Current through Register Vol. 42, No. 11, August 30, 2024
(1)
MANUFACTURED OR PROCESSED SEVERED
MATERIALS: Severed materials are subject to the severance
tax if used by the operator, producer or purchaser in a manufacturing process
to produce a product which is later sold by the operator, producer or purchaser
as tangible personal property. A producer/first purchaser must measure or
otherwise calculate the tons of each severed natural mineral contained in the
sold product and report that amount on the severance tax return.
(2)
MATERIALS SOLD FOR USE
OUTSIDE THE STATE:
(a)
Materials sold to a purchaser for use outside the State must be reported by the
producer on the monthly severance tax return.
(b) If such materials are not transported on
the public roads in the State, the producer may subtract the quantities of such
materials from the total sales amounts shown on the monthly tax return in
calculating the taxable quantities.
(c) Materials must be loaded into a
non-highway conveyance (i.e. barge or train car) at the producer's site to
qualify for the exemption with the exception of quarries or mines that are
contiguous to or overlap the State line when materials are not transported on
the public roads in Alabama. If the materials are transported any distance on
the public roads in the State, the tax is due and no exemption may be
claimed.
(d) The producer must
maintain records documenting the method of transportation of all materials for
which an exemption is claimed.
(e)
Such materials are subject to audit verification.
(3)
MATERIALS STOCKPILED BY
THE PRODUCER:
(a)
Materials which are moved from one place to another on the same site or
transported to another site owned by the same operator or producer are not
subject to the severance tax while in the possession of the producer.
(b) The materials become subject to the
severance tax and must be reported on the monthly tax returns at the time the
products are sold, delivered or transferred to a purchaser.
(4)
MATERIALS
USED BY THE PRODUCER/PURCHASER:
(a) Severed materials which are used by the
producer/first purchaser and never transferred or sold, as tangible personal
property, are not subject to the severance tax; including severed materials
which are used by the producer to perform a furnish-and-install
contract.
(b) Materials not from a
commercial quarry, such as from a borrow pit, which are both, severed and used
by a producer, operator, or any other person for fill, are not subject to the
severance tax. The severance tax is due if any severed products are sold by the
producer and used for fill by a purchaser.
(5)
MATERIALS TRANSFERRED
WITHOUT SALE:
(a) Severed
materials which are donated or otherwise transferred without sale, in a bona
fide transaction, to an unrelated person for no consideration, are not subject
to the severance tax.
(b) Materials
which are transferred for any consideration or economic benefit, such as in a
barter transaction, are deemed to be sold for severance tax purposes.
(c) Materials transferred from a producer to
a related person, such as a parent, subsidiary or sister company, are deemed to
be sold at the time of the transfer.
(6)
COMMINGLED
MATERIALS:
(a) If natural
minerals severed from more than one county are commingled at one site, the tax
shall be allocated to the individual counties using the first-in, first-out
(FIFO) accounting method.
(b)
Severed materials which are sold from the site must be allocated between
counties in the same order that the materials are received at the
site.
(c) Producers/first
purchasers receiving exempt product must keep records to show the amount of
natural minerals stockpiled by county, the withdrawal date by county, and the
amount of taxes paid by county.
Author: Alisa G. Johnson
Statutory Authority:
Code of Ala.
1975,
40-2A-7(a)(5),
40-13-55.
