ALABAMA DEPARTMENT OF REVENUE v. CSX TRANSPORTATION, INC.

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Case Basics
Docket No. 
13-553
Petitioner 
Alabama Department of Revenue, et al.
Respondent 
CSX Transportation, Inc.
Decided By 
Advocates
(Solicitor General, Alabama, for the petitioner)
(Assistant to the Solicitor General, Department of Justice, for the United States as amicus curiae supporting the petitioner)
(for the respondent)
Term:
Facts of the Case 

Alabama imposes a 4% sales tax on the gross receipts of retail businesses and a 4% use tax on storage, use, or consumption of tangible personal property. Accordingly, rail carriers that purchase diesel fuel within the state are subject to a 4% sales tax. However, motor and water carriers that purchase fuel in Alabama pay an excise tax of $0.19 per gallon.

In 2008, CSX Transportation, Inc. (CSX) sued the Alabama Department of Revenue for violating the Railroad Revitalization and Regulatory Reform Act of 1974 (4-R Act), which targeted local and state taxation schemes that discriminated against rail carriers. CSX argued that the sales tax was discriminatory because it required the rail carriers to pay more than their competitors for purchasing diesel fuel in the state. The district court dismissed the case and U.S. Court of Appeals for the Eleventh Circuit affirmed the dismissal by citing precedent that held that a railroad could not challenge its competitors’ exemptions from a sales tax as discriminatory under the 4-R Act. The Supreme Court granted certiorari, overturned the ruling, and remanded the case. On remand, the district court conducted a bench trial and issued an order holding that the state’s sales tax does not discriminate against rail carriers for the purposes of the 4-R Act, because the amount that motor carriers paid was roughly equal to that paid by rail carriers. The Court of Appeals reversed the lower court’s decision and held that the tax is discriminatory because the state had not offered sufficient justification for exempting CSX’s competitors from the sales tax.

Question 

Does a state violate the Railroad Revitalization and Regulatory Reform Act of 1974 when it requires rail carriers to pay a sales-and-use tax but exempts the railroad’s competitors?

In resolving such a claim, should a court consider other aspects of the state’s tax scheme rather than focusing solely on the challenged provision?

Conclusion 
Decision: 7 votes for Alabama Department of Revenue, 2 vote(s) against
Legal provision: Railroad Revitalization and Regulation Reform Act of 1976

Unanswered, and yes. Justice Antonin Scalia delivered the opinion for the 7-2 majority. The Court held that the appellate court correctly examined the railroad’s situation in relation to its comparison class of competitors in the transportation industry. The Court also held that, in determining whether discrimination occurred, a court must look at the state’s tax scheme as a whole rather than just the challenged provision. A provision may seem discriminatory when examined in isolation, but the tax code as a whole may subject a competitor to a comparable tax. Because the appellate court did not examine the state’s justifications for its tax regime, the Court remanded the case for further proceedings to determine whether discrimination in violation of the Railroad Revitalization and Regulatory Reform Act of 1974 occurred.

Justice Clarence Thomas wrote a dissenting opinion in which he argued that the majority opinion’s definition of discrimination was overly broad and could lead to inconsistent applications of the statute. Because the railroad was unable to prove that the tax “targets and singles out” the railroad as compared to other taxpayers, there was no discrimination. Justice Ruth Bader Ginsburg joined in the dissent.

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ALABAMA DEPARTMENT OF REVENUE v. CSX TRANSPORTATION, INC.. The Oyez Project at IIT Chicago-Kent College of Law. 26 April 2015. <http://www.oyez.org/cases/2010-2019/2014/2014_13_553>.
ALABAMA DEPARTMENT OF REVENUE v. CSX TRANSPORTATION, INC., The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/2010-2019/2014/2014_13_553 (last visited April 26, 2015).
"ALABAMA DEPARTMENT OF REVENUE v. CSX TRANSPORTATION, INC.," The Oyez Project at IIT Chicago-Kent College of Law, accessed April 26, 2015, http://www.oyez.org/cases/2010-2019/2014/2014_13_553.