United States Tobacco Co. v. Commonwealth

Dissenting Opinion by

Judge Rogers:

I respectfully dissent.

The United States Tobacco Company is a New Jersey corporation engaged in the manufacture and sale of tobacco products. During the tax year here in question it maintained no manufacturing plants in Pennsylvania; it had no inventory of its products in this State; it maintained no offices in Pennsylvania; it had no bank accounts here; it maintained no corporate records here; and it held no corporate meetings in Pennsylvania.

The sole contact or connection of United States Tobacco Company with Pennsylvania was through so-called missionary representatives whose sole functions were to solicit orders. These individuals did not accept orders, adjust or settle claims or collect accounts. They were without agency powers and were not permitted to change any price list or other rule of their employer. They were hired by, controlled and paid from an out-of-state office.

The missionary representatives traveled about the State in company owned cars which constituted the only tangible property of the United States Tobacco' Company located in Pennsylvania. The missionary representatives carried a limited supply of their employer’s products purchased by them at cost from wholesalers which they either gave outright or sold to retailers at the wholesale *223price. The purpose of carrying these small quantities of products was to provide them to retailers in introducing new items or replacing stale stock in trade. There was no profit realized on the disposition of these items and they were carried and used solely for promotional purposes and as aids in the solicitation of orders.

On exactly these facts the United States Tobacco Company was held not to be subject to the Pennsylvania corporation income tax in Commonwealth v. United States Tobacco Company, 70 Dauphin 217 (1957).

In Northwestern States Portland Cement Company v. Minnesota, 358 U.S. 450 (1959), the Supreme Court upheld the constitutionality of state income tax impositions with respect to taxpayers engaged exclusively in interstate commerce where the sole activity of the taxpayers other than the solicitation of orders was the maintenance of an office and equipment in the taxing states. As the majority herein notes, Congress, in response to the Northwestern States decision, enacted P.L. 86-272, 15 U.S.C.A. §381 et seq., denying states the power to impose taxes on the income of persons engaging in interstate commerce whose only business activity within the taxing state was that of the solicitation of orders. Since the activities of the United States Tobacco Company are limited to the activities of the company’s missionary representatives, there seems to this writer to be no' warrant for overruling Commonwealth v. United States Tobacco Company, supra.

The only authorities for so drastically changing the law advanced by the majority are Standard Pressed Steel Company v. State of Washington, 419 U.S. 560 (1975), and Colonial Pipeline Company v. Traigle, U.S. , 44 L.Ed.2d 1 (1975). Those cases are clearly distinguishable on the facts. Standard Pressed Steel Company was a manufacturer of metal fasteners with a home office in Pennsylvania and plants in Pennsylvania and California. Boeing Aircraft Company was a valued customer located in the State of Washington. Standard Pressed Steel had *224one employe permanently located in Washington. He was an engineer who consulted with Boeing regarding its anticipated needs for his employer’s products and followed up difficulties in use of its fasteners. Standard Pressed Steel about every six weeks sent a group of its engineers to visit Boeing and meet with the latter’s people on engineering problems respecting the use of the fasteners. The Supreme Court concluded that the taxpayer’s engineering activities within Washington were substantial and justified the tax imposed by that state. Neither Standard Pressed Steel’s full time employe nor the visiting engineers were engaged in soliciting orders for sales, as was United States Tobacco Company’s only activity here.

Colonial Pipeline Company v. Traigle, supra, is also clearly distinguishable. There the taxpayer was held to have submitted to the taxing power of Louisiana by having voluntarily qualified to do business there and by maintaining employes within that state to inspect and maintain a portion of its pipeline there located. Again, the taxpayer’s employes were engaged in activities other than the mere solicitation of orders to be filled from the home office.

It is my belief that the majority’s holding almost obliterates the immunity conferred by the Commerce Clause and that it fails to give effect to the will of Congress expressed by P.L. 86-276.

'It is further clearly contrary to the time-honored principle that “where a corporation chooses to stay at home in all respects except to send abroad advertising or drummers 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.” Norton Co. v. Department of Revenue, 340 U.S. 534, 537 (1951).

I would sustain the appeal.

Judge Blatt joins in this dissent.