supp. 396 (D.Mass. 1988) ("Town of Concord"), the court addressed whether electricity was a "commodity" for purposes of the price restrictions under the Robinson-Patman Act, 15 U.S.C.A. § 13(a).  A "commodity" is not necessarily tangible personal property; in fact, it is considerably broader in scope.  See Opinion of the Justices, 408 Mass. 1201, 1206-11 (1990) (concluding that inclusion of the term "commodities" in Article 4 of the Massachusetts Constitution authorizes taxation of services).  In fact, the court in Town of Concord pointed out that "electricity is not an obviously tangible" item or product and acknowledged that "the average consumer of electricity" might well believe that "she is paying for a service rather than purchasing a product."  Id. at 398.  
The court's decision is based on considerations specifically relating to price restrictions under the Robinson-Patman Act, particularly whether electricity, like other items subject to those restrictions, "is a thing bought and sold in the marketplace."  Id.  The fact that the court determined that, except for not being "an obviously tangible item," "electricity is not significantly different from other items deemed commodities subject to the price discrimination prohibitions of antitrust laws" (Id.) does not mean that electricity should be treated as tangible personal property for purposes of the corporate excise apportionment formula.
The Commissioner's citation of a case holding that electricity is a "product" within the meaning of the strict liability rule in Restatement (Second), Torts, § 402A (1965) is also not helpful. The Wisconsin court in Ransome v. Wisconsin Elec. Power Co., 87 Wis.2d 605 (1979), while never using the term "tangible personal property," relied on public policy grounds to support its decision in favor of the consumer-plaintiff.  The public policy grounds supporting a ruling of strict liability have no relevance to the issue in the present appeals.
The remaining cases cited by the Commissioner, holding that electricity can be measured, add nothing to the analysis.  The fact that electricity can be measured is not contested and does not answer the question of whether it is tangible personal property.  If there is anything significant about the subject of measurability, it is that electricity is measured in a manner - the passage or use of current over time - that does not remotely resemble the measurements - height, weight, volume, number of items, etc. - that apply to items of tangible personal property.
EVEN IF ELECTRICITY IS PROPERLY CONSIDERED TANGIBLE PERSONAL PROPERTY FOR PURPOSES OF § 38(f), THE PARTNERSHIPS' SALES TOOK PLACE IN RHODE ISLAND, NOT MASSACHUSETTS

The tangible property rule under § 38(f) attributes sales to the state in which the taxpayer completes its delivery to the purchaser.  Under the Unit Power Agreements with the Purchasers, the Partnerships effected delivery of the electricity they generated and sold at a specific interconnection point with the NEPOOL grid, the EHV/PTF substation in Rhode Island.  At that point, the Purchasers took responsibility for further transmitting the electricity, including the cost of using all NEPOOL transmission facilities and the line losses from dissipation of power during transmission beyond the Rhode Island substation.  Accordingly, the Partnerships completed their delivery obligations, and the Purchasers took possession of the electricity, in Rhode Island.
The Commissioner argues that NEPOOL acted as a "common carrier" that "picked up electricity" from the Partnerships in Rhode Island and delivered it to customers in Massachusetts.  If a seller hires a "common carrier" to ship goods to a buyer, the sale occurs at the buyer's location, where the property is delivered to the buyer. See 830 C.M.R. 63.38.1(9)(c)1.  However, if a buyer "uses its own truck and driver or hires its own carrier to pick up" the property, the sale occurs at the seller's location, when the buyer or the carrier it hires picks up the property. Id.
Apart from the awkwardness of fitting the sale of electricity into a model that uses concepts such as "pick up," "truck," "driver," and "carrier," the common carrier analogy fails on a number of fronts.  First, the Purchasers, not the Partnerships, were members of NEPOOL that had both the right to use other NEPOOL members' transmission facilities and the contractual responsibility to transmit the electricity beyond the Rhode Island substation. To the extent that the NEPOOL grid could be considered a "truck" or "carrier," it was a carrier hired by the Purchasers that delivered the electricity.
Further, neither NEPOOL nor the NEPOOL transmission grid fit the definition of a "common carrier" which, according to Black's, is one who is: 
required by law to convey passengers or freight without refusal if the approved fee or charge is paid . . . One who holds himself out to the public as engaged in business of transportation of persons or property from place to place for compensation.

See also National Private Truck Council, Inc. v. Commissioner of Revenue, 426 Mass. 324, 325, n. 1 (1997) ("common carrier" is a "for-hire" transporter of goods).  There is nothing in the record to suggest that NEPOOL is required by law to make its facilities available to the general public or any non-member, such as the Partnerships, that is willing to pay the cost of transmission.  Only members, such as the Purchasers, that have accepted the terms of the NEPOOL Agreement may use the transmission grid.  Accordingly, to the extent that NEPOOL can be viewed as a "carrier" that "shipped" the electricity, it was the Purchasers, as members of NEPOOL that were also contractually responsible for transmitting the electricity beyond the Rhode Island substation, that "hired" the carrier.
	Further, the Partnerships cannot be considered as having a responsibility to deliver the electricity to retail customers because, unlike a seller that arranges for the shipment of goods to a purchaser, the Partnerships have no idea of the identity or location of the ultimate purchaser.  The ultimate destination of the electricity generated by the Partnerships is the location of the Purchasers' customers, if not the customers of the Purchaser's customers.  The identity and location of the Purchasers' wholesale and retail customers is not reasonably ascertainable by the Partnerships.  Accordingly, the Partnerships cannot be viewed as having "delivered" the electricity to these entities.
Accordingly, even if, contrary to the Board's finding and ruling, electricity is properly considered "tangible personal property" for purposes of § 38(f), the Partnerships' sales of electricity would still be attributable to Rhode Island, where their delivery obligation to the Purchasers was satisfied.  
CONCLUSION

On the basis of the foregoing, the Board ruled that electricity is not "tangible personal property" for purposes of the sales factor of the corporate excise apportionment formula under § 38(f).  Accordingly, the Partnerships' sales of electricity are attributed to the state in which the Partnerships incur the greatest proportion of their cost of performing their income-producing activity.  Because, on the basis of the record, the Partnerships incurred all of their costs of performance in Rhode Island, their receipts from electricity sales are properly treated as Rhode Island, not Massachusetts, sales.  Accordingly, no receipts are includible in the numerator of appellants' Massachusetts sales factors and, therefore, appellants' sales factors are zero. The Board, therefore, issued a decision for appellants in these appeals.
		
				THE APPELLATE TAX BOARD			

				By:	___________________________________
					Frank J. Scharaffa, Commissioner

					___________________________________
					Donald E. Gorton, III, Commissioner

					___________________________________
					Nancy T. Egan, Commissioner

					___________________________________
	James D. Rose, Commissioner
A true copy,

Attest:_____________________________
  	    Assistant Clerk of the Board

 The other appellants are National Grid USA Service Company, Inc. (formerly known as New England Power Service Company), TCPL OSP Ltd. (formerly known as Narragansett Energy Resources Company), TCPL OSL, Ltd. and TCPL Power Ltd.
 The periods at issue for each appellant are as follows:
EUA, tax years 1994 through 1998;
TCPL OSP, tax years 1994 and 1996 through 1998;
National Grid, tax years 1994, 1997 and 1998;
TCPL OSL, tax years 1997 and 1998;
TCPL Power, tax years 1994 through 1998.

 A second issue, which is moot if appellants prevail on the sales factor issue, is whether appellants should be taxed as utility corporations under G.L. c. 63, § 52A, rather than as business corporations under G.L. c. 63, §§ 32 and 39.
 Each of the Purchasers also purchased electricity from other sources and each of the Purchasers other than TCPM also generated electricity.
 Given the Board's ruling in favor of appellants on this issue, the issue of whether appellants should be taxed in Massachusetts as utility corporations under G.L. c. 63, § 52A, rather than as business corporations under G.L. c. 63, §§ 32 and 39, is moot.
 Pursuant to the so-called "throwback rule" under § 38(f), a sale of tangible personal property is also a Massachusetts sale if the tangible personal property is delivered or shipped to a purchaser outside the commonwealth, but the corporation is not taxable in the state of delivery and the property was not sold by an agent or agencies operating out of premises owned or rented by the corporation outside of Massachusetts. Neither party argued that the throwback rule was applicable to these appeals.
 Regarding sales of tangible personal property, § 25135 of the California Revenue & Tax Code provides that:
Sales of tangible personal property are in this state if:
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.
The property is shipped from an office, store, warehouse, factory, or other place of storage in this state and (1) the purchaser is the United States government or (2) the taxpayer is not taxable in the state of the purchaser.

   For sales of property other than tangible personal property, § 25136 of the California Revenue & Tax Code provides that:
Sales, other than sales of tangible personal property are in this state if:
The income-producing activity is performed in this state; or
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.

ATB 2006-240