William Wrigley, Jr., Co. v. Wisconsin Dept. of Revenue

• Decision Date: 07 December 1989
• Docket Number: No. 88-2265,88-2265
• Citation: 153 Wis.2d 559,451 N.W.2d 444
• Parties: WILLIAM WRIGLEY, Jr., CO., Petitioner-Respondent, v. WISCONSIN DEPARTMENT OF REVENUE, Appellant. WISCONSIN DEPARTMENT OF REVENUE, Petitioner-Appellant, v. WILLIAM WRIGLEY, Jr., CO., Respondent.d
• Court: Wisconsin Court of Appeals

Page 444

451 N.W.2d 444

153 Wis.2d 559

WILLIAM WRIGLEY, Jr., CO., Petitioner-Respondent, v. WISCONSIN DEPARTMENT OF REVENUE, Appellant.

WISCONSIN DEPARTMENT OF REVENUE, Petitioner-Appellant, v. WILLIAM WRIGLEY, Jr., CO., Respondent.d

No. 88-2265.

Court of Appeals of Wisconsin.

Submitted on Briefs July 18, 1989.

Opinion Released Dec. 7, 1989.

Opinion Filed Dec. 7, 1989.

Donald J. Hanaway, Atty. Gen. by F. Thomas Creeron, Asst. Atty. Gen., Madison, on briefs, for appellant.

Barbara J. Janaszek and Thomas E. Lange of Whyte & Hirschboeck S.C., Milwaukee and H. Randolph Williams of Baker & McKenzie, Chicago, on briefs, for petitioner-respondent.

Before EICH, C.J., GARTZKE, P.J., and DYKMAN, J.

EICH, Chief Judge.

The Wisconsin Department of Revenue appeals from an order reversing a decision of the Tax Appeals Commission. The commission upheld a franchise tax assessment against the William Wrigley, Jr., Company, an Illinois manufacturer of chewing gum which markets its products in Wisconsin and other states. The department assessed taxes and delinquent interest for the years 1973 through 1978, and Wrigley appealed to the commission on grounds that the assessment was prohibited by federal law. The commission upheld the assessment, but ruled that the department had applied an improper rate of interest. On review, the circuit court reversed and the department appealed.

The issues are: (1) whether the assessment is barred by the provisions of 15 U.S.C. sec. 381 (1988), allowing state taxation of income from interstate commerce only if the company's business activity within the state exceeds the "solicitation of [sales] orders"; and (2) if not, whether the assessed taxes were "delinquent" within the meaning of sec. 71.10(9), Stats. (1985-86), so as to justify application of an eighteen percent (1.5 percent per month) interest rate on the balance due. The trial court, voiding the assessment, did not reach the question of the proper interest rate. An ancillary issue concerns the scope of our review--whether we owe any deference to the commission's interpretation of a federal law.

We conclude that while we owe no deference to the commission in this instance, it nonetheless correctly determined that the assessment was not barred by federal law. We also conclude that the department applied the correct rate of interest. We therefore reverse the order of the trial court and remand with directions to enter an order affirming the commission's decision on the validity of the assessment and reversing its determination on the appropriate rate of interest to be applied to the assessment.

I. SCOPE OF REVIEW

The parties agree, as did the trial court, that the primary issue is the interpretation of 15 U.S.C. sec. 381--particularly the scope and meaning of the term "solicitation of orders."

We employ different standards for reviewing the findings of fact and conclusions of law of administrative agencies. The agency's factual findings will be upheld if supported by substantial evidence in the record. Sec. 227.57(6), Stats. The construction of a statute, however, is a question of law. Generally, we decide such questions independently, owing no deference to the trial court or administrative tribunal. In Interest of C.A.K., 147 Wis.2d 713, 715, 433 N.W.2d 298, 299 (Ct.App.1988).

Exceptions are made, however, for administrative agencies' interpretations of statutes they are charged by law to administer and enforce. In such situations the agency's interpretation of the statute is entitled to great weight if it reflects a practice or position long continued, substantially uniform and without challenge by governmental authorities and courts. School Dist. of Drummond v. WERC, 121 Wis.2d 126, 132-33, 358 N.W.2d 285, 288-89 (1984). Where this is the case, we will sustain the agency's interpretation if it has any rational basis. Id. at 132-33, 358 N.W.2d at 288.

Even where the higher "great weight" standard of deference is inapplicable, courts will accord "due deference" to an agency's application of the law to found facts when the agency has particular competence or expertise in the matter at hand Dept. of Revenue v. Milwaukee Refining Corp., 80 Wis.2d 44, 48, 257 N.W.2d 855, 857 (1977), or where the decision is intertwined with value and policy judgments appropriate to the agency's administration of the underlying law. Transp. Dept. v. Transp. Com'r, 135 Wis.2d 195, 199, 400 N.W.2d 15, 16 (Ct.App.1986). But no such deference is required where the courts are as competent as the agency to decide the question presented. Milwaukee Refining Corp., 80 Wis.2d at 48, 257 N.W.2d at 858.

Under more usual circumstances, we would accord some deference to the commission's decision in this case, based as it is on the interpretation of a law in a field in which it has expertise. Here, however, the statute subject to interpretation is an act of Congress, not a law created by the Wisconsin Legislature. Like all administrative agencies, the commission was created, structured and empowered by the legislature for the primary purpose of "determin[ing] ... all questions of law and fact arising under [specified provisions of the Wisconsin Statutes]." Sec. 73.01(4)(a), Stats. But whatever deference may be appropriate to the interpretation of particular sections of the Wisconsin Statutes by an agency created by the Wisconsin Legislature to do just that, we fail to see how or why similar deference should be accorded to the agency's interpretation of federal law.

The department responds with a brief reference to two cases, both cited for the proposition that deference must be paid in such a situation: Tecumseh Products Co. v. Wisconsin E.R. Board, 23 Wis.2d 118, 127-29, 126 N.W.2d 520, 524-25 (1964), and Milwaukee v. ILHR Department, 106 Wis.2d 254, 257-59, 316 N.W.2d 367, 369-70 (1982). We do not read either case as so holding. Tecumseh Products involved the Wisconsin Employment Relations Board's interpretation of the word "job" in a collective bargaining agreement, and the court appropriately paid deference to the board's expertise in construing such agreements. The Tecumseh Products court's reference to "federal law" had nothing to do with the scope of review of the agency's interpretation. It was simply a statement in another section of the opinion that the board "ha[d] jurisdiction to apply federal common law of collective-bargaining agreements in resolution of disputes under [Wisconsin Statutes]." Id., 23 Wis.2d at 129, 126 N.W.2d at 525.

The reference to Milwaukee v. ILHR Dept., is similarly unavailing, for there the court's reference to the deference to be accorded the agency's interpretation referred to its interpretation of a Wisconsin statute. Id., 106 Wis.2d at 257, 316 N.W.2d at 369. The reference to "federal law" was included only to illustrate the statute's conformity with federal statutes. Id., 106 Wis.2d at 259, 316 N.W.2d at 370.

We conclude, therefore, that whatever deference we may owe to a state agency's expertise and function when it interprets acts of the Wisconsin Legislature, no such deference is owed when the agency is interpreting statutes or rules of the federal government.

II. 15 U.S.C. SEC. 381 AS A BAR TO THE ASSESSMENT

The commission, after discussing the facts of Wrigley's business activities within the state, concluded that 15 U.S.C. sec. 381 did not prohibit assessment of Wisconsin franchise taxes to the company because its Wisconsin activities comprised more than the mere "solicitation of orders" within the meaning of the law. In so deciding, it adopted and applied a set of guidelines prepared by the Multistate Tax Commission (MTC), an association of state revenue officials, to the facts of Wrigley's activities in Wisconsin. The parties spend considerable time arguing the propriety of the commission's use of such extralegal "guidelines" as the benchmark for its decision here. While we share Wrigley's concern that the commission may have exceeded its authority by doing so, because we review its conclusions de novo we need not decide the propriety of its use of the MTC materials.

It is generally accepted that 15 U.S.C. sec. 381 was enacted in response to the decision of the United States Supreme Court in Northwestern Cement Co. v. Minn., 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421 (1959), and its denial of certiorari in Brown-Forman Distill. Corp. v. Collector of Revenue, 234 La. 651, 101 So.2d 70 (1958), cert. denied, 359 U.S. 28, 79 S.Ct. 602, 3 L.Ed.2d 625 (1959).

In those cases the Court upheld state taxation of the income of multistate businesses with little activity in the taxing states other than the presence of sales offices (Northwestern ) and so-called "missionary men" who solicited local wholesalers and sometimes assisted them in obtaining product display paraphernalia for use in retail stores (Brown-Forman ). According to reports accompanying the bill that became 15 U.S.C. sec. 381, these decisions led to "serious apprehension" in the commercial community that mere solicitation activities by multistate businesses would subject them to multiple state taxation. U.S. Tobacco Co. v. Com., 478 Pa. 125, 386 A.2d 471, 474 (1978), cert. denied, 439 U.S. 880, 99 S.Ct. 217, 58 L.Ed.2d 193 (1978), citing S.Rep. No. 658, 86th Cong., 1st Sess. 2, reprinted in 1959 U.S.Code Cong. & Admin.News 2548. Thus, 15 U.S.C. sec. 381 was the congressional response to Northwestern and Brown-Forman --a law passed to "allay the fear that 'mere solicitation' would subject interstate businesses to multiple state taxation." Tobacco Co., 386 A.2d at 474.

Courts in other jurisdictions considering the language of 15 U.S.C. sec. 381 have varied in their interpretations of the "solicitation" provisions of the law. The narrowest view, that obtaining in New Jersey and Arkansas, among other states, is that "solicitation of business" must be strictly limited to the specific task of asking a customer to purchase one's product. Clairol,...