Supreme Court Grants Certiorari To Two State Tax Cases


Supreme Court grants certiorari to two state tax cases

On July 1, 2014, the Supreme Court granted certiorari to two state tax cases, just one day after denying certiorari in the Mississippi Equifax case.  The two cases, which will be heard during the Court’s October 2014 term, are:

Direct Marketing Association v. Brohl.  This challenge to Colorado’s use tax reporting statute is somewhat of a surprise, given the case’s long history.  The DMA challenged the use tax reporting regime in federal court, won, and then lost in the Tenth Circuit on the grounds that the Tax Injunction Act prohibits federal courts from ruling on state tax matters where a plain, speedy, and efficient remedy exists in the state courts.  The DMA then took its case to the Colorado state court, where it has prevailed so far.  But the DMA also appealed the Tenth Circuit’s ruling to the Supreme Court, arguing that the use tax reporting regime isn’t a tax statute, but rather provides for only a secondary aspect of state tax administration.  For more information or to read the parties’ briefs, see SCOTUSblog’s post on the case.  To read more about the Tenth Circuit’s decision, see this earlier TaxHatchet post.

Alabama Department of Revenue v. CSX Transportation.  Alabama, like many other states, has a general sales tax regime that applies to all taxpayers, including railroads, but that exempts the railroad’s competitors (here, trucking) and imposes a separate tax regime on the competitors.  The Federal Railroad Revitalization and Regulatory Reform (“4-R”) Act prohibits discriminating against railroads in state taxation.  In addition to the issues presented by the parties, the Court added the issue of whether, in resolving a claim of unlawful tax discrimination under the 4-R Act, a court should consider other aspects of the state’s tax regimes rather than looking only at the challenged tax provision.  This case is the latest iteration of several years of cases brought by the railroads, which are litigating this and related cases around the country.  For example, a similar case was argued last month before the Sixth Circuit, and new lawsuits were filed in Tennessee on Monday, so much may rest on the Court’s decision.  For more information or to read the parties’ briefs, see SCOTUSblog’s post on the case.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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