Complete Auto Transit, Inc. v. Brady

Background

A Michigan trucking company that hauls new cars for a major automaker from a Mississippi railhead to local dealers was assessed state "privilege" and sales taxes for several years. The company paid under protest, sued in a Mississippi chancery court seeking a refund, and the Mississippi Supreme Court upheld the assessments. The State assessed specific amounts for two periods and required payment while the company pursued its claim in state court.

Reasoning

The central question was whether Mississippi violated the Constitution’s Commerce Clause when it applied its tax labeled as a "privilege of doing business" to activity that the parties assumed was interstate commerce. The Court rejected an older, formal rule that such labels automatically make a tax unconstitutional. Instead, the opinion says courts must look at practical effects — whether the tax has a real connection to the State, is fairly apportioned, does not favor in‑state commerce over interstate commerce, and relates to services the State provides. Because the company did not claim lack of connection, discrimination, or unfair apportionment, the Court found no constitutional bar and affirmed the state courts’ judgment.

Real world impact

The decision means states can, in many cases, tax activities that are part of interstate business even if the tax is called a "privilege" tax, so long as the tax meets the practical tests described by the Court. Businesses can no longer win by pointing only to a statute’s wording; they must show actual discrimination, multiple taxation, or poor apportionment to overturn a state tax.