Peterson v. State Tax Assessor

Citation1999 ME 23,724 A.2d 610
PartiesThomas O. PETERSON and Christopher R. Peterson v. STATE TAX ASSESSOR.
Decision Date02 February 1999
CourtMaine Supreme Court

724 A.2d 610
1999 ME 23

Thomas O. PETERSON and Christopher R. Peterson
v.
STATE TAX ASSESSOR

Supreme Judicial Court of Maine.

Argued January 7, 1999.

Decided February 2, 1999.


724 A.2d 611
John M.R. Paterson (orally), Bernstein, Shur, Sawyer & Nelson, P.A., Portland, for plaintiff

Andrew Ketterer, Attorney General, Thomas A. Knowlton, Asst. Atty. Gen. (orally), Stanley W. Piecuch, Asst. Atty. Gen., Augusta, for defendant.

Before WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER, and CALKINS, JJ.

RUDMAN, J.

[¶ 1] Thomas O. Peterson and Christopher R. Peterson appeal from a summary judgment entered in the Superior Court (Cumberland County, Mills, J.) affirming the State Tax Assessor's income tax assessments against each of them. The Petersons contend that the court erroneously concluded that their activities in Maine on behalf of Peterson Dental Supply (PDS) from 1989 through 1992 were not exempt from Maine income tax by virtue of the provisions of 15 U.S.C. § 381 (1994).1 We disagree and affirm the judgment of the Superior Court.

[¶ 2] Thomas and Christopher are New Hampshire residents and the only partners of PDS, a New Hampshire general partnership formed in 1989. Although PDS has done business in Maine since 1989, neither the partnership nor its partners have filed Maine income tax returns. PDS realized total sales of approximately $619,000 in 1989; $893,000 in 1990; $873,000 in 1991; and $880,000 in 1992. During those years, Thomas made about five trips per month to Maine to visit his customers, and Christopher made about two trips per month. They each saw around twelve to fifteen customers per visit, and visited each Maine customer between six and ten times per year.

[¶ 3] The Maine Bureau of Taxation conducted an audit of PDS for the years 1989 through 1992, concluded that the Petersons were subject to Maine income tax, and separately imposed income tax, interest, and penalties on both Christopher and Thomas. The Petersons subsequently requested reconsideration, but the Assessor denied their requests. The Petersons appealed the Assessor's final administrative decisions to the Superior Court by filing petitions for judicial review, pursuant to 36 M.R.S.A. § 151 (1990 & Supp.1998);2 5 M.R.S.A. § 11002 (1989);

724 A.2d 612
and M.R.S.A. Civ. P. 80C. In their petitions, the Petersons argued that they were not subject to Maine income tax pursuant to 15 U.S.C. § 381(a)

[¶ 4] The Superior Court (Brennan, J.) ordered the actions consolidated. The Assessor filed a motion for a summary judgment that the Petersons were subject to Maine income tax. In response, the Petersons filed an opposition to the Assessor's motion for a summary judgment and a cross-motion for a summary judgment that their income was exempt from Maine income tax. In support of their cross-motion for a summary judgment, the Petersons argued that they were immune from Maine income tax under 15 U.S.C. § 381 because their in-state activities were either: (a) "solicitations of orders";3 or (b) merely "de minimis."

[¶ 5] The court concluded that the Petersons were not immune from Maine income tax because their disputed activities were neither: (a) "solicitations of orders"; nor (b) "de minimis."4 On that basis, the court granted the Assessor's motion for a summary judgment, denied the Petersons' cross-motion for a summary judgment, and affirmed the Assessor's assessment and decision on reconsideration. This appeal followed.

[¶ 6] We review the entry of a summary judgment "for errors of law, viewing the evidence in the light most favorable to the party against whom the judgment was entered." Landry v. Leonard, 1998 ME 241, ¶ 4, 720 A.2d 907, 908 (quotations omitted). We will uphold a summary judgment "if the evidence demonstrates that there is no genuine issue as to any material fact and that the moving party is entitled to [a] judgment as a matter of law." Id. (quotations omitted). "The function of a summary judgment is to permit a court, prior to trial, to determine whether there exists a triable issues of fact or whether the question before the court is solely one of law." Id. (quotations omitted). We review issues of law de novo. See Longley v. Knapp, 1998 ME 142, ¶ 10, 713 A.2d 939, 943.

[¶ 7] Maine law imposes an income tax on the portion of income that a nonresident derives from sources within the State. See 36 M.R.S.A. § 5142 (1990 & Supp.1998).5 Since partnerships are business entities not subject to income tax, Maine law imposes income tax on the individual nonresident partners. See 36 M.R.S.A. § 5190 (1990). However, the federal government's plenary

724 A.2d 613
power to regulate interstate commerce, pursuant to the commerce clause of the United States Constitution, limits Maine's broad authority to impose a net income tax on nonresidents who solicit interstate sales in Maine. See Great N. Nekoosa Corp. v. State Tax Assessor, 675 A.2d 963, 964-65 (Me.1996); Kennametal, Inc. v. Comm'r of Revenue, 426 Mass. 39, 686 N.E.2d 436, 438-39 (1997)

[¶ 8] Specifically, "[f]ederal law prevents a state from...

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    ...Tax Assessor, 2011 ME 52, 17 A.3d 1198 (three opinions); State v. Thonpon, 2008 ME 166, 958 A.2d 887 (two opinions); Peterson v. State Tax Assessor, 1999 ME 23, 724 A.2d 610; Stevens v. State Tax Assessor, 571 A.2d 1195 (Me. 1990); Green v. State Tax Assessor, 562 A.2d 1217 (Me. 1989). That......
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