Illinois nexus does not allow for tax on tugboat supplies.

Even though a tugboat company passed three out of four prongs of the Commerce Clause test under the U.S. Supreme Court test used in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), the tax apportioned by the state was found in violation of interstate commerce laws. The four prong test includes substantial nexus with the state, fair apportionment, non discrimination against interstate commerce, and a fair relationship to the services provided by the state. These criteria must be met so that a state taxing scheme or particular state exemption does not interfere with interstate commerce. Although the tugboats spent more than half of their time pushing barges in Illinois waters, they did not receive any services from the state while using Illinois waterways. The taxation of fuel and supplies loaded onto tugboats outside the state violated the U.S. Constitution Commerce Clause since all four prongs were not met successfully. (American River Transportation Company v. Glen L. Bower, Docket No. 2-02-1290, July 21, 2004)

Posted on September 10, 2004