BLUE BUFFALO COMPANY, LTD.
COMPTROLLER OF the TREASURY
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Circuit Court for Baltimore City, Case No.: 24-C-17-004798,
Wanda Heard, Judge.
by: Michael A, Jacobs (Daniel Z. Herbst, Reed Smith, LLP, on
the brief), Philadelphia, PA, for Appellant.
by: Michael J. Salem (Brian E. Frosh, Atty. Gen., on the
brief), Annapolis, MD, for Appellee.
Kehoe, Leahy, Sally D. Adkins (Senior Judge, Specially
Sally D., J.
Md.App. 699] Federal law provides immunity from state
taxation to interstate corporations whose sole business in
the taxing state is the solicitation of orders. 15 U.S.C. §
381(a). When the State asserts its rights to tax an
interstate corporation that sells its goods within our
borders, we look to the Supreme Courts decision in
Wisconsin Dept. of Revenue v. William Wrigley, Jr.,
Co., 505 U.S. 214, 223, 112 S.Ct. 2447, 120 L.Ed.2d 174
(1992) for instruction as to interpreting the statute. At
issue here is whether a dog food manufacturer exceeded the
scope of the statutory protection when
its employees performed various activities in Maryland
relating to its product. Upon review, we hold that important
aspects of the appellants activities went beyond the
solicitation of orders. We therefore affirm the decision of
the Circuit Court for Baltimore City.
Md.App. 700] FACTUAL OVERVIEW AND PROCEDURAL
Appellant Blue Buffalo Co., Ltd., is a Delaware corporation
that is commercially domiciled in the state of Connecticut.
Blue Buffalo is in the business of formulating and selling
premium pet food. During 2011 and 2012 (the "Tax
Years"), these products were produced by independent
manufacturers located outside Maryland, shipped into the
state by common carrier, and sold through national chains and
local independent retailers. Blue Buffalo did not maintain
any corporate office, warehouse, storeroom, or distribution
facilities inside the state.
Although most of Blue Buffalos business was conducted
outside of Maryland, the corporation maintained several
employees inside the state. During the Tax Years, those
employees were: one Distributor Sales Manager, one Account
Manager, two Regional Demo Managers, and several dozen
"Pet Detectives." The parties dispute the nature,
scope, and significance of these individuals activities
during the Tax Years.
Buffalos management staff was responsible for building the
companys relationships with retailers and taking advantage
of market opportunities. The Distribution Sales Manager
regularly met with the managers of local independent retail
stores to arrange bulk orders of Blue Buffalo products.
Likewise, the Account Manager met with representatives of
national chains that carried Blue Buffalo products—
such as Pet Smart, Petco, and Tractor Supply. From time to
time, both managers served as a face for Blue Buffalo in the
broader community. The Distribution Sales Manager
periodically attended pet-related community events, such as
adoption fairs and pet walks. The Account Manager organized
events in retail stores to demonstrate the advantages of Blue
Buffalos products to ultimate consumers.
Regional Demo Manager was chiefly responsible for recruiting,
training, and managing Pet Detectives in their assigned
geographic area. The Pet Detectives were on-the-ground sales
representatives, stationed at retail locations where Blue
Buffalo products were sold. Their primary duty [243 Md.App.
701] was to interact with customers and encourage them to buy
Blue Buffalo products from the retailer. They also advised
retailers on the proper display of Blue Buffalo products and
encouraged retailers to place orders when inventory was
running low. The Pet Detectives would provide their Regional
Demo Manager with regular reports on detailing sales, pet
visits, and hours worked at each store. These reports
occasionally included comments on customer interactions,
product suggestions, the activities of competitors, and
issues encountered on the job.
Buffalo paid Marylands corporate income tax in 2011 and 2012
for a total amount of $706,966 based on the activities of its
Maryland employees. It later filed amended returns for the
Tax Years to request a full refund, on the grounds that its
staff were limited to the solicitation of orders, an activity
protected from taxation under 15 U.S.C. § § 381-384
("Public Law 86-272"). After a hearing, the
Comptroller determined that Blue Buffalo had not met its
burden to show that it qualified for protection under 15
U.S.C. § 381 for the Tax Years. Blue Buffalo appealed to the
Maryland Tax Court, characterizing its employees activities
as missionary sales protected by 15 U.S.C. § 381(a)(2). The
Tax Court found that several of Blue Buffalos activities
served an independent business purpose, and therefore upheld
the Comptrollers decision. The Circuit Court for Baltimore
City affirmed, and Blue Buffalo now appeals.
Standard of Review
appeal, we review the decision of the Tax Court, rather than
the circuit court. Comptroller of Treasury v. Johns
Hopkins Univ., 186 Md.App. 169, 181, 973 A.2d 256
(2009). We may uphold a Tax Court decision only on the
findings and reasons given by the Tax Court. NIHC, Inc.
v. Comptroller of Treasury, 439 Md. 668, 683, 97 A.3d
1092 (2014). As the Tax Court is an adjudicatory
administrative agency, its final orders are examined under
the same standards [243 Md.App. 702] of review governing
other agencies. Id. at 682, 97 A.3d 1092. Findings
of fact are reviewed for substantial evidence and entitled to
deference if the record reasonably supports the agencys
conclusion. Id. at 683, 97 A.3d 1092. Pure questions
of law are reviewed without deference. Ramsay, Scarlett &
Co., Inc. v. Comptroller of Treasury, 302 Md. 825, 834,
490 A.2d 1296 (1985).
review of the Tax Courts application of the law to the facts
is generally narrow: "we will not substitute our
judgment for the expertise of ... the administrative
agency." Gore Enterprise Holdings, Inc. v.
Comptroller of Treasury,437 Md. 492, 503-04, 87 A.3d
1263 (2014) (cleaned up). Commensurate with this expertise,
an agencys legal conclusions based on interpretations of the
statutes and regulations it administers are afforded
"great weight." Id. at 505, 87 A.3d 1263.
This principle is limited by the "plain meaning"
rule of interpretation; that is "where there is no
ambiguity and the words of the statute are clear, we simply
apply the statute as it reads." Frey v. Comptroller
of Treasury,422 Md. 111, 182, 29 A.3d 475 (2011)
(cleaned up). Likewise, an agencys conclusion predicated on