Citations
- 892 F. Supp. 2d 1300
Full opinion text
MEMORANDUM OPINION
ABDUL K. KALLON, District Judge.
“Discrimination cases sometimes do raise knotty questions about whether and when dissimilar treatment is adequately justified.” CSX Transp., Inc. v. Ala. Dep’t of Revenue, — U.S. -, 131 S.Ct. 1101, 179 L.Ed.2d 37 (2011). Here, on remand from the Supreme Court of the United States, see id., this court is called upon to answer such a knotty question and must determine whether, under the Railroad Revitalization and Regulatory Reform Act (“4-R Act”), 49 U.S.C. § 11501, the State of Alabama’s “sales and use” tax constitutes “another tax that discriminates against a rail carrier.” See doc. 1 (“Complaint”). The court finds no violation of the 4-R Act, and accordingly, will enter a separate order DISMISSING Plaintiff CSX Transportation, Inc.’s (“CSX”) Complaint with prejudice.
I. PROCEDURAL HISTORY
CSX originally filed this action on April 14, 2008, “seeking to restrain and enjoin defendants ... from assessing, levying, or collecting from plaintiff Alabama sales and use taxes on plaintiffs purchase or consumption of diesel fuel and gasoline used for rail transportation purposes in Alabama” because the “imposition of Alabama sales and use taxes on diesel fuel and gasoline purchased and used for rail transportation purposes is discriminatory and unlawful under Section 306 of the [4-R Act], Pub.L. No. 94-210, 90 Stat. 54 (February 5, 1976), now codified as 49 U.S.C. § 11501.” Doc. 1, at 3. CSX’s Complaint “also seeks a declaratory judgment pursuant to 28 U.S.C. § 2201 that defendants’ imposition of sales and use taxes on the purchase and consumption of diesel fuel and gasoline for rail transportation purposes in Alabama violated” the 4-R Act. Id. at 3-4. On July 8, 2008, 2008 WL 7908674, Judge U.W. Clemon granted CSX’s motion for a preliminary injunction and ordered CSX to “pay the disputed tax funds into an Escrow Fund, to be established at a financial institution mutually agreed to by the parties, pending final resolution of this action.” Doc. 14.
However, on July 28, 2008, the court stayed this action pending the outcome of the Eleventh Circuit’s decision in Norfolk S. Ry. Co. v. Ala. Dep’t of Revenue, NO. 08-12712-FF. See doc. 19. On December 16, 2008, the court dismissed this action, thereby dissolving the preliminary injunction, because the Eleventh Circuit held in Norfolk Southern that a tax exemption cannot constitute “another tax that discriminates against a rail carrier.” Doc. 22 (citing Norfolk S. Ry. Co. v. Ala. Dep’t of Revenue, 550 F.3d 1306, 1314-15 (11th Cir.2008)). CSX appealed on January 29, 2009, doc. 23, but the Eleventh Circuit affirmed this court’s dismissal under Norfolk Southern on September 3, 2009. Doc. 28 (CSX Transp., Inc. v. Ala. Dep’t of Revenue, 350 Fed.Appx. 318 (11th Cir.2009)). CSX petitioned the Supreme Court of the United States for a writ of certiorari which the Court granted on June 14, 2010 to decide the following question: “Whether a State’s exemptions of rail carrier competitors, but not rail carriers, from generally applicable sales and use taxes on fuel subject the taxes to challenge under 49 U.S.C. § 11501(b)(4) as ‘another tax that discriminates against a rail carrier.’ ” CSX Transp., Inc. v. Ala. Dep’t of Revenue, — U.S. -, 130 S.Ct. 3409, 177 L.Ed.2d 323 (2010).
On February 22, 2011, Justice Kagan announced the opinion of the Court reversing the Eleventh Circuit and holding that “CSX may challenge Alabama’s sales and use taxes as ‘tax[es] that diseriminat[e] against ... rail carriers]’ under § 11501(b)(4).” CSX Transp., Inc. v. Ala. Dep’t of Revenue, — U.S. -, 131 S.Ct. 1101, 1114, 179 L.Ed.2d 37 (2011) (alterations in original). The majority opinion, however, refused to address whether “Alabama’s taxes in fact discriminate against railroads by exempting interstate motor and water carriers.” Id. As such, the Court remanded the merits question. Id. at 1107 n. 5, 1114. The Eleventh Circuit, in turn, vacated its prior opinion, 350 Fed. Appx. 318, and vacated this court’s “December 18, 2008 order dissolving the preliminary injunction and dismissing CSXT’s case,” thereby remanding the case for further proceedings consistent with the Supreme Court’s opinion. CSX Transp., Inc. v. Ala. Dep’t of Revenue, 639 F.3d 1040 (11th Cir.2011).
The undersigned received this remanded matter upon reassignment of the action on February 28, 2011, and, on March 10, 2011, restored the previously entered preliminary injunction, thereby enjoining Defendants from “assessing, levying, and/or collecting taxes on diesel fuel purchases and use by [CSX], pending a trial and determination on the merits of [CSX’s] cause of action.” Doc. 35. The court also required CSX to “pay the disputed tax funds into an Escrow Fund, to be established at a financial institution mutually agreed to by the parties, pending final resolution of this action.” Id. On April 25, 2012, the court held a bench trial in this matter, see doc. 65, and also received pre- and posttrial briefs by both parties, see docs. 61, 62, 67, 68, 69, 70.
II. FACTUAL BACKGROUND
The parties stipulated to many of the underlying facts in this matter. CSX is a Virginia Corporation with its principal place of business located in Jacksonville, Florida. CSX is engaged in interstate commerce as a common carrier by railroad. The Alabama Department of Revenue (“Department”) is the Department of the State of Alabama charged with the responsibility to administer and collect taxes within Alabama, including the administration of sales and use taxes. Defendant Julie P. Magee is the Commissioner of Revenue of the State of Alabama (“Commissioner”) and is named in this action in her official capacity only. As Commissioner, Ms. Magee exercises general supervision over administration of the assessment and taxation laws of Alabama, including those imposing sales and use taxes.
Alabama imposes a sales tax on the gross receipts from the business of selling at retail or renting tangible personal property, or of furnishing entertainment. Alabama also imposes a use tax on the use or other consumption of property in the state. Railroads are subject to the sales and use taxes on either their purchase or consumption of diesel fuel in the State of Alabama. The tax is imposed by the State at the rate of 4%. See Ala.Code §§ 40-23-2(1), 40-23-61(a). Moreover, under Alabama law, counties and municipalities may impose sales and use taxes which correspond to and parallel the state’s sales and use tax. The rates imposed by the counties and municipalities are in addition to the 4% rate imposed by the State of Alabama. The counties and municipalities are required by state statute to conform their rules, regulations, and procedures for the administration of sales and use taxes to the rules, regulations, and procedures adopted by the Department of Revenue. See Ala.Code §§ 11-3-11.2, 11-51-200 through 204; Ala.Code § 40-12-4. The following are the current sales and use tax rates imposed by cities and counties on CSX’s purchase and use of diesel fuel: City of Birmingham-4%, City of Mobile-4%, City of Montgomery-3.5%, County of Jefferson-2%, County of Mobile-1%, County of Shelby-1%, County of Montgomery-2.5%, County of Jackson-2%, City of Bridgeport-3%.
The Commissioner, acting through the Department, collects and administers sales and use taxes. The sales tax is collected by retailers, including operators of places of amusement, but is actually imposed on the consumer. See Ala.Code § 40-23-26(c). CSX, however, holds a direct pay permit issued by the Department. Under a direct pay permit, vendors of CSX do not collect the sales tax from CSX and then remit the taxes to the Department or local counties and municipalities; instead, CSX files sales and use tax returns and pays the taxes directly to the Department and to the local counties and municipalities.
The principal competitors to rail carriers in the transportation of property in interstate commerce in the State of Alabama are on-highway motor carriers of property (“motor carriers”) and carriers of property by ship, barge, and other vessel (“water carriers”). Air carriers are also engaged in the transportation of property in interstate commerce, but this mode of transportation only marginally competes due to the relatively small size and weight of the property transported in Alabama. Water carriers are exempt from sales and use taxes on their purchase or consumption of diesel fuel used for interstate or foreign commerce. See Ala.Code §§ 40-23-4(a)(10) (sales tax), 40-23-62(12) (use tax). Additionally, motor carriers are not subject to sales and use taxes on their purchase or consumption of petroleum products used for on-road transportation purposes; rather, interstate motor companies pay a Motor Fuels Excise Tax totaling 19$ per gallon for on-road diesel fuel. See Ala.Code §§ 40-17-2(1), 40-17-220(e). According to the Freight Analysis Framework, an analysis of freight movement published by the United States Department of Transportation, in the year 2002, 82% of freight moved intrastate within Alabama was transported by trucks, 6% by rail, and 1% by water.
As it relates to the disbursement of the 19