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Pennsville Commercial Land, Inc. v. Conectiv, Inc.

A-2441-03T5 (N.J. Super. App. Div. 2004) (Unpublished)

TAXATION; UTILITIES—Monies received by a utility company for extending or relocating power lines and poles is taxable to the utility and the tax may be used to “gross-up” the company’s charge to the requesting customer.

A developer leased a property for the construction, display, and maintenance of billboards to be subleased to third parties. The developer contacted a local electric company to install an underground line from an existing power source so as to have power at the site and to illuminate its billboards. The electric company charged the developer at rates that included federal and state taxes. The developer sued the electric company, alleging that the electric company had violated its tariff by charging the developer for taxes associated with its payment of contributions in aid of construction (CIAC).

The Administrative Law Judge (ALJ) first concluded that the company’s tariff provided that the tax gross-up charges were the responsibility of the developer. The tariff stated that neither the municipality nor its citizens were responsible for the costs of such a project, including for the taxes. Furthermore, the ALJ reasoned that since the electric company’s tax obligations could either be borne by all the ratepayers or by the primary beneficiary of the project, common law rightly assigned those costs to the particular customer whose requests for electric services resulted in the CIAC and the ensuing tax obligations. The Board of Public Utilities (BPU) adopted the ALJ’s decision, and the Appellate Division affirmed the BPU’s decision.

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