Amicus Curiae Brief — Wisconsin Dept. of Revenue v. William Wrigley, Jr., Co.

FILE

IN THE | OFFICE OF THE CLERK

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1991

WISCONSIN DEPARTMENT OF REVENUE,

Petitioner,

Vv.

WILLIAM WRIGLEY, JR. COMPANY,

Respondent.

AMICUS CURIAE BRIEF OF THE

CITY OF NEW YORK IN SUPPORT

OF WISCONSIN DEPARTMENT OF

REVENUE

O. PETER SHERWOOD,

Corporation Counsel of the

City of New York,

100 Church Street,

New York, New York 10007.

(212) 788-0842 or 0835.

EDWARD F. X. HART, *

FRANCES J. HENN,

STANLEY BUCHSBAUM,

of Counsel.

November 21, 1991.

*Counsel of Record.

TABLE OF CONTENTS

Page

Interest of the Amicus Curiae _....... 1

Facts Relied Upon ........ccccccscees 2

ARGUMENT

A PROPERLY APPORTIONED

NON - DISCRIMINATORY INCOME

TAX MAY BE IMPOSED BY A

STATE OR CITY IN WHICH

TANGIBLE PERSONAL PROPERTY

IS SOLD BY DELIVERY ACROSS

INTERSTATE BOUNDARIES,

WHERE THE ACTIVITIES OF THE

VENDOR IN THAT STATE OR

CITY GO BEYOND MERE

SOLICITATION OF ORDERS.......

a. The federal law and its

background _...............

b. The claimed "de minimis"

extension of the immunity

c. Additional reasons showing

that the immunity provision

does not apply

GREE Shs bees eb ecerecccocvecoces

TABLE OF CASES

Cases Page

Brown-Forman Distill, Corp. v.

Collector of Revenue, 234 La.

651, 101 So.2d 70 (1958) cee eeee 7

Brown-Forman Distill. Corp. v.

Collector of Revenue,

359 U.S. 28 (1959) wc ccc cece eee 7

Gillette Co, v. Tax Comm.,

56 AD 2d 475 (3d Dept., 1977),

affd., 45 NY2d 846 (1978) eocecccces 18

Heublein, Inc. v. South Carolina

Tax Commn., 409 U.S. 275

ccc ec cccccess 17

Northwestern Cement Co. vy.

Minnesota, 358 U.S. 450

DTT TOSREGGESGSCC Seer eccceecccece 5

Wrigley v. Dept. of Revenue,

160 Wis.2d ri, 465 N.W.2d 800 (1991),

153 Wis.2d 559,

451 N.W.2d 444 rrr 2

LAW AND AUTHORITIES

Page

N.Y.C. Administrative Code

SS SPST ITIESETETE EE 2

ET sh cep ecleecccccee 2

N.Y. Laws 1966 ch. 772 .........00005. 2

Webster's Third New International

Ps Se ececncccccceeccoces 16

1959 U.S. Code Congressional and

Administration News, vol.2 ....... 8-13

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No, 91-119

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1991

WISCONSIN DEPARTMENT OF REVENUE,

Petitioner,

Vv.

WILLIAM WRIGLEY, JR. COMPANY,

Respondent.

BRIEF OF AMICUS CURIAE

CITY OF NEW YORK

ee ae ee

Interest of the Amicus Curiae

Pursuant to Rule 37.5, the City of New

York, as a political subdivision of the State

of New York, is exercising the right to file

a brief amicus curiae in support of the

position of the Wisconsin Department of

Revenue.

The City's interest in the case stems

from the fact that similar questions of tax

liability arise under tax laws which it

imposes. The City imposes a tax based on

the net income of a corporation. N.Y.C,

Administrative Code, Title 11, ch. 6,

subch.2. The State of New York authorized

the imposition of this City tax. N.Y. Laws

1966, ch. 722. The City also imposes an

unincorporated business net income tax.

N.Y.C. Admin, Code, Title 11, Ch. 5. This

also was authorized by New York Laws of

1966, chapter 772.

Facts Relied on

We adopt the statement of relevant facts

as stated in the opinion of the Wisconsin

Supreme Court. Wrigley v. Dept. of Rev.,

160 Wis. 2d 53, 465 N.W.2d 800 (1991). We

rely also on those facts as more fully

developed in the opinion of Wisconsin's

intermediate appellate court, the Court of

Appeals. 53 Wis.2d 559, 451 N.W.2d 444

(1989).

ARGUMENT

A PROPERLY APPORTIONED

NON - DISCRIMINATORY INCOME

TAX MAY BE IMPOSED BY A

STATE OR CITY IN WHICH

TANGIBLE PERSONAL PROPERTY

IS SOLD BY DELIVERY ACROSS

INTERSTATE BOUNDARIES,

WHERE THE ACTIVITIES OF THE

VENDOR IN THAT STAT” OR

CITY GO BEYOND MERE

SOLICITATION OF ORDERS.

a. § The federal law and its background

(1)

Public Law 86-272, codified in 15

U.S.C. 381, was enacted in 1959. In effect,

it bars a State or a political subdivision

thereof from imposing a net income tax on

income derived in the State by any person

from interstate commerce "if the only

business activities" within the State are

either: (1) “the solicitation of orders" for

sales of tangible personal property with the

orders sent outside the State "for approval

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i

or rejection" and with the approved order

"filled by shipment or delivery" from a point

outside the State, or

(2) the solicitation of orders in the

name of or for the benefit of a prospective

customer of such person if the orders when

filled are in accordance with the

requirements of paragraph (1).

Thus, the bar against imposition of a

net income tax applies "only" when all that

occurs in the State is "solicitation" with

orders accepted or rejected outside the State

and with delivery of the goods ordered,

shipped or delivered from outside the State.

The law narrowly confines the prohibition,

and its history shows a clear intent to so

confine it.

(2)

The language limiting the prohibition in

the statute is clear and unambiguous. This

makes it unnecessary to consider’ the

-4-

background or history leading to _ its

enactment. We shall, however, review it to

show that an extremely narrow restriction

was intended.

In Northwestern Cement Co. Vv.

Minnesota, 358 U.S. 450 (1959), this Court

upheld income taxes imposed by two States

on net income from exclusively interstate

operations of foreign corporations. In one

State the taxed corporation engaged in a

regular and systematic course of solicitation

with the orders being subject to acceptance,

filling and delivery from its plant outside the

taxing State. In the taxing State it leased

an office, equipped with its own furniture

and fixtures, which was used by one

salesman, another salesman, who was a

district manager, and a_ secretary. Two

additional salesmen used the office as a

clearing house. Two cars were furnished to

these salesmen. The salesmen also received

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and transmitted to their employer claims for

loss or damage in any shipments.

In the other State the vendor had

salesmen, who carried on the usual sales

activities, including regular _ solicitation,

receipt and forwarding of orders, as well as

promoting the business and good will of the

vendor. It also had an office for one

salesman and a full-time secretary. Other

than office equipment, supplies or

advertising literature and the like, the

vendor had no property in the State. All

orders were subject to approval by the out

of state home office and were shipped from

there on an "f.o0.b. warehouse basis."

In the first paragraph of this Court's

opinion, the Court said (358 U.S. at 452):

"We conclude that net income from

the interstate operations of a

foreign corporation may be

subjected to state taxation

provided the levy is not

discriminatory and _ is_ properly

apportioned to local activities

within the taxing State forming

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sufficient nexus to support the

same."

In Brown-Forman Distill. Corp. vy.

Collector of Revenues, 234 La. 651, 101

So.2d 70 (1958), a Kentucky distilling

corporation was held subject to a Louisiana

income tax on its income from that State.

The distiller's activities in Louisiana

consisted of having "missionary men", who

called on wholesale dealers and who, on

occasion, accompanied salesmen of _ these

wholesalers to assist them in obtaining

orders from retail dealers. An appeal was

taken to this Court. It was dismissed and,

treating it as a petition for certiorari, the

petition was denied. Brown-Forman vy.

Collector of Revenue, 359 U.S. 28 (1959).

In light of the decisions in_ the

Northwestern case, the sentence in_ the

opinion which we have quoted, and _ the

refusal of this Court to review the Louisiana

case, businesses began to fear that the long

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established rule that a tax could not be

imposed simply because drummers_ or

salesmen came into the taxing state was

about to be overruled. They lobbied

Congress for a law designed to prevent that

from happening. As a result, Public Law

86-272 was enacted.

(3)

The Senate Report on the bill which

was enacted and the Conference Report on it

prepared by managers on the part of the

House of Representatives are more readily

found in the 1959, Volume 2, of the United

States Code Congressional and Administrative

News at pages 2548 to 2561.

The Senate Report, at the outset,

states that the bill is designed to deal with

the problem arising by reason of _ the

Northwestern case, and it also refers to the

refusal to review the Brown-Furman case in

Louisiana. It pointed out that businesses

were afraid that "mere solicitation of orders

[would] be regarded as a local activity

forming a sufficient 'nexus' with the State”

to permit the imposition of taxes (p.2551).

The Report made it clear that the bill

was designed to prevent mere _ solicitation

from becoming the sole basis for imposing

the tax. In its "DETAILED DESCRIPTION

OF COMMITTEE'S BILL", it repeats, at least

four times, that the exemption or immunity

from the tax applies "only" or "merely"

where all that is done in the State is

solicitation (pp. 2552, 2553, 2554). The

bill, however, treats a sales office in the

State of the sale as a part of solicitation (p.

2553). It states that the immunity granted

will not be available if the business activities

by salesmen are not limited to the solicitation

of orders, and it goes on to note that it will

not be available "where the orders are filled

by a shipment or delivery from a stock of

goods, warehouse, plant, or factory

maintained by the person within the State

(p. 2553).

(4)

The short conference report prepare by

managers for the House of Representatives

also emphasizes that the bill is designed to

give immunity "where the only business

activity within the State by the out-of-State

company was solicitation" (p.2560).

(5)

The use of the word "only" to describe

the solicitation which will grant immunity in

the statute enacted, therefore, follows the

intent of the drafters of the bill.

The claimed "de minimis" extension of

the immunity.

b.

The vendor concedes that its activities

in Wisconsin were not "only" the solicitation

of orders, but urges that the additional

activities were "de minimis" or trifles. It

cannot be denied that every rule of law and

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every statute may be subject to a "de

minimis" exception. Where, however, the

statute provides immunity if the "only"

activity is solicitation, a de minimis exception

would apply solely to the most

inconsequential activity. The extreme limit of

what would be regarded as inconsequential is

indicated not only by the language of the

statute, but by the intent of its drafters.

It should be noted that the statute

specifies certain exceptions to the mere

solicitation limitation. Thus, neither the use

of an independent contractor to make sales

nor the maintenance of an office used solely

for making sales or soliciting orders is to be

treated as removing the exemption [15

U.S.C. §381(c)]. Specifying these activities

and mentioning no others indicates how very

slight any possible de minimis exception

would have to be. This is also shown by

the requirement that, in addition to mere

-ll-

solicitation, the "orders are [to be] sent

outside the State for approval or rejection"

and must be "filled by shipment or delivery

from a point outside the State" [15 U.S.C.

§381 (a)(1)].

The drafters indicated that conduct

going beyond solicitation would not be

protected by the immunity being granted.

They stated that it "will not be available to

a person, however, if the business activities

by salesmen within the State” are not limited

to the "solicitation" of orders (p. 2553). It

was noted that, while the immunity would

extend to the use of a sales office, it would

not be available if its primary purpose and

use were other than for sales purposes (pp.

2553-2554). The Report repeatedly states

that the exemption applies only where the

sole activity in the State is solicitation or

the use of an independent contractor or

sales office, but it goes on to state that

-12-

whether any other activity constitutes a

basis for imposing the tax is left "for future

determination by the Congress, or in the

absence of congressional action, by the

courts" (p. 2554).

The Wisconsin Supreme Court, in part,

escaped "de minimis" by ruling that any

activity incidental to or inextricably bound

to solicitation was to be _ treated as

solicitation; still other activities were treated

as de minimis (465 N.W.2d at 811). The

definition of solicitation ascribed by the

Wisconsin Court flies in the face of the terms

of the statute. If the intent had been to

treat activities incidental or inextricably

bound to solicitation as being covered by

that term, it would be inconsistent with the

explicit statement that, for the exemption to

apply, the orders must be sent out of the

State for approval or rejection and that they

must be filled by shipment or delivery from

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a point outside the State. Both such

matters are incidental to or inextricably

bound to solicitation. Where matters relating

to solicitation were to be given’ the

exemption, the law specifically so provided,

as in the case of independent contractors or

sales offices.

Even if, despite all of the indications of

the limited nature of the exemptions, de

minimis could be applied, it could reasonably

be used only where the exception was

extremely minimal. Moreover, where there

are a number of activities which, if treated

individually, might be regarded as_ de

minimis, the aggregation of these activities

falls in a different category. Otherwise the

"only" restriction in the statute limiting it to

solicitation would become meaningless.

Here we have the following activities

which have been treated as either an element

-14-

of solicitation or as de minimis by the Court

below:

Replacement of stale gum by stock

in the hands of the salesmen;

Sales of gum and its immediate

transfer to fill racks when making

“agency stock checks;"

Regular and _ periodic training

seminars held in Wisconsin;

Maintaining product displays both

as to location and design;

Recommending hiring, firing and

raises by a regional manager in

Wisconsin;

Involvement in credit transactions

by regional manager;

and the rental of some _ storage

space in Wisconsin for’ several

months to store a representative's

car and supplies (each

representative carried a supply of

gum with a wholesale value of

approximately $1000).

These activities in Wisconsin exceeding

mere solicitation, especially when taken

together, cannot be disregarded as_ de

minimis or trifling under a law which limits

the exemption to those whose sole activity in

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the State is "only" solicitation. The limited

nature of the exemption does not have to

rest on any canon of statutory construction.

It is called for by the terms of the statute

and the clear intention shown by its history.

There is no sound basis for treating

the listed activities as simply "solicitation."

Since the sole aim of a vendor of tangible

goods is to sell those goods, any activity in

the selling state, no matter how extensive,

could, under such an interpretation, be

deemed merely an element of solicitation.

The only relevant definition of "solicit"

in Webster's Third New _ International

Dictionary reads as follows:

"to make petition to: ENTREAT,

IMPORTUNE (to the king for

relief): esp: to approach with a

request or plea (as in selling or

begging) **."

The statute itself, especially when read

in light of its history, makes clear that the

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term "solicitation" was not intended to be so

broadly interpreted.

c. Additional reasons showing that the

immunity provision does not apply.

(1)

Although Heublein, Inc. v. South

Carolina Tax Comm'n, 409 U.S. 275 (1972),

the only case decided by this Court

involving Public Law 86-272, involves a

somewhat different issue, the opinion

emphasizes the limited nature of the

exemption from State tax which the statute

provides. The Court pointed out, quoting

from an earlier case, that "unless Congress

conveys its purpose clearly, it will not be

deemed to have significantly changed the

Federal-State balance." (pp. 281-282)

(2)

To treat the exemption as extending to

any activity which advances or assists in the

sale of goods would not only expand the

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narrow limits of the law, but would go far

beyond the stated intent of the drafters.

Instead of preventing an interstate seller

from being disadvantaged, it would give him

a tremendous advantage over a_ local

manufacturer or wholesale vendor. The

interstate vendor would escape the income

tax placed on local industry even though he

went beyond mere salesmanship in the State

and acted, so far as customers are

concerned, as though all activities relating

to them were the same as those of local

sellers.

(3)

The case of Gillette Co. v. Tax Comm.,

56 AD2d 475 (1977), affd., 45 NY2d 846

(1978), is in no way inconsistent with our

position. In that case the vendor had no

property in New York other than salesmen's

samples. The ground on which the tax was

imposed was the vendor's efforts to induce

-~18-

sales by advising retailers (who do not buy

directly from Gillette Co. but § from

wholesalers who buy from them) with regard

to “display techniques" (56 AD 2d at pp.

481-482). The New York court concluded

that "some sort of calls upon direct accounts

was expressly anticipated and condoned by

the statute" (ibid.).

CONCLUSION

THE JUDGMENT BELOW SHOULD

BE REVERSED.

Respectfully submitted,

O. PETER SHERWOOD,

Corporation Counsel of

the City of New York,

Attorney for Amicus Curiae

City of New York.

Edward F. X. Hart,*

Frances J. Henn,

Stanley Buchsbaum,

of Counsel.

November 21, 1991.

* Counsel of record.

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