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National Railroad Passenger Corp. v. California State Board of Equalization … (1986)

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Use Tax on Railroad Passenger Cars Discriminated Against Rail Carrier

The National Railroad Passenger Corp. (Amtrak) purchased 15 railroad passenger cars which were first used in California. The Board assessed use tax of $978,000 against Amtrak on these purchases. Amtrak contended that the Federal Railroad Revitalization and Recovery Act, which prohibits any state tax which discriminates against a rail carrier, barred imposition of the use tax on Amtrak. Amtrak further argued that since the California use tax does not apply to purchases of commercial passenger aircraft, commercial passenger watercraft, or rail freight cars, it should not apply to purchases of railroad passenger cars.

The United States District Court for the Northern District of California held in favor of Amtrak. The court held the use tax was discriminatory under the federal Act, and that the Act did not require that a rail carrier must show it is in competition with other types of passenger carriers whose purchases are exempt from tax. Also, the tax was not de minimis, since the amount assessed was almost $1 million, and the tax would apply to all railroad passenger cars first used in California. National Railroad Passenger Corp. v. California State Board of Equalization (1986) 652 F.Supp. 923.