Virginia Administrative Code
Title 23 - TAXATION
Agency 10 - DEPARTMENT OF TAXATION
Chapter 210 - RETAIL SALES AND USE TAX
Section 23VAC10-210-960 - Mining and mineral processing
Current through Register Vol. 41, No. 3, September 23, 2024
A. Mining and mineral processing generally. Section 58.1-609.3(2)(v) of the Code of Virginia exempts tangible personal property used directly in mining and processing. Used directly refers to those activities which are an integral part of the production of a product including all steps of an integrated process, but not including ancillary activities such as general maintenance and administration and includes reclamation activities required by state or federal law when performed by the mining company on land which it has mined previously.
Direct use in mining begins with the drilling of the shaft in deep mining or the removal of the overburden in strip mining, auger mining or quarrying and ends with the conveyance of the mined product to storage or stockpile at the mine site. Direct use in mining processing begins with the handling of the raw material at the processing plant site and ends with the conveyance of the processed product to storage at a stockpile at the plant site. The fact that particular property may be considered essential to the conduct of the business of mining or mineral processing because its use is required either by law or practical necessity does not, of itself, mean that the property is used directly in mining or mineral processing operations.
Mining and processing are separate and distinct activities. The mine site and the processing site constitute separate plant sites unless both are owned and operated by the same person and connected by a private transportation system, such as a conveyor or private roadway. If the mine and the processing plant are owned by different entities, private transportation systems, including hauling vehicles, between the two sites will be exempt only if owned by the processing plant operator. In this instance the processing plant site will be deemed to begin at the point the mineral product leaves the mine site via a private transportation system and such transportation will be deemed to be handling of the raw material at the processing plant site. If the transportation system is owned by the mine operator, transportation including hauling vehicles to the processing plant site will constitute distribution subsequent to the end of the mining function.
Where public roadways or public transportation systems are used between the mine site and the processing plant site, each will be deemed to be a separate plant site, and tangible personal property used to transport the product between the two separate plane sites will be taxable. For an illustration of the taxability of transportation systems, see Figure 1.
For Mining and mineral processing, see Virginia Administrative Code print product.
Transportation of a waste product from the processing plant to a waste dump at the plant site is a part of production line quality control and is included in mineral processing. Systems used to transport the waste product from the production line at the processing plant to the dump will not be subject to tax provided both of the following conditions are met:
In all instances, the construction of private transportation systems, such as hauling roads and railroad tracks, which upon their completion constitute a fixture upon or improvement to realty is a taxable activity. All materials incorporated into such systems, as well as machinery and tools used in their construction, are subject to the tax.
Removal of the overburden in surface mining operations, removal of the overburden at the opening of a deep mine tunnel or shaft and grading the area of the well location are part of the mining process, and tangible personal property used in these removal processes is not subject to the tax. Construction of tunnels, shafts, and passageways in underground mines is an exempt activity.
Other land clearing activities at the mine site, well location, or the mineral processing plant site, such as for the construction of a processing plant or office buildings, and the construction and maintenance of roads or other private transportation systems, are not a part of mining and property used in such activities is subject to the tax.
Research for the purpose of improving administrative efficiency or any other testing not related to product quality control are not part of mining or mineral processing and are taxable activities. Examples of taxable research are efficiency surveys, management studies, consumer surveys, economic surveys, advertising, or promotions.
Repair and maintenance is not mining. Therefore, repair and maintenance facilities, either within the mine or elsewhere, including tools, supplies, machinery and equipment used in performing repair and maintenance work are 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.
Machinery and tools used by the person engaged in mining or mineral processing to fabricate exempt machinery or equipment are exempt from the tax only if the preponderance of their use is in an exempt manner. For information on the taxability on items used in both a taxable and exempt manner, see subsection C of this section.
Ancillary activities such as plant construction and administration are not a part of mineral processing and are taxable activities. Construction materials such as concrete, structural steel, and roofing which become permanently incorporated into the processing plant, and machinery and tools used in the construction of the plant are subject to the tax.
Steel or similar supports which are a component part of exempt processing equipment or machinery and which do not become permanently affixed to realty are not subject to tax. The concrete foundations onto which such supports are bolted, floors on which machinery rests, and structures housing equipment and machinery are not used directly in processing and are subject to the tax.
B. Examples of property used in mining and mineral processing. The following are examples of both taxable and exempt tangible personal property used in each of the above referenced activities. These lists are exemplary and are not intended to be all inclusive.
Taxable:
Blueprints and blueprinting equipment
Explosives, blasting, and dislodging equipment and test drilling equipment and supplies
Engineering equipment
Surveying equipment
Pneumatic rock drills, jackhammers and air compressors
Seismic equipment
Maps
Sight rods
Spades
All other property used in exploration
Taxable:
Bulldozers, scrapers, and similar equipment, except when used in removing overburden or grading well site
Logging and timbering equipment used for land clearance, except when used in removing overburden
Exempt:
Explosives, blasting, and dislodging equipment and supplies
Shaft drilling equipment
Bulldozers and scrapers used in removing overburden or grading well location
Pneumatic rock drills, jackhammers, and air compressors
Fuel and supplies used to operate exempt equipment
Taxable:
Light fixtures, bulbs, and other illumination equipment, except when integral part of extraction equipment
Containers for fuel and supplies
Concrete
Exempt:
Digging and extracting equipment, machinery and tools including continuous miners, bulldozers, augers, backhoes, drag lines, cranes, power shovels, picks, and other cutting machines and hand tools
Mine support materials, including timber and tools used in mine roof installation
Oil and gas drills and accessories thereto
Drainage pumps, pipes, and valves used within the mine
Blasting and dislodging equipment and supplies, including explosives
Roof bolting machines, roof bolts, compressors, timbers, wedges, cribbing, collars, roof supports, and accessories thereto
Rock dust and other dust allaying materials, rock dusting equipment, and dust collectors
Ventilation equipment including brattice cloth, lumber, blocks, fans, and air blowers
Transportation devices and equipment used to haul extracted product from mine face or pit to a stockpile located outside the mine or pit, including shuttle cars, conveyor belts and accessories thereto, front end loaders, mine car handling equipment, and ballast
Lubricants and similar supplies used in exempt equipment, including oils, starting fluids, antifreeze, and brake fluid
Personnel cars, trolley locomotives, battery locomotives, mine cars, and supply cars
Cable and trolley wire, steel rail, track bolts, spikes, and braces used within the mine or pit
Trolley telephones and mine telephones used within the mine for purposes such as dispatching on mine railways within the mine or work coordination
Protective apparel, including goggles, miner's lamps, self rescuers and methanometers furnished to production personnel
Chemicals used in oil or gas well "completion"
Fuel and supplies used to operate exempt machinery and equipment including transformers and rectifiers, battery chargers, air compressors, and generators
Repair or replacement parts and accessories which become a component part of exempt machinery and equipment
First aid equipment and supplies
Taxable:
Clerical supplies
Reports
Tangible personal property used in marketing or other administrative research
Exempt:
Testing scoops or shovels
Coal ash fusion furnace, portable ovens, calorimeter, centrifuge, and similar laboratory equipment
Sample containers such as crucibles and sacks and labels therefor
Laboratory computers
Chemicals used in research and testing
Protective apparel furnished to laboratory personnel
Taxable:
Welding equipment and supplies
Drills, cranes, and similar equipment used in repair
Hand tools used in repair
Soaps and cleaning compounds, rags, and similar cleaning accessories
Solvents, brooms, mops, brushes, rags and similar cleaning accessories
Paint, except used on exempt machinery and equipment
Electrical testing equipment and test panels
Repair or replacement parts, fuel, and supplies used in repair or maintenance equipment
Exempt:
Repair or replacement parts for exempt machinery, tools, and equipment including wire rope and chain, welding rods, wire, and electrodes and paint used on exempt machinery and repair or replacement parts
Taxable:
Structural construction materials, such as fabricated steel products, angle irons and beams, concrete, and roofing, and machinery and tools used in the construction of tipples, screening plants, preparation plants, and refining plants
Administrative items used in the refining plant, such as forms, labels, reports, furniture, and office supplies
Light bulbs and light fixtures
Fuel or other supplies used for heating or cooling
Exempt:
Coal cleaning equipment, vibrating screens, dewatering devices, washing tables, separation devices, dust treating devices, weighing devices and controls therefor, used in processing plant
Rock crushers, grinders, and similar equipment and parts therefor
Taxable:
Repair or replacement parts, fuel, and supplies for vehicles used to transport or convey the product from storage at the mine or processing plant site
Railroad sidings at preparation plants, rails, ties, spikes, track bolts, bars, and switches therefor
Road construction and maintenance equipment and supplies, culvert pipe, stone, concrete, and asphalt used in road construction
Bulldozers, graders, front-end loaders, drag lines, cranes, and parts and supplies therefor used in road construction and maintenance
Bulldozers, front-end loaders and similar equipment used to load product from storage into vehicles for distribution
Storage bins and facilities
Chemicals used to preserve or protect product in storage
Scales and similar weighing devices
Oil or gas pipelines and accessories thereto
Exempt: (See subdivision A 2 of this section.)
Conveyor systems, vehicles and repair parts, fuel, and supplies therefor used to transport product for further processing at a mineral processing plant site or to remove product from production line to storage in storage pile, silo or rail car at plant site.
Exempt:
Bulldozers, graders, front-end loaders, hydroseeders, and other equipment used in land recontouring
Fertilizers, seeds, seedlings and trees
Fuel, supplies, repair and replacement parts for machinery and equipment used in reclamation
Taxable:
Office supplies and equipment
Light bulbs and lighting fixtures used in offices, shops, bath-houses, storage, and similar facilities
Fuel used for heating, cooling, or lighting purposes
Billing supplies
Tangible personal property used in supply houses, stores, bath-houses, and eating facilities
Mine maps and surveys
Personnel records and supplies, including safety records and miner identification tags
Textbooks, educational, and reference materials
Property used in the exhibition of mine products
Property used to prevent and control fires
Janitorial supplies
Eating facilities, such as picnic tables, even when located in mine or processing plant
C. Preponderance of use. When a single item of tangible personal property is used in two different activities, one of which constitutes direct use in mining or mineral processing (exempt) and the other of which constitutes a taxable activity, the sales and use tax shall apply in full when the preponderance of the item's use (fifty percent or more) is in taxable activities. Likewise, the item will be totally exempt from the tax if the preponderance of its use is in exempt activities.
D. Certified pollution control property. Any property or facility which has been certified by either the State Water Control Board or the State Air Pollution Control Board as used primarily for the purpose of preventing or abating air or water pollution is not subject to the tax. This is applicable to both real and tangible personal property. Only certified property or facilities qualify for exemption.
E. Contracted activities. The mining and mineral processing exemption extends to persons engaged in any phase of mining or mineral processing, provided such activities qualify for exemption as set forth in subsections A and B of this section. This requires that activities be performed at the mine or mineral processing plant site. For example, persons who construct a mine under contract with an industrial mining operation would not be subject to the tax on items used directly in an activity exempt under subsection B of this section. Contractors engaged in mine construction must apply to this department for exemption.
F. Applicability of this section. This section is intended to illustrate the application of the sales and use tax to mining and mineral processing and is based upon the usual methods of doing business used in the industry generally. Persons whose methods of doing business differ or who have specific factual questions should contact this department for a ruling on the taxability of the specific situation.
Statutory Authority
§§ 58.1-203 and 58.1-609.3(2) of the Code of Virginia.
