This is Part 3 of a 6-part series by The John Ellis Company, An Accountancy Corporation — On the evolution of NEXUS under the Commerce Clause and Due Process Clause.
In Complete Auto Transit v. Brady (1977), the Supreme Court established the framework still used today to evaluate state taxes.
The four-prong test requires:
1. Substantial Nexus
2. Fair Apportionment
3. No Discrimination Against Interstate Commerce
4. Fair Relation to State Services
Note: Fairly apportioned developed two tests that both must be met, Internal Constant and External Constant. Internal constant is if, hypothetically, the same tax was in all states no transaction would be taxed twice and External Constant the tax is only on the activity in the state.
Why This Matters
Even after Wayfair, which will be discussed later, this framework still governs. Nexus alone does not determine whether a tax is valid.
At The John Ellis Company, An Accountancy Corporation, we regularly identify issues not just with nexus, but with how taxes are structured and applied under this broader constitutional test.
A defensible tax position requires more than meeting thresholds. Contact The John Ellis Company, An Accountancy Corporation for a full constitutional SALT analysis.