Complete Auto Transit, Inc. v. Brady
| Complete Auto Transit, Inc. v. Brady | |||||||
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| Argued January 19, 1977 Decided March 7, 1977 | |||||||
| Full case name | Complete Auto Transit, Inc. v. Brady, Chairman, Mississippi Tax Commission | ||||||
| Citations | |||||||
| Prior history | Certiorari from the Supreme Court of Mississippi | ||||||
| Holding | |||||||
| A privilege tax, when used in conjunction with the "four-prong" test, does not discourage interstate commerce. | |||||||
| Court membership | |||||||
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| Case opinions | |||||||
| Majority | Blackmun, joined by unanimous | ||||||
| Laws applied | |||||||
| U.S. Const. art. I, § 8 | |||||||
Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), is a United States Supreme Court case regarding the Commerce Clause and sales tax.
Background
Complete Auto was an auto transporter involved in moving General Motors vehicles from the railhead at Jackson, Mississippi to dealerships in Mississippi.
The Mississippi State Tax Commission levied a tax upon Complete Auto "for the privilege of engaging or continuing in business or doing business"[1] in the state of Mississippi. The Court refers to the tax as a "sales tax"; however, it was a "transaction privilege" or gross receipts tax based on Complete Auto's gross receipts.
Arguments
Complete Auto argued against the constitutionality of tax, stating that they were part of an interstate operation, involved in transporting vehicles from the factories in Michigan to the dealers in Mississippi.[2] According to Complete Auto, taxation on interstate operations not only discourages interstate commerce but also is a violation of the Commerce Clause.
Ruling
The Supreme Court ruled in favor of Mississippi. The ruling issued that Complete Auto established a "four-prong" test for constitutionality of a tax under the Commerce Clause:[3]
- Substantial nexus - connection between a state and a potential taxpayer clear enough to impose a tax.[3]
- Nondiscrimination - interstate and intrastate taxes should not favor one over the other.[1]
- Fair apportionment - taxation of only the apportionment of activity that transpires within the taxing jurisdiction.[4]
- Fair relationship to services provided by the state - company enjoys services such as police protection while in a state.[1]
Even though Complete Auto asserted that it was a part of an interstate operation, the Court agreed with Mississippi that while operating within the state, it was afforded services, such as police protection, provided for by taxation.
Subsequent developments
The test enunciated in Complete Auto Transit received significant interpretation in Commonwealth Edison Co. v. Montana, 453 U.S. 609 (1981).[5]
References
- 1 2 3 "COMPLETE AUTO TRANSIT, INC. v. BRADY, 430 U.S. 274 (1977)". FindLaw. Retrieved 2008-10-01.
- ↑ "Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977)". Justia. Retrieved 2008-10-01.
- 1 2 "Arizona Department of Revenue NEXUS UNIT". Arizona Department of Revenue. Retrieved 2008-10-01.
- ↑ "Texas Franchise Tax Throwback Apportionment Provision Violates the Commerce Clause of the United States Constitution" (PDF). Sutherland Asbill & Brennan LLP. Retrieved 2008-10-01.
- ↑ Raabe, William A.; Whittenburg, Gerald E.; and Sanders, Debra L. Federal Tax Research. 8th ed. Florence, Ky.: Cengage Learning, 2008. ISBN 0-324-65965-2