February 01, 2004 | By Keith Martin in Washington, DC

Pennsylvania said independent power companies must pay a gross receipts tax on sales of electricity directly to end users.

Solar Turbines, Inc. — a subsidiary of Caterpillar — owned a gas turbine in York County, Pennsylvania that it used to supply electricity to Caterpillar at cost. Pennsylvania collects a gross receipts tax of 44 mills per dollar on gross revenue from the sale of electricity by any “electric light company.” The tax only applies to retail sales — not wholesale. Solar Turbines argued that the tax only applies to utilities and not independent generators. A Pennsylvania court disagreed in late January. The case is Solar Turbines Inc. v. Commonwealth of Pennsylvania.

Solar Turbines supplied some of its electricity to Metropolitan Edison, the local electric utility. The court said that taxes did not have to be paid on this electricity because the supply to Met Ed was not a retail sale.

Keith Martin