Opinion ID: 1613623
Heading Depth: 2
Heading Rank: 4

Heading: fair relation to services provided

Text: The fourth prong of the Complete Auto test raises the issue whether the SBT through the CAD provisions is fairly related to the services provided by Michigan. In Goldberg, supra at 266-267, the United States Supreme Court provided an explanation of what the fourth prong requires. The Court stated: The purpose of this test is to ensure that a State's tax burden is not placed upon [companies] who do not benefit from services provided by the State. Commonwealth Edison [ Co v Montana, 453 US 609, 627; 101 S Ct 2946; 69 L Ed 2d 884 (1981)]. ... The tax which may be imposed on a particular interstate transaction need not be limited to the cost of the services incurred by the State on account of that particular activity. Id. at 627, n 16. On the contrary, interstate commerce may be required to contribute to the cost of providing all governmental services, including those services from which it arguably receives no direct `benefit.' Ibid. (emphasis in original). The fourth prong of the Complete Auto test thus focuses on the wide range of benefits provided to the taxpayer, not just the precise activity connected to the interstate activity at issue. Indeed, last Term, in D H Holmes [ Co, Ltd v McNamara, 486 US 24, 32; 108 S Ct 1619; 100 L Ed 2d 21 (1988)], we noted that a taxpayer's receipt of police and fire protection, the use of public roads and mass transit, and the other advantages of civilized society satisfied the requirement that the tax be fairly related to benefits provided by the State to the taxpayer. Caterpillar's business activities in Michigan during the years 1981 through 1984 consisted of the following: the employment of from two to five sales representatives who were residents of Michigan, the ownership interest in patterns and tooling used by unrelated third-party Michigan suppliers in the manufacture and production of parts purchased by Caterpillar, the leasing of a forklift truck, and the sales of products shipped into Michigan. In light of Caterpillar's business activity in Michigan, we find that Caterpillar has received the benefits of a civilized society that Michigan provides, as characterized by the Court in Goldberg, supra . Therefore, we find that the SBT through the CAD provisions is fairly related to the services provided by Michigan. Thus, the fourth prong of the Complete Auto test is satisfied.