Department of Revenue v. General American Transportation Corp.
Docket: Nos. 69756 and 69757
Court: Supreme Court of Florida; February 17, 1988; Florida; State Supreme Court
The Department of Revenue appeals a ruling from the First District Court of Appeal that declared the ad valorem taxation of private line railroad cars unconstitutional under section 193.085(4), Florida Statutes (1979). The court certified a critical question regarding whether this tax assessment is discriminatory, as it does not apply similarly to nonresident railroad rolling stock. The Florida Supreme Court, retaining jurisdiction under Article V of the Florida Constitution, answered the certified question in the negative, concluding that the tax is not discriminatory. It emphasized that the taxation framework allows equitable taxation of all railroad cars and prevents double taxation.
Private carline corporations lease railroad cars to shippers but do not own or operate any railroad tracks. Shippers have three options for sourcing railroad cars: private carlines, resident railroad cars (which are taxed based on track ownership in Florida), and nonresident railroad cars (which are not taxed in Florida as they are taxed in the states where the owning railroads have tracks). Section 193.085(4)(b) mandates annual returns from private car and freight line companies, allowing the Department of Revenue to assess the average number of cars present in Florida and determine their value. The assessed value is apportioned to local jurisdictions based on the track mileage of the railroads where the cars operated in the previous year.
The carline companies contest tax assessments on their rolling stock for the years 1980 and 1984, claiming that section 193.085(4)(b), Florida Statutes (1979), discriminates against private carline owners since rail cars owned by nonresident railroads are not taxed in Florida. They argue that both private carlines and nonresident railroads are similarly situated, as neither owns track in Florida, and assert that their shipper customers control car movements without any business purpose for the private carline companies related to Florida’s tax assessments. The trial court ruled that applying this statute to the plaintiffs is unconstitutional due to unequal treatment, as it does not tax nonresident railroad rolling stock, thus canceling the assessments.
The district court of appeal upheld this ruling and referred the legal issue to the higher court. The Department of Revenue contends that Florida cannot tax nonresident railroad cars arriving through interchanges, as they maintain tax situs in their home states, relying on a U.S. Supreme Court decision. The court aligns with the Department, determining that taxing private line railcars does not breach the equal protection clauses of the U.S. or Florida Constitutions. It notes that the respondents seek a tax advantage over both resident and nonresident railroads, which are fully taxed where they own tracks. According to section 193.085(4), resident railroad cars are taxed under the unit rule method, while private carline cars are taxed based on their presence in Florida, using a ratio of miles traveled in Florida to total nationwide miles. The fairness of these assessment methods is supported by a Kentucky court ruling, and it is acknowledged that nearly all states use the unit rule to tax rolling stock, where a proportion of the total rolling stock is taxable based on the mileage of the railroad's lines within the state.
A railroad operating 4,000 miles, with 1,000 miles in a particular state, is assessed taxes based on the unit rule, which allows for a portion of its cars—5,000 in this case—to be deemed taxable within that state. The Supreme Court has generally upheld this rule, although exceptions arise if its application leads to injustice. Each railroad car is taxed by the state it operates in, and a balance is maintained through car interchange. Tank line companies, lacking operational lines, may not be taxed in their owner's domicile if their cars are permanently absent. However, these companies must still contribute to state taxes based on the average number of cars used in that state. Legislative power dictates property classification for taxation. The central issue involves equal protection in tax application; while private carline companies and nonresident railroads share similarities, nonresident railroads are taxed on their full property value, making additional assessments in Florida potentially double taxation. In contrast, private carlines pay only apportioned taxes. The lawsuit seeks a tax advantage under equal protection, but the court finds that private carlines benefit from Florida's infrastructure and thus must adhere to tax assessments. The district court's decision is reversed, and the trial court is instructed to reinstate tax assessments for 1980-1984. Justices concur.
