WILLIAM WRIGLEY, JR. CO., Petitioner-Respondent, v. Wisconsin DEPARTMENT OF REVENUE, Appellant. Wisconsin DEPARTMENT OF REVENUE, Petitioner-Appellant, v. WILLIAM WRIGLEY, JR. CO., Respondent.
No. 88-2265
Court of Appeals of Wisconsin
December 7, 1989
451 N.W.2d 444 | 153 Wis. 2d 559
Submitted on briefs July 18, 1989. Petition to review granted.
For the respondent the cause was submitted on the briefs of Barbara J. Janaszek and Thomas E. Lange of Whyte & Hirschboeck S.C. of Milwaukee and H. Randolph Williams of Baker & McKenzie of Chicago, Ill.
EICH, C.J. 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
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
I. SCOPE OF REVIEW
The parties agree, as did the trial court, that the primary issue is the interpretation of
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.
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 defer-
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].”
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.
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
It is generally accepted that
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
Courts in other jurisdictions considering the language of
A slightly more liberal view—really a middle ground—is that held by, among others, the Oregon court: that is, that “solicitation” also includes those generally accepted or customary acts in the industry which lead to the placing of orders. Miles Laboratories, Inc. v. Department of Revenue, 546 P.2d 1081, 1083 (Or. 1976).
The broadest position finds favor in Pennsylvania and New York. The Pennsylvania Supreme Court, in Tobacco Co., 386 A.2d at 478, held that permissible “solicitation” under
However, we do not believe that “solicitation of orders” should encompass post-sale activities that are not closely or “inextricably related” to the solicitation of orders. Thus, it should not include those acts which follow as a natural result of the transaction, such as collections, servicing complaints, technical assistance and training, and similar activities. Miles Laboratories, 546 P.2d at 1083.
The application of
In the opinion accompanying its order, the commission determined that Wrigley employees carried on the following “non-immune” activities within the State of Wisconsin during the years in question: (1) replacing stale gum; (2) maintaining product displays both as to location, design and content; (3) direct sales of gum through “agency stock checks“; (4) maintaining offices in home; (5) conducting regular and periodic training seminars; (6) recommending hiring, firing and salary increases for sales representatives; (7) involvement in credit transactions;1 (8) training and supervision of sales representatives; (9) rental of storage space; and (10) purchase of “non-incidental” advertising in Wisconsin. The commission concluded that, taken together, these were “considerable activities” within the state which “transcended the solicitation of orders protected by [
Examining the commission‘s findings, the circuit court concluded that there was no evidence that “regular and periodic” training seminars were held in Wisconsin. The court then discussed “qualif[ying]” evidence relating to several of the remaining findings and concluded that
As we have said, we review the commission‘s decision independently, owing no deference to the trial court‘s determination. And while the trial court‘s decision in this case was thoughtful, thorough and well-reasoned, we take a different view of the evidence. Our own reading of the record leads us to conclude that there is substantial evidence to support the commission‘s order.
The substantial evidence rule is not a preponderance-of-the-evidence test, but an inquiry into whether reasonable minds could arrive at the same conclusion reached by the commission. Farmers Mill of Athens, Inc. v. ILHR Dept., 97 Wis. 2d 576, 579, 294 N.W.2d 39, 41 (Ct. App. 1980). The fact that the evidence is in conflict is not grounds for reversal, for it is the commission‘s function, not ours, to weigh and determine the credibility of, and to draw inferences from, the evidence. Id. at 580, 294 N.W.2d at 41. We note also that, when one or more inferences reasonably may be drawn from the evidence, the choice of inferences is an act of fact-finding, and the inference drawn by the agency is conclusive. Id. And when we review an agency‘s decision, just as when we review a trial court‘s decision, our task is to search for evidence to support that decision, not for evidence which would support a different or contrary result. Hawes v. Germantown Mutual Ins. Co., 103 Wis. 2d 524, 543, 309 N.W.2d 356, 365 (Ct. App. 1981).
The commission also found that Wrigley‘s sales representatives made direct sales of gum to retailers through what was known as “agency stock checks.” Radosevic testified that sometimes—perhaps once a month—when he was setting up and placing a display rack for a retailer he would fill the rack with gum and would bill the wholesaler for the products left in the store, and the wholesaler would then bill the retailer. The papers prepared to arrange these billings were known as “agency stock checks.”
The evidence in support of the commission‘s findings that Wrigley personnel conducted “regular and periodic training seminars” in Wisconsin and otherwise trained and supervised the field representatives is found in the testimony of the company‘s district manager, John Kroyer, and that of Gary Hecht, the regional manager. According to Kroyer, each new sales representative was trained “in the field,” under the direction of the regional manager, for a period of about four weeks before going out on his or her own. In addition, in the years in question (1973-76) Kroyer “occasionally” conducted
Hecht testified that it was his practice to conduct day-long group meetings with Wisconsin representatives once or twice a year, usually in a hotel. The purpose of the meetings, according to Hecht, was to “communicate” with the representatives on the company‘s “major thrust[s] or objective[s] such as the introduction of a new brand or a new packaging....” Hecht also described his supervision of the sales representatives, including “periodic” evaluations of their sales presentations and other aspects of their work, assigning specific duties to them, re-drawing sales territories and similar activities. In addition, Richard Radosevic, in his capacity as one of Wrigley‘s “key account sales managers” attended at least
The finding that Wrigley‘s Wisconsin managers recommended the hiring, firing and salary increases for sales representatives is also supported by the testimony of John Kroyer. Kroyer acknowledged that he had “hired” at least one field representative during his three-year term as Wrigley‘s regional manager in Wisconsin. While he stated that he did not have the “final say” in hirings, he acknowledged that when a vacancy occurred, he “handled the process of locating an applicant and interviewing him.” He would then make the “final selection” and communicate his “recommendation” to the company‘s district manager in Chicago for approval. Kroyer also described how he once “fired” a sales representative—calling it “a rather spontaneous on the spot dismissal,” although he again stated that the “ultimate decision [resided] with the district manager.” When asked about his own role in the process, however, Kroyer said simply: “I terminated him [for poor job performance.]” He stated that before he did so he had told his supervisor that “if I found what I thought I‘d find” in investigating the representative‘s performance, “I was going to dismiss [the employee], and he [the manager] agreed.” Finally, Kroyer acknowledged that he would make recommendations for pay raises for sales representatives under his direction. Here, too, Kroyer‘s superior, the district manager, had the final “say” in the matter.
The commission also found that Wrigley‘s Wisconsin personnel had been “involved” in customer credit matters. This finding also has support in the record. Kroyer testified that, in his capacity as regional manager, he would occasionally “get involved” with “credit problems” involving Wisconsin accounts. Wrigley‘s Chi-
There was also evidence supporting the commission‘s finding that, on one occasion at least, Wrigley rented storage space in Wisconsin. When Kroyer terminated an employee in 1973, he rented space in a Madison warehouse to store the company car, cases of gum, display materials and similar goods. He was reimbursed by Wrigley for the rental expenses. When the replacement was hired, the new person continued to rent the warehouse space and the lease was still in effect three years later when Kroyer left the area to take another position. Finally, we note extensive discussion in the record relating to Wrigley‘s advertising efforts, both in Wisconsin and elsewhere, including Wisconsin ads on radio, television and “coupon” ads in state newspapers.2
In addition, there was evidence that Kroyer maintained an office in his home in Wisconsin, using at least some company-furnished equipment. He was not reimbursed for any office expenses other than the telephone
There is, as we have said, other evidence which may be read to contradict some of the testimony referred to above. But, as we have also said, our task is not to look for evidence to support a decision the agency could have, but did not, make—nor even to weigh the evidence; it is simply to determine whether there is substantial evidence to support the decision made. The testimony just discussed leads us to answer that question in the affirmative.
The inquiry then becomes whether the found facts support the conclusion that Wrigley‘s Wisconsin activities go beyond the solicitation of orders, as that term appears in
The peculiar facts of this case, then, lead us to conclude that Wrigley was engaged in something more than the solicitation of orders in the State of Wisconsin in the years in question, for they include acts that go beyond those that are inextricably related to such solicitation and generally considered to lead to, rather than follow, the placing of orders. Wrigley‘s Wisconsin employees were not just “missionaries.” They were hirers, firers, meeting organizers, trainers, customer credit “intervenors” or “mediators,” renters of warehouse space, stale product replacers, inventory-carriers, display stockers, sellers and billers. We conclude that
III. THE INTEREST PENALTY
The Department of Revenue imposed interest of 1.5 percent per month on the taxes assessed to Wrigley. The percentage is that applicable to “delinquent” income and franchise taxes under
The commission disagreed, holding instead that
Concluding that the assessment represented “additional taxes” which could not become “delinquent” until at least thirty days after a final decision in Wrigley‘s action contesting the tax—the commission ruled that the so-called “penalty” interest provisions of
The department, pointing to
We agree with the department, and we find the reasoning of dissenting Commissioner Junceau to be particularly persuasive on whether this was an “additional assessment” within the meaning of
We have some sympathy with Wrigley‘s position that where, as here, a taxpayer believes it owes no tax and thus files no returns, and it is later determined after extensive agency and judicial proceedings that taxes were in fact due in the years in question, it makes sense to treat the due date for penalty purposes as some time after the final court determination of liability. But the legislature has plainly spoken in
By the Court.—Order reversed and cause remanded with directions to enter an order affirming the decision of the Wisconsin Tax Appeals Commission insofar as it upheld the franchise tax assessment and reversing the decision insofar as it authorized imposition of interest on the assessment at a rate lower than 1.5 percent per month.
DYKMAN, J. (dissenting). It is undisputed that
The circuit court focused on the way chewing gum is sold. Eighty-five to ninety percent of Wrigley‘s sales managers’ time is spent soliciting. Over ninety percent of Wrigley‘s sales are “impulse sales.” Thus, a customer‘s observation of a Wrigley product must create the desire to purchase, or the business activity fails. If the customer, when observing a Wrigley display, recalls a taste of stale gum, or if the display is sloppy, dirty, or unattractive in any way, the sale may not occur. The display must contain the customer‘s preferred flavor. It is not surprising therefore, that a Wrigley‘s sales manager does whatever necessary to maintain an attractive display. His or her activities in relation to that display are therefore without a doubt for the purpose of “inducing customers to place orders.”
Of course, the sales managers did not tend to the displays in a vacuum. When Pennsylvania focused on the use of a company car as evidence that sales managers were doing more than “mere solicitation” the court replied, “Congress could hardly have intended to exempt only walking solicitors.” United States Tobacco Co. v. Commonwealth, 386 A.2d 471, 478 (Pa.), cert. denied, 439 U.S. 880 (1978).
Congress could have hardly intended to exempt solicitors without records or a place to keep them, or to make exemption dependent upon whether solicitors met on occasion to compare notes or hear of the latest fad in consumer taste. With eighty-five to ninety percent of a
I would view these other activities, not by the length of the list, but as the de minimis result reached when all are totalled. When I do so, I reach the same result as did the circuit court. I would therefore affirm and not reach the question of whether an interest penalty is applied.