Cincinnati Milacron Co. v. Hardesty

MeHUGH, Justice,

dissenting:

This case is another in the steadily increasing number of cases in West Virginia imposing the business and occupation tax on an out-of-state taxpayer. It revolves solely around the question of whether there was sufficient nexus to sustain the tax on the activities of the taxpayer in West Virginia. A detailed analysis of the majority opinion is not necessary. It is sufficient to note that the result in the case now before this Court illustrates the extreme circumstances on which this Court will seize to impose a business and occupation tax on an out-of-state taxpayer. The facts were stated succinctly in the circuit judge’s opinion.

The Products Division had three nonresident salesmen who solicited sales in West Virginia. These salesmen also solicited sales in Kentucky, Pennsylvania and Maryland. Petitioner’s Exhibit No. 7 entitled ‘B & 0 Tax Questionnaire— Products Division’, indicates that 5%, 18%, and less than 1%, respectively, of these non-resident salesmen’s sales were to West Virginia customers and Zlk%, 5%, and less than 1%, respectively, of their time was spent in West Virginia. The exhibit also indicates that the Products Division performed no installation, follow-up testing, repairs or maintenance, or other service within West Virginia.
The Machine Tool Division had only one salesman soliciting in West Virginia. This non-resident salesman was listed as a field sales engineer and spent approximately forty-five percent of his time in the State. About the same percentage of his sales were to West Virginia customers. The record indicates that although he did no actual design work within West Virginia, he had the ability to handle certain engineering problems which might arise.
All of the taxpayer’s salesmen sent their orders out-of-state for approval. If an order was accepted, the items were shipped by common carrier to the customer f. o. b. The actual installation of all machinery shipped into West Virginia was performed by the customer although the taxpayer would assist in a general supervisory manner. The taxpayer did . on occasion send a serviceman or engineer into West Virginia in order to repair a machine. However, the taxpayer encouraged customers to send their employees to Cincinnati, Ohio to learn how to operate and service machinery. The audit amounts disclosed that the taxpayer’s gross income from service in West Virginia was about eight-tenths of one percent of gross income from wholesale sales to West Virginia purchasers.
Here the only contacts for the wholesale sales business were (1) solicitation of orders by four non-resident representatives who spent, respectively, about forty-five, eighteen, five, and less than one percent of their total time soliciting orders from West Virginia purchasers, and (2) sporadic intrastate repair or maintenance service work, the gross income from which was less than one percent of the gross income from wholesale sales to West Virginia purchasers of the machin-' ery being repaired or maintained.

Armed with the cursory opinions in J. C. Penney Co., Inc. v. Hardesty, 164 W.Va. 525, 264 S.E.2d 604 (1979); Western Maryland Railway v. Goodwin, 167 W.Va. 805, 282 S.E.2d 240 (1981) and this case, the taxing authorities of this State need not *142fear being hindered by sound legal principles from our sister states which have similar statutes. See, e.g., Ind. Dept. of State Rev. v. J. C. Penney Co., Ind.App., 412 N.E.2d 1246 (1981).

There has been a steady erosion in the nexus required. An example of the rapacious designs of the state authorities appears in the tax commissioner’s brief where the following words are written: “Nexus is automatically met by presence in West Virginia.” That doctrine is uncomplicated and simple to apply. I fear that this Court is being lured into that greedy embrace.

I always thought that a sufficient nexus between the activities of the taxpayer and the State was required. See, e.g., Maryland v. Louisiana, 451 U.S. 725, 101 S.Ct. 2114, 68 L.Ed.2d 576 (1981); Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977); Standard Pressed Steel Co. v. Dept. of Revenue, 419 U.S. 560, 95 S.Ct. 706, 42 L.Ed.2d 719 (1975); General Motors Corp. v. Washington, 377 U.S. 436, 84 S.Ct. 1564, 12 L.Ed.2d 430 (1964); Virginia Foods of Bluefield, Va., Inc. v. Dailey, 161 W.Va. 94, 239 S.E.2d 770 (1977). How much longer will sufficient modify nexus in West Virginia?

It is my opinion that the decision of the circuit judge in this case was articulate, well reasoned and supported by authority. On the facts of this case, I do not believe that there was sufficient nexus to sustain the tax on the sales activities of the taxpayer in West Virginia. I also agree with the circuit judge that the taxpayer is taxable on its service activities in this state. I would affirm the ruling of the Circuit Court of Kanawha County.