Alabama Railroad Tax Case Back in Court

A federal tax lawsuit that could change the way states tax the trucking industry is wending its way through the federal court system for a second time.

A federal appeals court is now weighing claims by CSX Transportation that the Alabama Department of Revenue’s 4% fuel tax on railroads is discriminatory because the same tax does not apply to motor carriers.

Truckers purchasing fuel in Alabama instead pay a 19-cent a gallon tax at the pump.

The case already has been to the U.S. Supreme Court, which ruled in February 2011 that CSX had the right to argue its claim in the federal court, but did not decide if the tax was discriminatory.

The Supreme Court directed the lower court to reconsider the claim by CSX, saying it erred in not allowing the Class I railroad to use a 1976 federal law in pressing its discrimination claim.

A federal district court judge in Alabama reheard CSX’s arguments, but again ruled in August that the tax was not discriminatory.

A few days later, CSX appealed the case to the 11th U.S. Circuit Court of Appeals in Atlanta.

“Railroads pay sales tax on the purchase of their diesel fuel; their stipulated principal competitors do not,” CSX said in a court brief filed on Nov. 28 with the appeals court.

The Eastern freight railroad claimed it is possible for an interstate trucker to avoid the tax altogether by filling up in Georgia and running across Alabama without purchasing any fuel in Alabama.