505 U.S. 214 (1992), 91-119, Wisconsin Department of Revenue v. William Wrigley, Jr., Co.

Docket Nº:No. 91-119
Citation:505 U.S. 214, 112 S.Ct. 2447, 120 L.Ed.2d 174, 60 U.S.L.W. 4622
Party Name:Wisconsin Department of Revenue v. William Wrigley, Jr., Co.
Case Date:June 19, 1992
Court:United States Supreme Court

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505 U.S. 214 (1992)

112 S.Ct. 2447, 120 L.Ed.2d 174, 60 U.S.L.W. 4622

Wisconsin Department of Revenue


William Wrigley, Jr., Co.

No. 91-119

United States Supreme Court

June 19, 1992

Argued Jan. 22, 1992



During 1973-1978, respondent chewing gum manufacturer, which is based in Chicago, sold its products in Wisconsin through a sales force consisting of a regional manager and various "field" representatives, all of whom engaged in various activities in addition to requesting orders from customers. Wisconsin orders were sent to Chicago for acceptance, and were filled by shipment through common carrier from outside the State. In 1980, petitioner Wisconsin Department of Revenue concluded that respondent's in-state business activities during the years in question had been sufficient to support imposition of a franchise tax. Respondent objected to the assessment of that tax, maintaining that it was immune under 15 U.S.C. § 381(a), which prohibits a State from taxing the income of a corporation whose only business activities within the State consist of "solicitation of orders" for tangible goods, provided that the orders are sent outside the State for approval and the goods are delivered from out-of-state. Ultimately, the State Supreme Court disallowed the imposition of the tax.

Held: Respondent's activities in Wisconsin fell outside the protection of § 381(a). Pp. 220-235.

(a) In addition to any speech or conduct that explicitly or implicitly proposes a sale, "solicitation of orders" as used in § 381(a) covers those activities that are entirely ancillary to requests for purchases -- those that serve no independent business function apart from their connection to the soliciting of orders. The statutory phrase should not be interpreted narrowly to cover only actual requests for purchases or the actions that are absolutely essential to making those requests, but includes the entire process associated with inviting an order. Thus, providing a car and a stock of free samples to salesmen is part of the "solicitation of orders," because the only reason to do it is to facilitate requests for purchases. On the other hand, the statutory phrase should not be interpreted broadly to include all activities that are routinely, or even closely, associated with solicitation or customarily performed by salesmen. Those activities that the company would have reason to engage in anyway, but chooses to allocate to its in-state sales force, are not covered. For example, employing salesmen to repair or service the company's products is not part of the "solicitation of orders," since there is

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good reason to get that done whether or not the company has a sales force. Pp. 223-231.

(b) There is a de minimis exception to the activities that forfeit § 381 immunity. Whether a particular activity is sufficiently de minimis to avoid loss of § 381 immunity depends upon whether that activity establishes a nontrivial additional connection with the taxing State. Pp. 231-232.

(c) Respondent's Wisconsin business activities were not limited to those specified in § 381. Although the regional manager's recruitment, training, and evaluation of employees and intervention in credit disputes, as well as the company's use of hotels and homes for sales-related meetings, must be viewed as ancillary to requesting purchases, the sales representatives' practices of replacing retailers' stale gum without cost, of occasionally using "agency stock checks" to sell gum to retailers who had agreed to install new display racks, and of storing gum for these purposes at home or in rented space [112 S.Ct. 2450] cannot be so viewed, since those activities constituted independent business functions quite separate from the requesting of orders, and respondent had a business purpose for engaging in them whether or not it employed a sales force. Moreover, the nonimmune activities, when considered together, are not de minimis. While their relative magnitude was not large compared to respondent's other Wisconsin operations, they constituted a nontrivial additional connection with the State. Pp. 232-235.

160 Wis.2d 53, 465 N.W.2d 800, (1991) reversed and remanded.

SCALIA, J., delivered the opinion of the Court, in which WHITE, STEVENS, SOUTER, and THOMAS, JJ., joined, and in Parts I and II of which O'CONNOR, J., joined. O'CONNOR, J., filed an opinion concurring in part and concurring in the judgment, post, p. 236. KENNEDY, J., filed a dissenting opinion, in which REHNQUIST, C.J., and BLACKMUN, J., joined, post, p. 236.

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SCALIA, J., lead opinion

JUSTICE SCALIA delivered the opinion of the Court.

Section 101(a) of Public Law 86-272, 73 Stat. 555 (1959), 15 U.S.C. § 381, prohibits a State from taxing the income of a corporation whose only business activities within the State consist of "solicitation of orders" for tangible goods, provided that the orders are sent outside the State for approval and the goods are delivered from out-of-state. The issue in this case is whether respondent's activities in Wisconsin fell outside the protection of this provision.


Respondent William Wrigley, Jr., Co. is the world's largest manufacturer of chewing gum. Based in Chicago, it sells gum nationwide through a marketing system that divides the country into districts, regions, and territories. During the relevant period (1973-1978), the Midwestern district included a Milwaukee region, covering most of Wisconsin and

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parts of other States, which was subdivided into several geographic territories.

The district manager for the Midwestern district had his residence and company office in Illinois, and visited Wisconsin only six to nine days each year, usually for a sales meeting or to call on a particularly important account. The regional manager of the Milwaukee region resided in Wisconsin, but Wrigley did not provide him with a company office. He had general responsibility for sales activities in the region, and would typically spend 80-95% of his time working with the sales representatives in the field or contacting certain "key" accounts. The remainder of his time was devoted to administrative activities, including writing and reviewing company reports, recruiting new sales representatives, making recommendations to the district manager concerning the hiring, firing, and compensation of sales representatives, and evaluating their performance. He would preside at full-day sales strategy meetings for all regional sales representatives once or twice a year. The manager from 1973 to 1976, John Kroyer, generally held these meetings in the "office" he maintained in the basement of his home, whereas his successor, Gary Hecht, usually held them at a hotel or motel. (Kroyer claimed income tax deductions for this office, but Wrigley did not reimburse him for it, though it provided a filing cabinet.) Mr. Kroyer also intervened two or three times a year to help arrange a solution to credit disputes between the Chicago office and important local accounts. Mr. Hecht testified that he never engaged in such activities, although Wrigley's formal position description for regional sales manager continued to list as one of the assigned duties "[r]epresent[ing] the company on credit problems as necessary."

[112 S.Ct. 2451] The sales or "field" representatives in the Milwaukee region, each of whom was assigned his own territory, resided in Wisconsin. They were provided with company cars, but not with offices. They were also furnished a stock of gum

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(with an average wholesale value of about $1000), a supply of display racks, and promotional literature. These materials were kept at home, except that one salesman, whose apartment was too small, rented storage space at about $25 per month, for which he was reimbursed by Wrigley.

On a typical day, the sales representative would load up the company car with a supply of display racks and several cases of gum, and would visit accounts within his territory. In addition to handing out promotional materials and free samples, and directly requesting orders of Wrigley products, he would engage in a number of other activities which Wrigley asserts were designed to promote sales of its products. He would, for example, provide free display racks to retailers (perhaps several on any given day), and would seek to have these new racks, as well as preexisting ones, prominently located. The new racks were usually filled from the retailer's existing stock of Wrigley gum, but it would sometimes happen -- perhaps once a month -- that the retailer had no Wrigley products on hand and did not want to wait until they could be ordered from the wholesaler. In that event, the rack would be filled from the stock of gum in the salesman's car. This gum, which would have a retail value of $15 to $20, was not provided without charge. The representative would issue an "agency stock check" to the retailer, indicating the quantity supplied; he would send a copy of this to the Chicago office or to the wholesaler, and the retailer would ultimately be billed (by the wholesaler) in the proper amount.

When visiting a retail account, Wrigley's sales representative would also check the retailer's stock of gum for freshness, and would replace stale gum at no cost to the retailer. This was a regular part of a representative's duties, and at any given time up to 40% of the stock of gum in his possession would be stale gum that had been removed from retail stores. After accumulating a sufficient amount of stale product, the representative either would ship it back to

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Wrigley's Chicago office or would dispose of it at a local Wisconsin landfill.

Wrigley did not own or lease real property in Wisconsin, did...

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