Court Case: Complete Auto Transit, Inc. v. Brady

Question 1

Who were the parties involved in the case?

Answer 1

1. Complete Auto (MI-based company)
2. Brady (MS DOR)
3. US Supreme Court

Question 2

What year did the case take place in?

Answer 2

1977

Question 3

What were the facts of the case?

Answer 3

• Complete Auto was hired by GM
• Complete Auto transported trucks from GM factories into MS by rail, and then took them to car dealerships.
• MS imposed a tax on Complete Auto for the privilege of doing business in the state.
• Because the vehicles were going to be used for Complete Auto’s interstate transportation business, Complete Auto sued the state, saying that MS’s tax put an an undue burden on interstate commerce and broke the Commerce Clause.

Question 4

What was the decision of the case?

Answer 4

• The Supreme Court held that the tax was constitutional because it met all four prongs in a test they created called the “Complete Auto Test”.

Question 5

What are the four prongs of the Complete Auto Test?

Answer 5

1. Substantial Nexus
2. Fairly Apportioned (internally and externally)
3. No Discrimination on Interstate Commerce
4. Fairly Related to Benefits Provided by State

Question 6

What does “internal consistency” refer to in the Complete Auto Test and how why was it satisfied in this case?

Answer 6

• A tax that does not lead to double taxation if every state hypothetically adopted the same tax.
• The tax was internally consistent because if every state adopted it, there would not be double taxation since the tax only applied to purchases within state borders.

Question 7

What does “external consistency” refer to in the Complete Auto Test and how why was it satisfied in this case?

Answer 7

• A tax that does not discriminate against interstate commerce in favor of intrastate commerce.
• The tax was externally consistent because it didn’t put an undue burden on out-of-state vs in-state business. The tax was applied to all businesses on any purchases made within state borders, regardless of where those businesses were located (out-of-state or in-state)

Question 8

What does the third prong “Fairly Related to Benefits” refer to in the Complete Auto Test and how why was it satisfied in this case?

Answer 8

• A tax that is fairly related to the benefits provided by the state.
• MS provided benefits to Complete Auto by providing the infrastructure, roads, and transportations systems that Complete Auto used in their business.

Question 9

What was the significance of this case?

Answer 9

It abandoned formalism of how a law is drafted and focused more on the practical effect a tax has on interstate commerce.

Question 10

True/False: The prongs in the Complete Auto Test were established in this case.

Answer 10

False. The prongs were previously established in other cases. People associate the prongs with this case because all four of them are looked at in this one case.

Question 11

Which tax concept was at the forefront of this case?

Answer 11

The Commerce Clause

Question 12

The court’s decision of the case struck down the “……” rule, which stated that privilege taxes violate the commerce clause.

Answer 12

Spector