The U.S. Supreme Court has found that motor carriers and water carriers are an appropriate comparison class in a rail carrier’s claim that Alabama’s asymmetrical sales tax treatment is discriminatory in violation of the Railroad Revitalization and Regulation Reform Act of 1976 (the 4-R Act). The 4-R Act prohibits a state from imposing a “tax that discriminates against a rail carrier” that is subject to the provisions of the Act. In Alabama, diesel fuel purchased by motor carriers and water carriers is exempt from tax, but diesel fuel purchased by rail carriers is subject to sales tax. The U.S. Supreme Court held that Alabama’s sales tax on diesel fuel purchased by rail carriers is discriminatory against rail carriers only if the state can’t justify the differences in tax treatment between the similarly situated taxpayers. The case was remanded to the Eleventh Circuit, and the U.S. Supreme Court directed it to consider Alabama’s justifications for the different tax treatment of rail, motor and water carriers. Previously, Alabama argued that sales and use tax exemptions can’t discriminate within the meaning of the 4-R Act, but the U.S. Supreme Court rejected this position. To see our previous news item on this decision, see U.S. Supreme Court Holds That 4-R Act Challenges Can be Based on Exemptions. The Court also held that other aspects of a state’s tax scheme may be considered when examining tax discrimination claims. The Court remanded the case to the Eleventh Circuit to consider whether the excise tax on diesel fuel for motor carriers is equivalent to the sales tax on diesel fuel for rail carriers. The Court also remanded the case for consideration of the different treatment for water carriers.(Alabama Department of Revenue v. CSX Transportation, Inc., U.S. Supreme Court, Dkt. 13-553, March 4, 2015)