Question

In Complete Auto Transit, the Supreme Court provided criteria for whether a state can tax an out-of-state business. Which of the following are those criteria? (Check all that apply.)

Multiple select question.
O A sufficient connection between the business and the state must exist
O A tax can NOT discriminate against out-of-state businesses.
O A state may tax only a fair portion of the income.
O A tax must be consistent with all other states taxes in which the business operates.
O The taxes must be fairly related to services provided.

Answer 1

In Complete Auto Transit, the Supreme Court established a four-part test for states to tax out-of-state businesses, which requires a sufficient connection, non-discrimination, fair apportionment of income, and taxes to be related to state services provided.

Step-by-step explanation:

In the case of Complete Auto Transit, the Supreme Court articulated a four-part test to determine the constitutionality of state taxation on out-of-state businesses. The criteria are as follows:

1. **Existence of a Sufficient Connection:** There must be a substantial nexus or connection between the out-of-state business and the taxing state.

2. **Non-discrimination:** The tax imposed should not discriminate against out-of-state businesses, ensuring equal treatment for in-state and out-of-state entities.

3. **Fair Apportionment:** The state may only tax a fair proportion of the business's income, preventing excessive or disproportionate taxation.

4. **Fair Relationship:** The taxes levied must be fairly related to the services provided by the state, establishing a connection between the taxation and the benefits derived by the business from the state.

These principles, grounded in the Commerce Clause, aim to balance state taxing power with the need to avoid undue burdens on interstate commerce, fostering fairness and avoiding impediments to free trade among states.