Alabama Department of Revenue v CSX Transportation, Inc.

CSX challenged Alabama’s imposition of diesel fuel sales tax on railroads but not motor carriers and water carriers under 49 USC 11501(b)(4). After remand from the Court, the district court found the tax did not violate (b)(4), but, the 11th Circuit reversed. The Court, 7-2, reversed and remanded. It held that under (b)(4), the proper comparison is between the railroad as taxpayer as similarly situated parties, the comparison group depends on the theory of discrimination and the correct comparison group here are the competitors of the railroad namely the motor carriers and the water carriers. The majority also held that a reviewing court must consider whether state’s imposition of different taxes on the similarly situated arties, such as Alabama’s imposition of a different tax on motor carriers, is the rough equivalent of the discriminatory tax and thus justifies the discrimination. The case was remanded to consider Alabama’s rough equivalent argument. Justice Thomas, joined by Ginsberg, dissented arguing discriminates is ambiguous, that (b)(1)-(b)(3) provide guidance which leads to the conclusion that the comparison group is general commercial and industrial taxpayers and here there is no discrimination at all as CSX chooses to buy the diesel it does to avoid federal excise tax and thus places itself in the tax position it is in not any discriminatory actions by Alabama. He also argued the majority’s rule is unworkable.