State and Local Taxation



State and Local Taxation

Question.1

List and explain the importance of the four criteria essential to tax in the Complete Auto Transit case. What was this case about? Why is it important?

This case was about the, Complete Auto who was an auto transporter, involved in moving vehicles of General Motors to dealership in Mississippi from Jackson, Mississippi from the railhead. A tax was levied on Complete Auto by the Mississippi State Tax Commission.

This tax levied on Complete Auto was for the privilege of continuing or engaging in business in Mississippi. This tax was referred as 'Sales Tax'. Based on Complete Auto's receipt, it was a gross receipt tax. Against the constitutionality of tax, Complete Auto argued and stated that they were part of interstate operation, and said that they were involved in transporting vehicles to the dealers in Mississippi from the factories in Michigan.

In favor of Mississippi, the Supreme Court ruled. Under the commerce clause, “four prong” test for constitutionality of tax was issued.

Nexus: to impose the tax, connection between the tax payer and the state must be sufficient.

Fair Apportionment: more than income of a taxpayer, the state must not tax more than that.

No Discrimination: In state taxpayers and out of state taxpayers must be treated with justice and equally.

Fairness related to services: services provided to the taxpayer by the state, must be fairly related.

Question.2

What is the significance of Public Law 86-272 is as applied in the Wrigley v.Wisconsin case? Who won and why? To what type of tax is Public Law 86-272 most often applied?

Where a state is prohibited from imposing tax, jurisdiction to tax is not present because corporation's activities are not exceeded from the standard sales solicitation establishes by Public Law 86-272.

As understood, Wisconsin Department of Revenue v. William Wringley, Jr. Co. as a case regarding out of state businesses and state franchise taxes, decided by Supreme Court of United states.

Wringley presence in the state was enough for a franchise tax as believed by Wisconsin. Under public law 86-272, State believed that Wringley was not afforded protection because solicitation was violated.

The state declared that activities leading up for sale is protected, but after the sales if any activity took place, then it is more than solicitation. It also argued that “asking the customer for the purchase of the product” activity beyond that will remove the protection of Public law 86-272. The court allowed the ...