Tax Law

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.


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Posted by Taxmaster - December 25, 2013 at 12:46 am

Categories: State Tax, Tax Law   Tags:

Tobacco Tax Hike: What it means to all

If there’s anything local convenience stores like, it’s a flurry of eager customers hoarding packs and packs of cigarettes before taxes skyrocket on July 1st, 2013.

On the said date, Minnesota’s tobacco taxes have increased by $1.60 per pack which adds up to the total state tax to $2.83 per pack. This increase means a Marlboro will now be at a state minimum of $7.83 per pack of 20’s.

What it means to the business

According to local stores and gasoline stations, their sales Sunday night saw the most dramatic spikes in their sales. Most of the stores have even reported doubling their monthly sales in the last week of June, just in time before the taxes go crazy. Another store reports selling 10 cartons in less than 20 minutes, and a woman claims to have bought stocks amounting to approximately $500, a definite steal compared to when Monday’s taxes go up.

Unfortunately for these stores, the almost sell-out performance of that week was met with very disappointing results come Monday.

What it means to the smokers

The increase in taxes was met with mixed inputs from the public’s end. While it was expected that smokers will react negatively, there are some heavy smokers who commented that the taxes may not impact their smoking habits, although they expect that it will affect their monthly budget.

A small number of smokers though, commented that higher taxes be considered as a sign to quit, or at least to motivate them to do so. Some also noted that they may resort to using electronic cigarettes, which are taxed less than tobacco.


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Posted by Taxmaster - December 20, 2013 at 12:46 am

Categories: Federal Tax, Income Tax, State Tax, Tax Law   Tags:

Reaping the benefits of marriage equality

Same sex couples have more than marriage equality to be thankful for with the recent United States Supreme court ruling – it also comes with financial benefits that can save them thousands of dollars on taxes.

When gay or lesbian couples marry, they will now be able to enjoy the rights and benefits experienced by any other couple. Depending on the income between the two individuals, their taxes could go up or down.

As an example, a person earning $70,000 and his partner $30,000, will have their tax bracket falling at $19,000 if filed separately vs. $12,000 if filed jointly. There may be instances where the joint filing brings them to pay higher taxes, but other social insurance and medical benefits will offset the disadvantage.

John Singh and Jeff Watson have been domestic partners for 12 years, and they could not get any happier than the opportunities opened for them. The IRS now recognizes California same-sex marriages and is already allowing these couples to file taxes jointly.

Before the ruling on the Defense of Marriage Act, same sex couples could only file taxes as domestic partners which only confused the IRS.  Once, Jeff Watson received notices from the IRS informing him of thousands of debt in self-employment taxes. But he wasn’t self-employed – his partner Jeff Singh was.

To date, specifics on joint filing of taxes are still being worked on by the federal government. As Jeff Watson pointed out, “once we have more clarity on that, we’ll probably be able to make a more informed decision.”


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Posted by Taxmaster - December 5, 2013 at 12:41 am

Categories: Federal Tax, Tax Law   Tags:

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