## Facts

- A Michigan motor carrier transported General Motors vehicles from a railhead in Jackson, Mississippi, to automobile dealers located within Mississippi.
- Mississippi imposed a tax for the privilege of doing business in the state, measured by gross income, on transportation businesses carrying persons or property for hire between points within Mississippi.
- The Mississippi State Tax Commission assessed the carrier for the tax covering August 1, 1968 through July 31, 1972.
- The carrier paid \$122,160.59 under protest and sued in Mississippi chancery court for a refund, alleging the tax violated the Commerce Clause because the hauling was part of an interstate shipment.
- The chancery court upheld the assessment, and the Mississippi Supreme Court unanimously affirmed, noting the carrier’s substantial in-state operations and reliance on state services.

## Issues

1. Whether the Commerce Clause prohibits a state from applying a “privilege of doing business” tax, measured by gross receipts, to in-state activity that is part of interstate commerce.
2. What standard governs the constitutionality of state taxes affecting interstate commerce, including whether a “privilege” label makes a tax per se invalid.

## Decision

- The Supreme Court unanimously affirmed and upheld the tax.
- The Court rejected a per se rule invalidating state taxes labeled as imposed on the “privilege of doing business” when applied to interstate commerce.
- The Court held a state tax on interstate commerce is valid if: (1) the activity has a substantial nexus with the taxing state, (2) the tax is fairly apportioned, (3) the tax does not discriminate against interstate commerce, and (4) the tax is fairly related to services provided by the state.
- The Court overruled *Spector Motor Service v. O’Connor*, which had treated “privilege of doing business” taxes on interstate commerce as automatically unconstitutional.
- Applying the four requirements, the Court found: the carrier had continuous in-state operations (nexus); the tax base was limited to transportation between points within Mississippi (apportionment and minimal risk of multiple taxation); the tax applied uniformly to in-state transportation businesses (no discrimination); and the carrier benefited from state services supporting its operations (fair relation).

## Legal Principles

- Interstate commerce is not immune from state taxation; the Commerce Clause bars only taxes that discriminate against or unduly burden interstate commerce.
- The constitutionality of a state tax affecting interstate commerce turns on economic effect and structure, not statutory labels such as “privilege” taxes.
- A state tax on interstate activity is valid when it (1) has substantial nexus with the taxing state, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to services the state provides.
- A tax confined to in-state receipts from activity occurring wholly within the state reduces the risk of cumulative, duplicative taxation by multiple states.

## Conclusion

The Court sustained Mississippi’s tax as applied to the carrier’s in-state hauling and established the controlling four-part framework for evaluating state taxes that touch interstate commerce, replacing earlier label-driven invalidation of “privilege” taxes.


Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977)