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Law in Plain English: Alabama Department of Revenue v. CSX Transportation, Inc.
This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.
Background: CSX pays Alabama's 4% sales tax whenever it purchases diesel fuel in the state. CSX's main competitors in the state-interstate motor and water carriers do not. Motor carriers pay an excise tax of 19c per gallon. Water carriers pay no tax at all on diesel fuel purchases. CSX filed suit, alleging that by paying the 4% sales tax, the state discriminated against CSX in violation of the Railroad Revitalization and Regulation Reform Act of 1976 (4-R Act). The Act provides that a state may not "[i]mpose another tax that discriminates against a rail carrier providing transportation subject to the jurisdiction of the Board under this part." The district court dismissed the complaint, reasoning that because the state's motor carriers paid a roughly equivalent amount in taxes pursuant to the state's fuel excise tax, the motor carriers' exemption from the sales tax was not discriminatory. The district court also found that CSX had offered no evidence regarding the purported discriminatory effect of the tax as it related to water carriers. The Eleventh Circuitreversed, finding that because rail carriers paid the state's sales tax and motor and water carriers did not, the tax was discriminatory-regardless of whether other taxes leveled the playing field.
Issue: The questions before the Court are (1) whether a state “discriminates against a rail carrier” in violation of 49 U.S.C. § 11501(b)(4) when the state generally requires commercial and industrial businesses, including rail carriers, to pay a sales-and-use tax but grants exemptions from the tax to the railroads’ competitors; and (2) whether, in resolving a claim of unlawful tax discrimination under 49 U.S.C. § 11501(b)(4), a court should consider other aspects of the state's tax scheme rather than focusing solely on the challenged tax provision.