Complete Auto Transit was a company that transported vehicles between states. Mississippi was one state that the company travelled through, and one in which they delivered vehicles. Mississippi levied a tax on Complete Auto Transit because they were taking part in interstate and intrastate transit. The tax was based on the “privilege of doing business in the state.”
Complete Auto Transit was based in Michigan and was obviously conducting interstate business. However, they disagreed with the tax and took the case to court. Complete Auto Transit v. Brady, included a ruling that would change interstate and intrastate transit forever. The courts ruled that companies that conducted business in more than one state, should be responsible for a portion of each state’s tax burden.
Complete Auto Transit v. Brady set a precedent for other states to begin charging a similar tax. However, it has been claimed that the decision in Complete Auto Transit v. Brady, may violate the Commerce clause because of the tax on interstate activity. Similar taxes are continuously challenged in courts. Many companies insist that those taxes are not allowed because of the Commerce Clause. In fact, those taxes may discourage companies from conducting business in more than one state.
The ruling in Complete Auto Transit v. Brady, laid out specific rules for taxes on interstate commerce. Business conducted must be connected to the state that is imposing the tax. In other words, the tax can not be imposed on business conducted in another state.Those taxes must be fair and apply to all business in the same manner. The taxes must not discriminate against any type of company, or individual.
Complete Auto Transit v. Brady, demonstrated the ambiguity of the Commerce Clause. The clause can be interpreted in number of ways, in order to benefit the individual that is interpreting the clause. In this case, Mississippi claimed that they were simply imposing a sales tax. However, it was seen by many, including the company, as a privilege tax, imposed simply for having the privilege of doing business in that state. A similar ruling was seen in Commonwealth Edison v. Montana. In both cases, the courts ruled that companies doing business in any state, would be responsible for a portion of the tax burden because they received services from that state, such as police protection. Contributing to a state,s tax burden, is meant to finance any benefits a company received while conducting business in that specific state.