[JURIST] The US Supreme Court [official website] on Wednesday ruled in Alabama Department of Revenue v. CSX Transporation, Inc. [opinion, PDF] that Alabama should be able to justify its decision to assess on railroads a fuel tax that it does not assess on motor carriers. The 7-2 ruling against CSX Transportation Inc. reversed the decision [opinion, PDF] of the US Court of Appeals for the Eleventh Circuit [official website], remanding the case to consider “whether Alabama’s fuel-excise tax is the rough equivalent of Alabama’s sales tax as applied to diesel fuel,” and would thus justify the motor carrier tax exemption. The court granted certiorari in order to consider who the “comparison class” in this case was for purposes of evaluating CSX’s 49 USC § 11501(b)(4)m [text] discrimination claim, in which CSX asserted that the state’s policy discriminates against the rail carrier, and whether a court should consider aspects of a state’s tax scheme other than the challenged tax provision when considering such a claim. The decision of whether the different treatment of the railroads was left for the Eleventh Circuit to decide.

The Supreme Court in 2011 ruled [JURIST report] in CSX Transportation, Inc. v. Alabama Department of Revenue [Cornell LII backgrounder] that a railroad may challenge sales and use taxes that apply to rail carriers but exempt their competitors in the transportation industry. Railroads pay a 4 percent sales tax and a 4 percent use tax to the state of Alabama when they purchase or consume diesel fuel. Interstate motor and water carriers—the primary competitors of railroad carriers—are exempt from paying these taxes.The petitioners, CSX Transportation, argued that the Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act) [text] restricts the ability of state and local governments to levy discriminatory taxes on rail carriers.