Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), is a case decided by the Supreme Court of the United States

Supreme Court of the United States

The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...

 regarding the Commerce Clause

Commerce Clause

The Commerce Clause is an enumerated power listed in the United States Constitution . The clause states that the United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Courts and commentators have tended to...

 and sales tax

Sales tax

A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale....

.

Background

Complete Auto was an auto transporter involved in moving General Motors

General Motors

General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...

 vehicles from the railhead

Railhead

The word railhead is a railway term with two distinct meanings, depending upon its context.Sometimes, particularly in the context of modern freight terminals, the word is used to denote a terminus of a railway line, especially if the line is not yet finished, or if the terminus interfaces with...

 at Jackson, Mississippi

Jackson, Mississippi

Jackson is the capital and the most populous city of the US state of Mississippi. It is one of two county seats of Hinds County ,. The population of the city declined from 184,256 at the 2000 census to 173,514 at the 2010 census...

 to dealerships in Mississippi

Mississippi

Mississippi is a U.S. state located in the Southern United States. Jackson is the state capital and largest city. The name of the state derives from the Mississippi River, which flows along its western boundary, whose name comes from the Ojibwe word misi-ziibi...

.

The Mississippi State Tax Commission levied a tax upon Complete Auto "for the privilege of engaging or continuing in business or doing business" in the state of Mississippi. The Court refers to the tax as a "sales tax

Sales taxes in the United States

There is no federal sales or use tax in the United States. 45 states and the District of Columbia impose sales and use taxes on the retail sale, lease and rental of many goods, as well as some services. Many cities, counties, transit authorities and special purpose districts impose additional local...

"; however, it was a "transaction privilege" or gross receipts tax

Gross receipts tax

A gross receipts tax or gross excise tax is a tax on the total gross revenues of a company, regardless of their source. A gross receipts tax is similar to a sales tax, but it is levied on the seller of goods or service consumers...

 based on Complete Auto's gross receipts.

Complete Auto argues

Complete Auto argued against the constitutionality

Constitutionality

Constitutionality is the condition of acting in accordance with an applicable constitution. Acts that are not in accordance with the rules laid down in the constitution are deemed to be ultra vires.-See also:*ultra vires*Company law*Constitutional law...

 of tax, stating that they were part of an interstate operation, involved in transporting vehicles from the factories in Michigan

Michigan

Michigan is a U.S. state located in the Great Lakes Region of the United States of America. The name Michigan is the French form of the Ojibwa word mishigamaa, meaning "large water" or "large lake"....

 to the dealers in Mississippi. According to Complete Auto, taxation on interstate operations not only discourages interstate commerce, but is a violation of the Commerce Clause.

Supreme Court 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:

• Substantial nexus - connection between a state and a potential taxpayer clear enough to impose a tax.
• Nondiscrimination - interstate and intrastate taxes should not favor one over the other.
• Fair apportionment - taxation of only the apportionment of activity that transpires within the taxing jurisdiction.
• Fair relationship to services provided by the state - company enjoys services such as police protection while in a state.

Even though Complete Auto asserted that they were a part of an interstate operation, the Court agreed with Mississippi that while operating within the state, they were afforded services, such as police protection, provided for by taxation.

Subsequent ruling

The test enunciated in Complete Auto Transit received significant interpretation in Commonwealth Edison Co. v. Montana

Commonwealth Edison Co. v. Montana

Commonwealth Edison Co. v. Montana, 453 U.S. 609 is a 6-to-3 ruling by the Supreme Court of the United States that held that a severance tax in Montana does not violate the Commerce Clause or the Supremacy Clause of the United States Constitution....

, 453 U.S. 609 (1981).