Court Rules that Alabama’s Fuel Tax is Discriminatory

The United States 11th Court of Criminal Appeals ruled this week that Alabama discriminated against railroads. This ruling comes due to the fact that railroads were made to pay a tax on fuels. Industries such as trucking and barges that compete with railroads were not required to pay the fuel taxes.

Court records show that CSX Railroad was paying a four percent sales tax on their diesel fuel purchases in the state of Alabama. Competing companies did not pay these taxes. .

CSX filed a lawsuit back in 2008 against the state Department of Revenue, but the district court ruled 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 had found that “the tax rate imposed per gallon of diesel fuel for rail carriers and motor carriers is essentially the same”

CSX appealed that decision.

In the appeal the U.S. 11th Court of Criminal Appeals ruled that Alabama did indeed discriminate against railroads by not taxing their competitors for the same fuels.

The court stated that “the state didn’t offer good enough justification for exempting the company’s competitors from paying the tax.

“In short, after establishing a comparison class of competitors and showing that its competitors did not pay the sales tax on diesel fuel purchases, CSX made a prima facie showing of discrimination under (the Railroad Revitalization and Regulation Reform Act of 1976),” the appeals court ruled.

“The burden shifted to the state to provide a ‘sufficient justification’ for the exemptions. It did not. We reverse the district court, hold that the State’s sales tax violates the 4-R Act (Railroad Revitalization and Regulation Reform Act), and remand to the district court with instructions to enter declaratory and injunctive relief in favor of CSX consistent with this opinion, “ the court ruled.