A MICHIGAN court said in December that sales taxes must be paid on electricity sold to telephone companies.

Michigan collects a 6% sales tax on sales of “tangible personal property.” Electricity is considered tangible personal property. However, no tax is owed if the buyer will use the article sold in “industrial processing,” defined as “converting or conditioning tangible personal property for ultimate sale at retail or use in manufacturing of a product to be ultimately sold at retail.” In other words, the buyer must use the electricity to produce another form of tangible personal property that will be sold to consumers.

AT&T argued that it converts electricity into telephone signals. The court said telephone signals are a service rather than a tangible product that one can hold or feel.

The decision came in a case called MidAmerican Energy Co. v. Department of Treasury before the Michigan court of appeals. Detroit Edison, Consumers Energy and AT&T joined in the suit.