Maryland Court Further Defines Activities Availed P.L. 86-272 Immunity

The Maryland Court of Special Appeals held that gathering information on market opportunities and competitor activities at Maryland retail locations through periodic routine reports compiled by sales and account manager employees of an out-of-state business exceeded U.S. Public Law (P.L.) 86-272 (5 U.S.C. § 381(a)) protection in Blue Buffalo Company, Ltd. v. Comptroller of Treasury (Dec. 20, 2019).

The Court stated that U.S. P.L. 86-272 was not a blanket protection for industry to conduct unfettered activities in the name of sales in Maryland. This decision has great significance given the limited guidance as to the nature of activities provided by state courts and legislatures that would be protected from state income taxation under P.L. 86-272 since the U.S. Supreme Court’s decision in Wisconsin Dep’t of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214, 223 (1992).

Facts and procedural history

Blue Buffalo, Ltd. (Blue Buffalo or Company), a Connecticut commercially domiciled manufacturer and seller of premium dog food, employed a sales staff consisting of a distributor sales manager, an account manager, two regional demo managers and several dozen “pet detectives,” who were on-the-ground sales representatives, stationed at third-party retailer locations in Maryland. The purpose of the pet detectives was to promote the sale of Blue Buffalo’s premium dog food and other products.For tax years 2011 and 2012, the Company filed amended corporate income tax returns claiming refunds based on its employees’ activities being limited to the solicitation of orders within P.L. 86-272. The refund claim was denied by the Comptroller and upheld by the Maryland Tax Court and the Circuit Court for Baltimore City.