The NCSL Blog


By Lisa Soronen

Its simple math.  Really.  But will the Supreme Court do it?  The Eleventh Circuit refused.

The question in Alabama Department of Revenue v. CSX Transportation is whether a state discriminates against rail carriers in violation of federal law even when rail carriers pay less in total state taxes than motor carriers.

No, argues a State and Local Legal Center (SLLC) amicus brief filed in the U.S. Supreme Court. Forty-two states exempt motor carriers from sales tax on diesel fuel.  

Rail carriers (railroads) in Alabama pay a 4 percent sales tax on diesel fuel.  Motor carriers (trucks) pay an excise tax of 19 cents per gallon and no sales tax. The Railroad Revitalization and Regulatory Reform Act (4-R) prohibits state and local governments from imposing taxes that discriminate against railroads. 

Since CSX filed its complaint, railroads paid less in sales tax than trucks paid in excise tax.

But, the U.S. Court of Appeals for the 11th Circuit refused to compare the total taxation of railroads and trucks to avoid the “Sisyphean burden of evaluating the fairness of the state's overall tax structure.”  Instead it concluded Alabama’s sales tax on railroads violates 4-R because Alabama’s competitors don’t pay it.

The SLLC brief argues that, given states' traditional power to tax, the court should interpret 4-R narrowly. The brief suggests the court could take three approaches to rule in favor of Alabama.

First, it could compare the tax treatment of rail carriers to all commercial and industrial taxpayers in the state (who all pay sales tax) instead of only railroad competitors. Second, the court could ignore the labels of sales and excise tax and compare the amount railroads and their competitors pay in total taxes.  Third, the court could note the relevant differences between railroads and their competitors. For example, water carriers traditionally have been exempt from all taxes on diesel fuel because of constitutional concerns about taxing vessels in navigable waters. 

Finally, the SLLC brief points out that “[r]uling in favor of CSX would threaten states’ ability to take in tax revenue, an ability already impeded by current economic conditions. This court must not allow 4-R to shield CSX—a $12 billion nationwide corporation—and other rail carriers from paying millions of dollars in taxes that fund vital public services. Congress did not intend for 4-R to enrich large corporations by impoverishing the states.”

All of the Big Seven, including NCSL, joined the SLLC brief along with SLLC associate members the International Municipal Lawyers Association and the Government Finance Officers Association.   

Lisa Soronen is the executive director of the State and Local Legal Center and writes frequently for the NCSL blog about the U.S. Supreme Court.


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This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.