CSX Railroad Fuel Tax Lawsuit Dismissed
Alabama Attorney General Steve Marshall and Revenue Commissioner Julie P. Magee applauded the ruling, saying it could return more than $10 million in unpaid taxes to Alabama's Education Trust Fund.
U.S. District Court Judge Abdul Kallon on March 29 issued an opinion finding the state did not violate the Railroad Revitalization and Regulatory Reform Act of 1976. He dismissed the lawsuit by CSX, which has been bounced around federal courts, including twice to the U.S. Supreme Court, for nearly a decade.
CSX and three other railroads contended in 2008 lawsuits that Alabama's taxing scheme was discriminatory because the state exempts motor carriers and water carriers from the diesel fuel sales tax it requires railroads to pay.
In his ruling Kallon found that:
Rail carriers pay the 4% sales tax when they purchase dyed diesel. However, when rail carriers purchase clear diesel, like motor carriers, they instead pay a 19 cents per gallon fuel-excise tax and are exempted from the sales tax. So, any "discrimination" results from CSX's business practices rather than state law.
The federal Commerce Clause prohibits Alabama from taxing water carriers for the fuel they purchase in Alabama.
CSX has suffered no competitive injury from the state's exemption of water carriers from the sales tax.
CSX could appeal the March 29 ruling.
"CSX is reviewing the court's decision and considering further options," Laura Phelps, manager of media relations for CSX Transportation, stated in an e-mail to AL.com March 30.
Alabama will seek to recoup the sales taxes that CSX has withheld since filing its lawsuit, an amount that is estimated to exceed $10 million, according to an Alabama Attorney General's statement. The lawsuits by the three other railroads have been stayed pending resolution of CSX's lawsuit, and the amounts of withheld taxes involved in those cases are not presently available, according to the statement.
"I hope that [the March 29] opinion signals the end of nine years of litigation that has resulted in millions of dollars being withheld from Alabama's public schools," Marshall stated in a press release. "Everyone in this state benefits from stronger schools, so everyone, including railroad companies, needs to pay their fair share of taxes to support our schools."
Magee also stated that "the Court's decision vindicates the state's imposition of sales tax on the railroad's purchase of fuel and clearly shows that the state never discriminated against CSX."
