Complete Auto Transit, Inc. v. Brady

Complete Auto Transit, Inc. v. Brady
Argued January 19, 1977
Decided March 7, 1977
Full case name Complete Auto Transit, Inc. v. Brady, Chairman, Mississippi Tax Commission
Citations 430 U.S. 274 (more)
97 S. Ct. 1076; 51 L. Ed. 2d 326; 1977 U.S. LEXIS 56
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
Chief Justice
Warren E. Burger
Associate Justices
William J. Brennan Jr. · Potter Stewart
Byron White · Thurgood Marshall
Harry Blackmun · Lewis F. Powell Jr.
William Rehnquist · John P. Stevens
Case opinions
Majority Blackmun, joined by unanimous
Laws applied
U.S. Const. art. I, § 8
This case overturned a previous ruling or rulings
Spector Motor Service v. O’Connor, 340 U.S. 602 (1951)

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977),[1] 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.[1] 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 established a four-prong test for constitutionality of a tax under the Commerce Clause:[2]

  • Substantial nexus - connection between a state and a potential taxpayer clear enough to impose a tax.[2]
  • 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.[3]
  • 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).[4]

References

  1. 1 2 3 4 5 Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977).  This article incorporates public domain material from this U.S government document.
  2. 1 2 "Arizona Department of Revenue NEXUS UNIT". Arizona Department of Revenue. Retrieved 2008-10-01.
  3. ↑ "Texas Franchise Tax Throwback Apportionment Provision Violates the Commerce Clause of the United States Constitution" (PDF). Sutherland Asbill & Brennan LLP. Retrieved 2008-10-01.
  4. ↑ 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
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