Ryan Announces U.S. Supreme Court Rules Favorably for Railroads Challenging State Tax Exemptions as Discriminatory

Mar 08, 2011, 06:00 ET from Ryan, LLC

DALLAS, March 8, 2011 /PRNewswire/ -- Ryan, a leading global tax services firm with the largest indirect tax practice in North America, today announced that in CSX Transportation, Inc. v. Alabama Department of Revenue, the U.S. Supreme Court ("Court") held that railroads may challenge state sales and use taxes under the Railroad Revitalization and Regulatory Reform Act of 1976 ("4-R Act").

The 4-R Act prohibits certain discriminatory taxes. Three prohibitions deal with taxes on property, and the fourth prohibits "another tax" that discriminates against rail carriers. Citing the 4-R Act, CSX Transportation, Inc. ("CSX") challenged Alabama's imposition of sales and use tax on diesel fuel purchased by rail carriers. CSX said the tax is discriminatory because fuel purchased by interstate motor and water carriers is exempt from the tax.

The Court's decision resolves the issue of whether railroads could challenge non-property taxes under the 4-R Act. In addition, the Court determined that an exemption from tax may be discriminatory in the same manner as an imposition of tax. However, the Court returned the case to the lower courts to determine whether Alabama's tax scheme is actually discriminatory under the 4-R Act.

Although the Court did not address all issues, this decision provides much needed guidance regarding non-property taxes imposed on railroads.

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Ryan is a leading global tax services firm, with the largest indirect tax practice in North America and the seventh largest corporate tax practice in the United States.  Headquartered in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning.  In 2010, Ryan received the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service.  Empowered by the award-winning myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 900 professionals and associates serves many of the world's most prominent Fortune 1000 companies.  More information about Ryan can be found at www.ryan.com.