Tax Type
Retail Sales and Use Tax
Description
Mining; Equipment fuel and repair parts
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
12-20-1989
December 20, 1989
Re: §58.1-1821 Application/Sales and Use Tax
Dear**************
This is in reply to your letter of August 1, 1989 in which you submit an application for correction of sales and use tax assessed for the period of July 1984 through June 1989.
FACTS
*******(the Taxpayer) operates a deep coal mining operation which extracts raw coal from a deep mine and conveys it to the surface where it is piled on the ground. The mineral rights to the mine are owned by a company other than the Taxpayer. The owner pays the taxpayer to extract the coal on a per ton and quality basis. once the coal is extracted, the Taxpayer uses a front end loader to load the raw coal on the owner's truck for transportation to the owners plant for processing. Transportation to the owner's plant is done across public roads to a separate plant location. The Taxpayer is contesting the taxing of repair parts and diesel fuel used in its front end loader. According to the auditor, the dozer used to maintain coal haul roads has been resolved and is no longer an item of contention. The last area contested by the Taxpayer is the penalty assessed on this audit.
DETERMINATION
In reference to the fuel and repair parts used in the front end loader by the Taxpayer, the Virginia Supreme Court ruled in the case of Commonwealth v. Wellmore Coal, 228 Va. 149., that when mineral excavated is subject to "further mining processing," the exemption continues. In the present case, the Taxpayer is using the front end loader to load raw extracted coal from a location at the mining site onto trucks which will transport the coal to the mine owners plant site for further processing. Due to the fact that the front end loader is used for handling material which is subject to further processing, the exemption will extend to the loader. §630-10-55.2(A)(3)(e) of the Virginia Retail Sales and Use Tax Regulations addresses repair and maintenance of mining machinery and states, in part, the following:
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- Replacement and repair parts which are used to replace worn or damaged parts on exempt machinery and equipment, as well as operating supplies which are actively and continually consumed in the operation of exempt machinery and equipment are deemed used directly in mining and/or mineral processing and are not subject to the tax.
- Replacement and repair parts which are used to replace worn or damaged parts on exempt machinery and equipment, as well as operating supplies which are actively and continually consumed in the operation of exempt machinery and equipment are deemed used directly in mining and/or mineral processing and are not subject to the tax.
In reference to the waiver of penalty, we do not find basis for the waiver of the penalties assessed. However, as the result of legislation enacted by the 1989 session of the General Assembly, a Tax Amnesty program will be conducted from February 1 to March 31, 1990. At that time, you will be able to receive a waiver of these penalties, provided that you are eligible for the amnesty program, complete an amnesty application, and pay in full the tax and interest assessed on all bills and non-filer periods that are due.
Further collection action on these penalties will be suspended pending the start of the amnesty program provided you complete the attached form and return it to this office within 15 days, along with your payment for the total tax and interest due. As stated on the attached form, the suspension of collection activity by the department does not relieve you from the responsibility to formally apply for amnesty during the amnesty period. In addition, interest will continue to accrue on the unpaid penalties during the period collection action is suspended.
The department's audit will be revised as soon as practicable to reflect the determination reached in this letter.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner