Magnetek Controls, Inc. v. REVENUE DIV., TREASURY DEP'T.

Bandstra, J. Defendant, Michigan Department of Treasury, assessed single business tax liability to plaintiff, Magnetek Controls, Inc., resulting from sales made in a number of other states for a number of tax years. Plaintiff paid taxes pursuant to those assessments under protest and brought this action seeking to recover a portion of the taxes paid. Defendant appeals as of right a Court of Claims judgment in favor of plaintiff, which followed a two-day bench trial. We affirm. Plaintiffs offices and factory are located in Michigan. Plaintiff manufactures four separate industrial product lines and has a product-line sales manager *403 for each one. A general sales manager supervises the four product-line sales managers. Sales are also made through independent sales representatives who are paid a commission based on sales and who work in various target states other than Michigan promoting plaintiffs products. The independent sales representatives do not exclusively sell plaintiffs products, but rather also sell other lines from other manufacturers. The general sales manager and the product-line sales managers regularly travel to other states for several reasons: to meet with the independent sales representatives to give them feedback and suggestions, especially to improve sales; to conduct seminars for groups of potential customers assembled by the independent sales representatives; to update the independent sales representatives concerning current information and new applications regarding plaintiffs products, as well as sales and marketing techniques plaintiff has found effective; and to accompany the representatives on calls to specific customers, often giving the sales presentation to the potential customer themselves. Plaintiff sells very technical products that are often adapted to the specific needs of a particular customer, and Michigan-based managers often travel to other states to help close sales by making customers more comfortable regarding the technical aspects of the products. Other trips outside Michigan are made to attend trade shows. Plaintiff’s trade show activity is not directed to any one state, but rather is directed to a specific niche market or target industry in the states surrounding the state in which a trade show is being conducted. One or more product-line sales managers attend these trade shows, often accompanied by *404 other employees of plaintiff. Plaintiffs employees attend trade shows to cultivate new customers, answer potential customers’ questions, and assess plaintiff’s competition. While in a state for a trade show, the general sales manager or the product-line sales managers also call upon customers located in that state. Plaintiff did not keep exact records for the tax years at issue of when the product-line sales managers or the general sales manager went to other states or of exactly what they did and with whom they met. Although expense records only showed that these employees spent approximately ten to fifteen percent of their time in other states, the general manager testified that, in reality, they spent approximately thirty to forty percent of their time away from Michigan. The nature and level of plaintiff’s activity in the other states in which it makes sales is important to its Michigan single business tax liability because sales made to customers in states where plaintiff “is not taxable” are considered to be Michigan sales for the purpose of that tax. MCL 208.52(b); MSA 7.558(52)(b). To avoid tax liability for sales, it is not necessary that plaintiff be actually taxed for sales made to customers in another state; the statute considers plaintiff to be taxable in another state if “that state has jurisdiction to subject the taxpayer to . . . taxes regardless of whether, in fact, the state does or does not.” MCL 208.42; MSA 7.558(42). Defendant assessed single business tax liability to plaintiff resulting from sales made to customers in a number of states for a number of tax years, and plaintiff paid taxes pursuant to those assessments under protest. In this Court of Claims action, plaintiff sought recovery of a portion *405 of the tax paid, arguing that sales to customers in the various states for the various tax years could have been subject to taxation by those states. Defendant argued that the states in which the sales were made could not subject plaintiff to taxation because of the limitation imposed by the Commerce Clause of the United States Constitution. US Const, art I, § 8. As will be explained more fully below, the Commerce Clause question hinges on the level of plaintiffs activity in the states in which sales were made. After hearing the evidence at trial, the Court of Claims expressed some frustration and criticism regarding plaintiffs record-keeping of its activity in various states. Nonetheless, the court concluded that in Indiana, Illinois, and Ohio during tax years 1990 and 1991 and in Pennsylvania during 1990, plaintiffs general manager and product-line sales managers had expended at least ten business days or two weeks of “solid effort” annually. 1 With respect to these tax years, the court determined that the Commerce Clause would not prevent the imposition of taxes on plaintiff by these states. Accordingly, under MCL 208.42; MSA 7.558(42) and MCL 208.52(b); MSA 7.558(52)(b), the trial court concluded that sales made to customers in these states during these tax years could not be attributed to Michigan for single business tax purposes. 2 Defendant appealed, arguing that the Court of Claims erred in its *406 analysis of the Commerce Clause question. We disagree. The United States Supreme Court recently analyzed the Commerce Clause question at issue here in Quill Corp v North Dakota, 504 US 298; 112 S Ct 1904; 119 L Ed 2d 91 (1992). Quill was a national merchandiser of office equipment and supplies. Id. at 302. It solicited business in North Dakota and elsewhere through catalogues and flyers, advertisements in national periodicals, and telephone calls. Id. It delivered all of its merchandise to its North Dakota customers by mail or common carrier from out-of-state locations. Id. North Dakota imposed an obligation on Quill to collect and administer a use tax for property purchased by North Dakota purchasers from Quill. Id. at 302-303. Quill argued that North Dakota did not have the power to compel it to collect the use tax under the Commerce Clause of the United States Constitution. 3 Id. at 303-304. The Supreme Court reiterated its holding in Complete Auto Transit, Inc v Bradley, 430 US 274, 279; 97 S Ct 1076; 51 L Ed 2d 326 (1977): “[W]e will sustain a tax against a Commerce Clause challenge so long as the ‘tax ... is applied to an activity with a substantial nexus with the taxing State . . . .’ ” Quill, supra at 311. 4 The Court answered the “substantial nexus” *407 question by reiterating the “bright-line exemption from state taxation created in [Nat’l] Bellas Hess, [Inc v Dep’t of Revenue of Illinois, 386 US 753; 87 S Ct 1389; 18 L Ed 2d 505 (1967)],” Quill, supra at 316, i.e., “a vendor whose only contacts with the taxing State are by mail or common carrier lacks the ‘substantial nexus’ required by the Commerce Clause.” Id. at 311. Because Quill fell within this bright-line exemption, the Court reversed the ruling of the North Dakota Supreme Court that had allowed the state to impose tax collection responsibilities on Quill. Id. at 319. Quill’s “bright-line” establishes a “safe harbor” for certain taxpayers, “the demarcation of a discrete realm of commercial activity that is free from interstate taxation.” Id. at 315. This does not mean, however, that any sort of commercial activity on the other side of the bright line, or outside the safe harbor, is necessarily subject to tax liability under the Commerce Clause. 5 Thus, for example, the Supreme Court found that Quill was not subject to North Dakota tax obligations under the Commerce Clause even though, “[i]n addition to its common-carrier contacts with the State, Quill also licensed software to some of its North Dakota clients.” Id. at 315, n 8. The Court affirmed its rejection, in Nat’l Geographic Society v California Bd of Equalization, 430 US 551, 556; 97 S Ct 1386; 51 L Ed 2d 631 (1977), of a “ ‘slightest presence’ standard of constitutional nexus.” Quill, supra at 315, n 8. Because a “slightest presence” is insuffi *408 cient to satisfy the “substantial nexus” requirement of Commerce Clause analysis, Quill leaves us with “the vagaries” of determining how much “physical presence” is sufficient. Id. at 331 (White, J., concurring in part and dissenting in part). 6 While clearly stating that a “slightest presence” is insufficient, the Court also stated that “the presence in the taxing State of a small sales force, plant, or office” would suffice to satisfy the “substantial nexus” requirement. Id. at 315. In the present case, plaintiff did not have a plant, office, or other property in the states for which tax relief was granted. The dispositive question becomes whether plaintiff’s employees by virtue of the annual two weeks of solid sales effort, along with the activity of independent sales representatives permanently located in the states and selling plaintiff’s lines along with those of other companies, 7 qualify as the kind of “small sales force” that the Supreme Court suggested would suffice. Defendant argues that anything short of a sales staff of plaintiff’s employees permanently located in a state and continuously soliciting sales is insufficient. Our Court has previously considered the application of Quill in Guardian Industries Corp v Dep’t of *409 Treasury, 198 Mich App 363; 499 NW2d 349 (1993), and Gillette Co v Dep’t of Treasury, 198 Mich App 303; 497 NW2d 595 (1993), but neither precedent is helpful for the question at issue here. In Gillette, supra at 314, the Court found that the physical presence requirement was satisfied where a taxpayer had a level of activity far in excess of that at issue here, the employment of at least eighteen full-time sales representatives soliciting orders from customers in the target state as well as an ownership interest in various properties there. Guardian was a consolidated appeal involving two cases. In the first, this Court reversed an order of summary disposition granted for the taxpayer because the record was unclear whether the taxpayer’s employees were “present in each target state.” Guardian, supra at 379. Similarly, in the second case, the Court determined that the taxpayers had failed to meet the burden of showing that the “substantial nexus” requirement was satisfied because the record did not establish that they had a physical presence in each of the target states. Id. at 380. In contrast to Gillette, the present case does not involve a full-time sales staff at work in the target states; in contrast to Guardian, there is no argument here that plaintiff did not have the level of physical presence determined by the trial court in the target states for each of the tax years for which relief was granted, i.e., at least two weeks’ worth of solid sales effort by plaintiff’s employees and a continuous presence of independent sales persons representing plaintiff’s lines among those of other companies. 8 *410 Of the many precedents cited by both parties from other jurisdictions applying Quill, we find In re Orvis Co, Inc v Tax Appeals Tribunal of the State of New York, 86 NY2d 165; 654 NE2d 954 (1995), most instructive. After a complete review of Quill in the context of Bellas Hess and other Supreme Court precedents, the court in Orvis rejected the taxpayer’s claim that Quill increased the in-state physical presence requirement of the substantial nexus analysis to require “ ‘substantial amounts of in-State people or property.’ ” Id. at 176. The court in Orvis noted that neither Bellas Hess, Quill, or surrounding Supreme Court cases expressed “any insistence that the physical presence of the interstate vendor be substantial. . . .” Id. Further, requiring that physical presence be substantial would “destroy the bright-line rule the Supreme Court in Quill thought it was preserving”; it would require a “weighing of factors such as number of local visits, size of local sales offices, intensity of direct solicitations, etc.” to determine whether there was “substantial” physical presence in the target state. Id. at 177. Finally, the court in Orvis, supra at 178, noted that in a recent case, Oklahoma Tax Comm v Jefferson Lines, Inc, 514 US_; 115 S Ct *411 1331; 131 L Ed 2d 261 (1995), the Supreme Court “did not apply a substantial physical presence test, but instead strictly utilized the substantial nexus prong of the Complete Auto test without even passing reference to the substantiality of the physical presence of the vendor ... in the taxing State.”. On the basis of this survey of relevant precedents, the court in Orvis, supra at 178, determined that Quill required the following test: While a physical presence ... is required, it need not be substantial. Rather, it must be demonstrably more than a “slightest presence.” . . . And it may be manifested by the presence in the taxing State of . . . property or the conduct of economic activities in the taxing State performed by the vendor’s personnel or on its behalf. Applying this standard to the cases before it, the court in Orvis determined that a Vermont wholesaler whose salespeople came into New York to visit nineteen customers an average of four times a year had sufficient physical presence in New York to be susceptible to the imposition of tax obligations by the state of New York. Id. at 180. The same was true for a second taxpayer before the court, a mail-order computer equipment supplier that had sent troubleshooting consultants into New York on forty-one occasions during the three-year audit period at issue. Id. at 180-181. On the basis of our review of Quill and surrounding precedents, we conclude that the court in Orvis correctly understood Quill and enunciated an appropriate test for applying Quill. Accordingly, just as Orvis rejected the taxpayers’ argument that substantial nexus requires “substantial amounts of in-State *412 people or property,” id. at 176, we reject defendant’s argument that an in-state sales force continuously soliciting customers is needed. Instead, tax obligations may be imposed, consistent with the Commerce Clause, on taxpayers with “demonstrably more than a ‘slightest presence’ ” in a state, and this requirement can be satisfied by “the conduct of economic activities in the taxing State performed by the vendor’s personnel or on its behalf.” Id. at 178. Consistent with the holding in Orvis, we further conclude that this test is satisfied in the present case, the facts at issue here being similar to those in Orvis. Plaintiff demonstrated to the trial court that it had more than a “slightest presence” in the states for which tax relief was granted. As the trial court concluded, economic activities were performed there by plaintiff’s personnel (the general sales manager’s and product-line sales managers’ visits), as well as by persons not employed by plaintiff but acting on its behalf in those states (the independent sales representatives). In sum, the Court of Claims properly determined that with respect to the tax years and states for which relief was granted to plaintiff, plaintiff had proved sufficient physical presence to make it susceptible to the imposition of a tax obligation by those states, notwithstanding Commerce Clause restrictions. Accordingly, the Court of Claims properly concluded that, under the provisions of MCL 208.42; MSA 7.558(42) and MCL 208.52(b); MSA 7.558(52)(b), sales made by plaintiff to taxpayers in those states during those tax years could not be attributed to Michigan for purposes of single business tax liability. The Court of Claims appropriately concluded that a refund was *413 owed to plaintiff, in an amount stipulated by the parties. We affirm. Footnotes [1] Defendant does not contest this factual finding, although, as will be discussed, defendant argues that the amount of effort expended by plaintiff in each state is insufficient to constitute a “substantial nexus’’ under a Commerce Clause analysis. [2] With respect to other states and tax years, the Court of Claims ruled against plaintiff concerning these same issues and disallowed any refund. Plaintiff has not appealed these adverse determinations. [3] Although the present case involves the imposition of a tax rather than the imposition of responsibility to administer a tax, the Commerce Clause analysis applies to either question. Quill, supra at 319 (Scalia, J., concurring in part and concurring in the judgment), citing Nat’l Geographic Society v California Bd of Equalization, 430 US 551, 558; 97 S Ct 1386; 51 L Ed 2d 631 (1977); Scripto, Inc v Carson, 362 US 207, 211; 80 S Ct 619; 4 L Ed 2d 660 (1960). [4] This is one part of a four-part test; the other requirements are not at issue in this appeal. See Quill, supra at 311. [5] In other words, the “bright-line” of Quill does not cut as cleanly on both sides. It definitively answers the question who cannot be taxed (vendors whose only contact with a state is through mail order or common carrier) but leaves somewhat open the question who may be taxed (some category of taxpayers with activity in a state beyond merely mail or common carrier contacts). [6] Justice White concluded “it is a sure bet” that these vagaries “will be tested to their fullest in our courts,” id. at 331 (White, J., concurring in part and dissenting in part), while Justice Scalia thought that Quill would not “lead to a flurry of litigation over the meaning of ‘physical presence,’ ” id. at 321 (Scalia, J., concurring in part and concurring in the judgment). This litigation and related litigation in other states since Quill was decided, as will be discussed, suggests that Justice White may have been correct. [7] Although plaintiff does not place primary reliance on the independent sales representatives’ activities to establish substantial nexus, we find their efforts on behalf of plaintiff to be relevant to the analysis under Quill. [8] Guardian also stated that “[t]he mere solicitation of sales, standing alone is insufficient to establish the substantial nexus required to withstand a commerce clause challenge to taxation.” Guardian, supra at 379. *410 However, we consider this to be dictum because, as we noted earlier, the reason for the Court’s holdings was that the record did not establish that the taxpayers had any physical presence in the target states. Further, we note that the Court in Guardian was working with a very limited definition of “solicitation.” Id. at 379-380. We do not conclude that the Court in Guardian meant to hold that any kind of sales activity in a state, standing alone, is insufficient to establish substantial nexus. That understanding of Guardian would conflict with the Supreme Court’s intimation that the existence of a “small sales force,” presumably only engaged in sales activity, would suffice. See Quill, supra at 315. We conclude, notwithstanding the “mere solicitation” language of Guardian, that sales activity standing alone can suffice to establish a substantial nexus, depending on the level of physical presence involved.