WASHINGTON — The U.S. Supreme Court has declined to hear a tax case involving CSX Transportation and the state of Alabama for the third time — a decision Bloomberg News calls a partial win for both parties.
The court rejected petitions by CSX and the Alabama Department of Revenue on Monday. That means a 2018 decision by the Eleventh Circuit appeals court stands. It found that Alabama was discriminatory against railroads because it requires them to pay state sales tax plus local taxes on diesel fuel purchases, while barges carrying interstate cargo are exempt.
The state will now face an order to fix the problem. It can end its taxing of railroads, losing at least $5 million a year in revenue, or similarly tax the barge industry — which will likely bring its own suit arguing the state cannot tax interstate commerce on a federal waterway, Bloomberg’s report says.
Mister McGuire:
I just watched “The Firm”. It figures I would be a sucker for a lawyer film. But there is a quote in it that is cogent.
“The difference between tax avoidance and tax evasion is
a. Whatever the IRS says;
b. A smart lawyer;
c. Ten years in prison;
d. All the above.”
I understand what you say about sales taxes and purchases in states other than the one you are domiciled in. But, there are loopholes, variances, and exclusions. And it is these which make the law so much fun.
For this reason I’m going with “C”.
I expect the reason CSX doesn’t do this (as did Conrail, according to Mister Oltmann) is simply because it is not cost effective.
I would dearly love to be a fly on the wall in the courtroom if they were to try. This is the sort of thing attorneys live for.
The above comments are general in nature and do not form the basis for an attorney/client relationship. They do not constitute legal advice. I am not your attorney. Find your own damn lawyer.
Anna, we must get you into a circle of TRAINS readers. They are generally fun and interesting folks to be around.
The above comments are general in nature and do not form the basis for an therapist/client relationship. They do not constitute professional advice. I am not your therapist. Find your own therapist.
This does not have anything to do with corporate risk taking. The real reason CSX doesn’t do what Anna suggested is because they would still have to pay the sales tax unless the state they brought the oil in from imposed a higher tax than Alabama. That is why on my state income tax return I have to declare what I purchased out-of-state (and brought home) and apply the 5.5% state tax to it. I get a credit if I bought it in a high tax state like California or New York but if the purchase was in a no tax state or a state with a lower than 5.5% sales tax I have to pay either the full 5.5% or the difference. Of course it is on the honor reporting system so it is hard to police for individuals but for a large corporation like CSX there is sure to be an audit. This only applies for products used in your home state so if, while visiting her, you buy a gift for your sister who does not live in your home state then no home state sales or use tax applies. But it would be reasonable to assume that CSX is going to use the diesel oil in Alabama since that is where it is purchased.
Anna – Conrail used to do exactly this…. They used Tank-Trains to deliver diesel to Selkirk NY from a Chicago refinery to get around NY state tax. It stopped when NY state changed the tax and closed the loophole.
Anna, you may be right, but I’d doubt that any railroad would do that because it would require some innovative risk taking. That is virtually dead in corporate America.
Well CSX stop fueling road engines in Alabama to decrease the burden until issue is resolved… Mississippi, Tennessee, Louisiana, or Georgia should do…
too funny Anna! 🙂
This is a railroad, they own a transportation system, they have tank cars. What is to prevent them from purchasing their diesel fuel in a low or no tax state and bringing it into Alabama for their own use? It would be interesting to watch the contortions of the Alabama Department of Revenue if CSX were to do something like this.
Watching them try would provide the best entertainment I have had with my clothes on for a good long time.
The above comments are general in nature and do not form the basis for an attorney/client relationship. They do not constitute legal advice. I am not your attorney. Find your own damn lawyer.
Logical. But wait until the truckers get on board for the same argument. So why did Alabama exempt water carrier fuel from sales taxes? To make the Tenn-Tom Waterway appear less of a boondoggle than it was (my suspicion)?
It should be noted that barges can carry diesel fuel as well. And probably more cheaply than CSX,