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Keywords

corporation

statuteobjectionsustainedappellant

Related Cases

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326

Facts

Complete Auto Transit, Inc., a Michigan corporation, was engaged in transporting motor vehicles manufactured outside Mississippi to dealers within the state. The Mississippi State Tax Commission assessed sales taxes against the company for the privilege of doing business in Mississippi for the period from August 1, 1968, through July 31, 1972. The company paid the assessments under protest and subsequently filed for a refund, claiming that the taxes were unconstitutional as they applied to its interstate commerce activities.

The taxes in question are sales taxes assessed by the Mississippi State Tax Commission against the appellant, Complete Auto Transit, Inc., for the period from August 1, 1968, through July 31, 1972. The assessments were made pursuant to the following Mississippi statutes: ‘There is hereby levied and assessed and shall be collected, privilege taxes for the privilege of engaging or continuing in business or doing business within this state to be determined by the application of rates against gross proceeds of sales or gross income or values, as the case may be, as provided in the following sections.’

Issue

Whether Mississippi's tax on the privilege of doing business in the state, as applied to Complete Auto Transit, Inc.'s interstate transportation activities, violated the Commerce Clause of the U.S. Constitution.

The issue in this case is whether Mississippi runs afoul of the Commerce Clause, U.S. Const., Art. I, s 8, cl. 3, when it applies the tax it imposes on ‘the privilege of . . . doing business' within the State to appellant's activity in interstate commerce.

Rule

A state tax on the privilege of doing business does not violate the Commerce Clause if it is applied to an interstate activity with a substantial nexus to the taxing state, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the state.

These decisions have considered not the formal language of the tax statute but rather its practical effect, and have sustained a tax against Commerce Clause challenge when the tax is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the State.

Analysis

The Supreme Court analyzed the Mississippi tax in light of the established principles regarding state taxation of interstate commerce. The Court found that the tax was applied to an activity that had a substantial nexus with Mississippi, was fairly apportioned, and did not discriminate against interstate commerce. The Court emphasized that the mere labeling of the tax as a privilege tax did not render it unconstitutional, especially since the company did not claim that the tax was unfairly apportioned or unrelated to the benefits received from the state.

The view of the Commerce Clause that gave rise to the rule of Spector perhaps was not without some substance. Nonetheless, the possibility of defending it in the abstract does not alter the fact that the Court has rejected the proposition that interstate commerce is immune from state taxation.

Conclusion

The U.S. Supreme Court affirmed the decision of the Mississippi Supreme Court, holding that the application of the sales tax on the privilege of doing business in Mississippi to Complete Auto Transit, Inc.'s interstate activities was constitutional.

There being no objection to Mississippi's tax on appellant except that it was imposed on nothing other than the ‘privilege of doing business' that is interstate, the judgment of the Supreme Court of Mississippi is affirmed.

Who won?

The prevailing party was the State of Mississippi, as the Supreme Court upheld the constitutionality of the sales tax applied to Complete Auto Transit, Inc.

The Supreme Court of Mississippi unanimously sustained the tax against appellant's constitutional challenge.

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Arkansas Best Corporation v. Commissioner of Internal Revenue, 83 T.C. No. 35, 83 T.C. 640, Tax Ct. Rep. (CCH) 41,581

McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33, 60 S.Ct. 388, 84 L.Ed. 565, 128 A.L.R. 876, 1940 A.M.C. 467, 22 O.O. 84

Ramrod, Inc. v. Wisconsin Dept. of Revenue, 64 Wis.2d 499, 219 N.W.2d 604

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Corporate Executive Board Company v. Virginia Department of Taxation, 297 Va. 57, 822 S.E.2d 918