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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1992
- **Citation:** 505 U.S. 214

## Text

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
~ii-

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

-16-

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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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0170%3A10. Public record. Not legal advice.