Iowa Pacific subsidiary owes Texas back taxes

State official: Rusk, Palestine & Pacific Railroad owes more than $250,000 dating back to October 2016
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A screen image capture of the Rusk, Palestine & Pacific page from the Iowa Pacific Holdings website. The Iowa Pacific subsidiary owes more than $250,000 to the state of Texas in sales taxes.
Iowa Pacific Holdings website
RUSK, Texas — Texas officials confirm that an Iowa Pacific subsidiary operating the Texas State Railroad owes more than $250,000 in unpaid sales taxes from late 2016 and early 2017.

In emails and conversations with Trains News Wire, an official with the Texas Comptroller of Public Accounts confirms that the Rusk, Palestine & Pacific Railroad owes $252,374 in taxes on Texas sales between October 2016 and January. The Texas official also confirms that the RP&P also owes $684 for a franchise tax, a net worth-based tax imposed on businesses organized in the state of Texas. That fee was due in May 2016.

Iowa Pacific acknowledges that it controls RP&P on its website and that the subsidiary operates under the Texas State Railroad name for excursion trains. Any freight the railroad hauls is under the Rusk, Palestine & Pacific name.

Kevin Lyons, the comptroller’s office representative, also confirmed that the state has revoked the railroad’s sales tax permit as of Feb. 1. It will remain revoked until the railroad pays the amounts it owes or agrees with the state on a payment plan, Lyons says. The permit allows businesses to collect state and any local sales tax on services and items that it sells, which would include passenger tickets, souvenirs, and possibly local freight moves. Businesses are typically required to collect tax when they make a sale.

“To the extent that back taxes are owed, the RPP will pay them,” Iowa Pacific President Ed Ellis says about the Rusk railroad in an early Friday email to News Wire. In a separate message a short time later Ellis also said, “And RPP believes taxes were over reported and overpaid in prior years.”

The Rusk, Palestine & Pacific Railroad drew criticism earlier this year when it laid off the majority of its Texas State staff without warning. Ellis and Iowa Pacific have maintained that the Texas State Railroad will open for the excursion season on March 4. The Texas State Railroad website, however, shows no events available for the early March weekend and several events for later in the season are showing as “sold-out.” Ellis tells News Wire that tickets will be available and that website will be corrected.

The Texas sales tax issue is the latest hit to Iowa Pacific in recent weeks. The railroad voluntarily ended its run operating the Indianapolis-to-Chicago Hoosier State Feb. 28 after failing to negotiate a more profitable contract with the State of Indiana in 2016. The railroad is also defending itself in a lawsuit filed Jan. 11 in Colorado over allegations that it failed to pay royalties due to the license holder of popular Polar Express trains that Iowa Pacific operated around the U.S. Locals in Upstate New York, meanwhile, are discussing their options after Iowa Pacific subsidiary Saratoga & North Creek canceled plans to run sleeper car excursion for skiers earlier this winter.
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