Ala. Dep’t of Revenue v. CSX Transp., Inc.

Alabama imposes sales and use taxes on railroads purchasing or consuming diesel fuel, but exempts their competitors: trucking companies and companies that transport goods interstate through navigable waters. Motor carriers pay an alternative fuel-excise tax on diesel, but water carriers pay neither sales tax nor excise tax. CSX, an interstate rail carrier, alleged discrimination against a rail carrier under the Railroad Revitalization and Regulation Reform Act, 49 U.S.C. 11501(b)(4). The Supreme Court held that a tax “discriminates” when it treats “groups [that] are similarly situated” differently without sufficient justification. On remand, the Eleventh Circuit held that CSX could establish discrimination by showing that Alabama taxed rail carriers differently than their competitors, but rejected Alabama’s argument that the fuel-excise tax on motor carriers justified the sales tax on rail carriers. The Supreme Court reversed and remanded. CSX’s competitors are an appropriate comparison class; the class need not consist of “general commercial and industrial taxpayers.” The Act’s subsections (b)(1) to (b)(3), addressing property taxes, limits the comparison class to commercial and industrial property in the same assessment jurisdiction. Subsection (b)(4) contains no such limitation, so the comparison class is based on the claimed theory of discrimination. When a railroad alleges discrimination compared to transportation industry competitors, its competitors in that jurisdiction are the comparison class. The comparison class must consist of individuals similarly situated to the claimant. Discrimination in favor of competitors frustrates the Act’s purpose of restoring railways’ financial stability while fostering competition among all carriers. The Eleventh Circuit erred in refusing to consider Alabama’s proposed justification. An alternative, roughly equivalent tax is one possible justification. On remand, the court is to consider whether Alabama’s fuel-excise tax is the rough equivalent of sales tax on diesel fuel and whether any alternative rationales justify the water carrier exemption. View "Ala. Dep't of Revenue v. CSX Transp., Inc." on Justia Law