Atchison, Topeka & Santa Fe Railway Co. v. Arizona

The State of Arizona appeals the district court’s grant of summary judgment in favor of the plaintiffs. The district court held that Arizona’s taxation scheme discriminated against the railroads and therefore violated the Railroad Revitalization and Regulatory Reform Act. We reverse.

I. Statement of the Case

A. Factual Background

The State of Arizona imposes both a transaction privilege tax and a use tax. Ariz.Rev. StatAnn. §§ 42-1301 et seq., 42-1401 et seq. (1991). 1 The Arizona transaction privilege tax, which is similar to a sales tax, is applicable to most businesses in Arizona. It is generally imposed at a rate of five percent on the sale of goods and services occurring in the state. The Arizona use tax is a reciprocal tax which imposes a five percent levy on the price of goods purchased outside the state which are later brought into the State for use, storage, or consumption.

The Arizona transaction privilege tax is applicable to seventeen classifications of industrial and commercial taxpayers. 2 The transporting classification of the transaction privilege tax is defined as “the business of transporting for hire persons, freight or property by motor vehicle, railroads…

dissenting:

I concur with the Court’s holding in respect to Section II A. However, I respectfully dissent because the majority utilizes an inappropriate comparison class in determining whether this tax exemption results in discrimination against the Railroads. I would AFFIRM the district court’s holding that the correct comparison group is the Railroads’ competitors, and that the tax discriminates against the Railroads.

I believe that using the competitor comparison class in this ease serves the purpose of (1) harmonizing what appears to be a conflict amongst the courts regarding the appropriate comparison class under 306(l)(d); (2) making statutory sense of 806(1) which provides a specific comparison class in three of four subsections, but pointedly omits any reference to a comparison class in the subsection at issue here; (3) upholding the purposes of the 4-R Act in avoiding adverse competitive effects against the railroads; and (4) avoiding the patently discriminatory effects of this tax.

I.

The majority cites two cases supporting the broad comparison group, Burlington Northern R.R. Co. v. City of Superior, 932 F.2d 1185, 1187 (7th Cir.1991); Kansas City So. Ry. v.…