Tax Type
Retail Sales and Use Tax
Description
Mining; Reclamation activities
Topic
Taxability of Persons and Transactions
Date Issued
07-21-1995
July 21, 1995
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear**************
This will reply to your letter of September 9, 1994 in which you seek correction of the sales and use tax audit assessment of*************(the "Taxpayer") for the period of April, 1991 through January, 1994.
FACTS
The Taxpayer is in the business of mining and mineral processing. The type of mining performed by the Taxpayer results in a certain amount of reclamation activity subsequent to the mining process. The audit resulted in the taxing of certain reclamation materials such as seed, lime, fencing and equipment used in repairing private roadways and areas around buildings which were away from the actual mining sites. The Taxpayer is taking exception to the tax application to reclamation materials based on Code of Virginia §45.1-180, Chapter 16, Permits for Certain Mining Operations; Reclamation of Land.
DETERMINATION
Code of Virginia §45.1-180.2 provides that the Commonwealth shall exercise its police power in a coordinated statewide program to ensure that "disturbed land" resulting from mining activities shall be reclaimed to a stable condition. Code of Virginia §45.1-180 defines "disturbed land" as "the areas from which overburden has been removed in any mining operation, plus the area covered by the spoil and refuse, plus any area used in such mining operation including land used for processing, stockpiling, and settling ponds".
Virginia Regulation (VR) 630-10-65.2(3)(h) addresses the retail sales and use tax application to reclamation activities in the mining industry and provides a sales and use tax exemption for the following:
-
- Reclamation is the restoration or conversion of mined land to a stable condition and the ongoing restoration or conversion of land currently being mined prior to total site reclamation... Reclamation activities required by state or federal law are a part of the mining process when performed by a mining company on land which it has previously mined. Reclamation activities which are not required by federal or state law are not a part of mining and tangible personal property used in such activities is subject to the tax. (Emphasis added).
- Reclamation is the restoration or conversion of mined land to a stable condition and the ongoing restoration or conversion of land currently being mined prior to total site reclamation... Reclamation activities required by state or federal law are a part of the mining process when performed by a mining company on land which it has previously mined. Reclamation activities which are not required by federal or state law are not a part of mining and tangible personal property used in such activities is subject to the tax. (Emphasis added).
Code of Virginia, Title 45.1, Mines and Mining, may require by law that all "disturbed land" by a mining company must be reclaimed, the tax code and regulations have specifically limited the retail sales and use tax exemption to a narrower range of activities. Therefore, the reclamation of access roads, refuse areas, and areas other than the land that was actually mined, are not considered part of the mining process and would not enjoy the exemption.
Based on the audit report, the only reclamation materials held taxable in the audit were those which were used to reclaim land which had not been previously mined. Therefore, based on this information, the department has no choice but to deny your application for relief.
If you should have any further questions, please feel free to contact********* of Tax Policy, at*************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8479K
Rulings of the Tax Commissioner