Alabama Department of Revenue, et al. v. CSX Transportation, Inc.

The Court has heard this case twice before. In its first opinion, the Court held that CSX Transportation could challenge Alabama’s sales-and-use tax as “another tax that discriminates against a rail carrier” in violation of 49 U.S.C. § 11501(b) because Alabama exempts trucks and water carriers—but not rail carriers—from paying the tax when purchasing diesel fuel to transport goods interstate. See CSX Transp., Inc. v. Ala. Dep’t of Revenue, 562 U.S. 277 (2010). In its second opinion, the Court held that the lower courts must look outside the challenged sales-and-use tax to determine whether Alabama could justify the exemptions. See Alabama Dep’t of Revenue v. CSX Transp., Inc., 135 S.Ct. 1136 (2015). On remand, the district court held a 4-day trial and found that Alabama justified both exemptions. The Eleventh Circuit agreed that Alabama justified the truck exemption but held that Alabama had not justified the water carrier exemption. It therefore ordered the district court to enjoin the tax. Rail carriers and States have fought over water carrier exemptions for more than 20 years. The issue is presently pending in multiple actions that lower courts have stayed pending resolution of this case. The question left open by the Court in CSX II and presented here is Under 49 U.S.C. § 11501(b)(4), when can a State justifiably maintain a sales-and-use tax exemption for fuel used by vessels to transport goods interstate without extending the same exemption to rail carriers?