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SUPREME COURT OF THE UNITED STATES
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No. 91-119
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WISCONSIN DEPARTMENT OF REVENUE,
PETITIONER v. WILLIAM WRIGLEY,
Jr., CO.
on writ of certiorari to the supreme court
of wisconsin
[June 19, 1992]

  Justice Kennedy, with whom The Chief Justice and
Justice Blackmun join, dissenting.
  Congress prohibits the States from imposing taxes on
income derived from -business activities- in interstate
commerce and limited to the -solicitation of orders- under
certain conditions.  15 U. S. C. 381(a).  The question we
face is whether Wrigley has this important tax immunity
for its business activities in the State of Wisconsin.  I agree
with the Court that the statutory phrase -solicitation of
orders- is but a subset of the phrase -business activities.-
Ibid.; ante, at 10-11.  I submit with all respect, though,
that the Court does not allow its own analysis to take the
proper course.  The Court instead devises a test that
excludes business activities with a close relation to the
solicitation of orders, activities that advance the purpose of
the statute and its immunity.
  The Court is correct, in my view, to reject the two polar
arguments urged upon us:  one, that ordinary and neces-
sary business activities surrounding the solicitation of
orders are part of the exempt solicitation itself; and the
other, that the only exempt activities are those essential to
the sale.  Id., at 8, 12.  Having done so, however, the Court
exits a promising avenue of analysis and adopts a test with
little relation to the practicalities of solicitation.  The

Court's rule will yield results most difficult to justify or
explain.  My submission is that the two polarities suggest
the proper analysis and that the controlling standard lies
between.  It is difficult to formulate a complete test in one
case, but the general rule ought to be that the statute
exempts business activities performed in connection with
solicitation if reasonable buyers would consider them to be
a part of the solicitation itself and not a significant and
independent service or component of value.
  I begin with the statute.  Section 381(a) provides as
follows:
      -No State, or political subdivision thereof, shall have
power to impose, for any taxable year ending after
September 14, 1959, a net income tax on the income
derived within such State by any person from inter-
state commerce if the only business activities within
such State by or on behalf of such person during such
taxable year are either, or both, of the following:
      -(1) the solicitation of orders by such person, or his
      representative, in such State for sales of tangible
      personal property, which orders are sent outside the
      State for approval or rejection, and, if approved, are
      filled by shipment or delivery from a point outside
      the State; and
      -(2) the solicitation of orders by such person, or his
      representative, in such State in the name of or for
      the benefit of a prospective customer of such person,
      if orders by such customer to such person to enable
      such customer to fill orders resulting from such
      solicitation are orders described in paragraph (1).-
15 U. S. C. 381(a).
The key phrases, as recognized by the Court, are -business
activities- and -solicitation of orders.-  Ante, at 10-11.  By
using -solicitation of orders- to define a subset of -business
activities,- the text suggests that the immunity to be
conferred encompasses more than a specific request for a
purchase; it includes the process of solicitation, as distin-
guished from manufacturing, warehousing, or distribution.
Congress could have written 381(a) to exempt -acts- of
-solicitation- or -solicitation of orders,- but it did not.  The
decision to use the phrase -business activities,- while not
unambiguous, suggests that the statute must be read to
accord with the practical realities of interstate sales
solicitations, which, after all, Congress acted to protect.
  The textual implication I find draws support from legal
and historical context.  Even those who approach legislative
history with much trepidation must acknowledge that the
statute was a response to three specific court decisions:
Northwestern States Portland Cement Co. v. Minnesota, 358
U. S. 450 (1959), International Shoe Co. v. Fontenot, 236 La.
279, 107 So. 2d 640 (1958), cert. denied, 359 U. S. 984
(1959), and Brown-Forman Distillers Corp. v. Collector of
Revenue, 234 La. 651, 101 So.2d 70 (1958), appeal dism'd,
cert. denied, 359 U. S. 28 (1959).  S. Rep. No. 658, 86th
Cong., 1st Sess., 2-3 (1959) (hereinafter S. Rep.); H. R. Rep.
No. 936, 86th Cong., 1st Sess., 1-2 (1959) (hereinafter H. R.
Rep.).  See ante, at 4-8 & n. 1.  These decisions departed
from what had been perceived as a well-settled rule, stated
in Norton Co. v. Illinois Dept. of Revenue, 340 U. S. 534
(1951), that solicitation in interstate commerce was pro-
tected from taxation in the State where the solicitation
took place.
      -Where a corporation chooses to stay at home in all
respects except to send abroad advertising or drum-
mers to solicit orders which are sent directly to the
home office for acceptance, filling, and delivery back to
the buyer, it is obvious that the State of the buyer has
no local grip on the seller.  Unless some local incident
occurs sufficient to bring the transaction within its
taxing power, the vendor is not taxable.-  Id., at 537.Firm expectations within the business community were
built upon the rule as restated in Norton.  Companies
engaging in interstate commerce conformed their activities
to the limits our cases seemed to have endorsed.  To be
sure, the decision to stay at home might have derived in
some respects from independent business concerns.  The
expense and commitment of an in-state sales office, for
example, might have informed a decision to send salesmen
into a State without further staff support.  Some interstate
operations, though, carried the unmistakable mark of a
legal rather than business justification.  The technical
requirement that orders be approved at the home office,
unless approval required judgment or expertise (for exam-
ple, if the order depended on an ancillary decision to give
credit or to name an official retailer), was no doubt the
product of the legal rule.
  These settled expectations were upset in 1959, their
continuing vitality put in doubt by Northwestern States,
International Shoe, and Brown-Forman.  In Northwestern
States, the Court upheld state income taxation against two
companies whose in-state operations included a sales staff
and sales office.  358 U. S., at 454-455.  Our disposition
was consistent with prior law, since both companies
maintained offices within the taxing State.  Ibid.  But the
Court's opinion was broader than the holding itself and
marked a departure from prior law.
-We conclude that net income from the interstate
operations of a foreign corporation may be subject to
state taxation provided the levy is not discriminatory
and is properly apportioned to local activities within
the taxing State forming sufficient nexus to support the
same.-  Id., at 452.
In the absence of case law giving meaning to -sufficient
nexus,- the Court's use of this indeterminate phrase created
concern and apprehension in the business community.  S.
Rep., at 2-4; H. R. Rep., at 1.  Apprehension increased after
our denial of certiorari in International Shoe and Brown-
Forman, where the Louisiana Supreme Court upheld the
taxation of companies whose business activities within the
State were limited to solicitation by salespeople.  S. Rep., at
3; H. R. Rep., at 2.  The concern stemmed not only from the
prospect for tax liability in an increasing number of States
but also from the uncertainty of its amount and apportion-
ment, the burdens of compliance, a lack of uniformity under
state law, the withdrawal of small businesses from States
where the cost and complexity of compliance would be
great, and the extent of liability for back taxes.  S. Rep., at
2-4.
  As first drafted by the Senate Finance Committee,
381(a) would have addressed the decisions in Northwest-
ern States, International Shoe, and Brown-Forman.  S. Rep.,
at 2-3; H. R. Rep., at 3; 105 Cong. Rec. 16378, 16934
(1959).  The Committee recommended a bill defining
-business activities- in three subsections, with one subsec-
tion corresponding to the facts in each of the three cases.
S. 2524, 86th Cong., 1st Sess. (1959).  Before the bill was
enacted, however, the Senate rejected the third of these
subsections, corresponding to Northwestern States, which
would have extended protection to companies with in-state
sales offices.  105 Cong. Rec. 16469-16477 (1959) (Senate
debate on an amendment proposed by Sen. Talmadge (Ga.)).
But the other two subsections, those dealing with the state-
court decisions in International Shoe and Brown-Forman,
were retained. Id., at 16367, 16376, 16471, 16934; H. R.
Rep. No., at 3.  Thus, while Northwestern States provided
the first impetus for the enactment of 381(a), it does not
explain the statute in its final form.  By contrast, the
history of enactment makes clear that 381(a) exempts
from state income taxation at least those business activities
at issue in International Shoe and Brown-Forman.  These
cases must inform any attempt to give meaning to 381(a).
  International Shoe manufactured shoes in St. Louis,
Missouri.  Its only activity within the State of Louisiana
consisted of regular and systematic solicitation by 15 sales-
people.  No office or warehouse was maintained inside
Louisiana, and orders were accepted and shipped from
outside the State.  The salespeople carried product samples,
drove in company-owned automobiles, and rented hotel
rooms or rooms of public buildings in order to make
displays.  International Shoe, 236 La., at 280, 107 So. 2d, at
640; Hartman, -Solicitation- and -Delivery- Under Public
Law 86-272: An Uncharted Course, 29 Vand. L. Rev. 353,
358 (1976).
  Brown-Forman distilled and packaged whiskey in Louis-
ville, Kentucky, for sale in Louisiana and elsewhere.  It
solicited orders in Louisiana with the assistance of an in-
state sales staff.  All orders were approved and shipped
from outside the State.  There was no in-state office of any
kind.  Brown-Forman salespeople performed two functions:
they solicited orders from wholesalers, who were direct
customers of Brown-Forman; and they accompanied the
wholesalers' own sales force on visits to retailers, who were
solicited by the wholesalers.  The Brown-Forman salespeo-
ple did not solicit orders at all when visiting retailers, nor
could they sell direct to them.  They did assist in arranging
suitable displays of the distiller's merchandise in the retail
establishments.  Brown-Forman, 234 La., at 653-654, 101
So.2d, at 70.
  The activities in International Shoe and Brown-Forman
extended beyond specific acts of entreaty; they included
merchandising and display, as well as other simple acts of
courtesy from buyer to seller, such as arranging product
displays and calling on the customer of a customer.  The
activities considered in International Shoe and Brown-
Forman are by no means exceptional.  Checking invento-
ries, displaying products, replacing stale product, and
verifying credit are all normal acts of courtesy from seller
to buyer.  J. Hellerstein, 1 State Taxation: Corporate
Income and Franchise Taxes -6.11[2], p. 245 (1983).  A
salesperson cannot solicit orders with any degree of
effectiveness if he is constrained from performing small acts
of courtesy.  Note, State Taxation of Interstate Commerce:
Public Law 86-272, 46 Va. L. Rev. 297, 315 (1960).
  The business activities of Wrigley within Wisconsin have
substantial parallels to those considered in International
Shoe and Brown-Forman.  Wrigley has no manufacturing
facility in the State.  It maintains no offices or warehouses
there.  The only product it owns in the State is the small
amount necessary for its salespeople to call upon their
accounts.  All orders solicited by its salespeople are ap-
proved or rejected outside of the State.  All orders are
shipped from outside of the State.  Other activities, such as
intervening in credit disputes, hiring salespeople, or holding
sales meetings in hotel rooms, do not exceed the scope of
381(a); I agree with the Court that these too are the
business activities of solicitation.  Ante, at 19-20; App.
10-13.
  The Department of Revenue, in an apparent concession
of the point, does not contend that the business activities of
Wrigley exceed the normal scope of solicitation; instead the
Department relies on a distinction between business
activities undertaken before and after the sale.  Brief for
Petitioner 18, 21.  Under the Department's submission, acts
leading to the sale are within the statutory safe-harbor,
while any act following the sale is beyond it.  Ibid.  I agree
with the Court, as well as with the Supreme Court of
Wisconsin, that this distinction is unworkable in the context
of a continuing business relation with many repeat sales.
Ante, at 15-16; App. to Pet. for Cert. A-41.
  As the Court indicates, the case really turns upon our
assessment of two practices:  replacing stale product and
providing gum in display racks.  Ante, at 18.  If the retail-
ers relied on the Wrigley sales force to replace all stale
product and that service was itself significant, say on the
magnitude of routine deliveries of fresh bread, then a
separate service would seem to be involved.  But my
understanding of the record is that replacement of stale
gum took place only during the course of regular solicita-
tion.  App. 27-28, 41, 58, 117-118.  There was no contract
to perform this service.  There is no indication in the record
that this was the only method dealers relied upon to remove
stale product.  It is not plausible to believe that by enacting
381(a) Congress insisted that every sales representative in
every industry would be prohibited from doing just what
Wrigley did.
  Acceptance of the stale gum replacement does not allow
industry practices to replace objective statutory inquiry.
The existence of a contract to perform this service, or an
indication in the record that this service provided an
independent component of significant value, would alter the
case's disposition, regardless of the seller's intentions.  The
test I propose does not depend on the sellers' intentions or
motives whatsoever; rather it requires an objective assess-
ment from the vantage point of a reasonable buyer.  If a
reasonable buyer would consider the replacement of stale
gum to provide significant independent value, then this
service would subject Wrigley to taxation.  The majority
appears to concede the point in part when it observes
Wrigley replaced stale gum free of charge, ante, at 19 n. 9,
which provides a strong indication that the replacement of
stale gum is valuable to Wrigley, not its customers, as an
assurance of quality given in the course of an ongoing
solicitation.
  I agree with the Court's approach, which is to provide
guidance by some general rule that is faithful to the precise
language of the statute.  But it ought not to do so without
recognition of some of the most essential aspects of solicita-
tion techniques.  No responsible company would expect its
sales force to decline giving minimal assistance to a retailer
in replacing damaged or stale product.  In enacting 381(a),
Congress recognized the importance of interstate solicita-
tion to the strength of our national economy.  The statute
must not to be interpreted to repeal the rules of good sales
techniques or to forbid common solicitation practices under
the threat of forfeiting this important tax exemption.
Congress acted to protect interstate solicitation, not to
mandate inefficiency.
  Even accepting the majority's test on its own terms, the
business activities which the Court finds to be within the
safe harbor of the federal statute are less ancillary to a real
sales solicitation than are the activities it condemns.  The
credit adjustment techniques and the training sessions the
Court approves are not related to a particular sales call or
to a particular sales solicitation, but the condemned display
and replacement practices are.  I do not understand why
the Court thinks that a credit dispute over an old transac-
tion, handled by telephone weeks or months later is exempt
because it -ingratiate[s] the salesman with the customer,
thereby facilitating requests for purchases,- ante, at 20, but
that this same process of ingratiation does not occur when
a salesman who is on the spot to solicit an order refuses to
harm the company by leaving the customer with bad
product on the shelf.  If there were any distinction between
the two, I should think we would approve the replacement
and condemn the credit adjustment.  The majority fails to
address this anomaly under its test, responding instead
that my observation of it suggests ambiguity in my own.
Id., at 14 n. 5.  In my view, both the gum replacement and
credit adjustment are within the scope of solicitation.
  I would agree with the Court that the furnishing of racks
with gum that is sold to the customer presents a problem of
a different order, id., at 18, but here too I think it adds no
independent value apart from the solicitation itself.  To
begin with, I think it rather well accepted that the setting
up of display racks and the giving of advice on sales
presentation is central to the salesperson's role in cultivat-
ing customers.  There are dangers for the manufacturer,
however, if the salesperson spends the time to set up a
display and then stocks it with free goods, because this
could create either the fact or the perception that retailers
were not receiving the same price.  Free goods lower the per
unit cost of all goods purchased.  The simplest policy to
avoid this problem is to charge for the goods displayed, and
that is what occurred here.  Moreover, I cannot ignore, as
the Court appears to do, that a minuscule amount of gum,
no more than 0.00007% (seven one-hundred thousands of
one percent) of Wrigley's in-state sales, was stocked into
display racks in this fashion.  Brief for Respondent 5; App.
to Pet. for Cert. A-43.  Indeed, the testimony is that Wrigley
salespeople would stock these display racks out of their own
supply of samples only as a matter of last resort, in
instances where the retailer possessed an inadequate
supply of gum and could not await delivery in the normal
course.
``QWell, I take it that if you put in the stand and it
        was a new stand, you took the gum out of your
        vehicle and transferred it to him there; is that
        correct?
``ANo, I would not say that's correct.
``QWell, did you ever stock new stands from your
        vehicle?
``AI would say possibly on some-on a few occasions.
``QAnd how many few occasions were there during
        your tenure as a field representative in 1978?
``ABoy.  I would just be guessing.  Maybe a dozen
        times.
``QAnd just what would-what all happened in that
        circumstance that you wound up putting in a new
        stand and taking the gum out of your vehicle and
        transferring it to the retailer?
``AWell, like I said, primarily I wanted to get a stand
        in and then he wanted to get that order through
        his wholesaler; but if he couldn't wait, if he said
        my wholesaler was just in yesterday or something
        or he was not going to be in for a week, he didn't
        want a stand sitting around, so we would then fill
        it and then bill the wholesaler. . . .''  App. 37-38.
Under the circumstances described here, I fail to see why
the stocking of a gum display does not -ingratiate the
salesman with the customer, thereby facilitating requests
for purchases,- ante, at 20, as is required under the rule
formulated by the Court.  The small amount of gum
involved in stocking a display rack, no more than $15-20
worth, belies any speculation, id., at 19 n. 9, that Wrigley
was driven by a profit motive in charging customers for this
gum.  App. 38.
  The Court pursues a laudable effort to state a workable
rule, but in the attempt condemns business activities that
are bound to solicitation and do not possess independent
value to the customer apart from what often accompanies
a successful solicitation.  The business activities of Wrigley
in Wisconsin, just as those considered in International Shoe
and Brown-Forman, are the solicitation of orders.  The
swapping of stale gum and the infrequent stocking of fresh
gum into new displays are not services that Wrigley was
under contract to perform; they are not activities that can
be said to have provided their own component of significant
value; rather they are activities conducted in the course of
solicitation and whose legal effect should be the same.  My
examination of the language of the statute, considered in
the context of its enactment, demonstrates that the con-
cerns to which 381(a) was directed, and for which its
language was drafted, are misapprehended by the Court's
decision today.
  I would affirm the judgment of the Wisconsin Supreme
Court.