Pennsylvania Clarifies Sales Tax on Equipment and Supplies Used in Mining Site Preparation

Wednesday, April 18th, 2012


The Pennsylvania Department of Revenue (DOR) has published a bulletin explaining sales tax rules for mining site preparation. Pa. Sales and Use Tax Bull. No. 2012-01 (Dept. of Revenue Apr. 16, 2012). Specifically, the bulletin discusses the taxability of equipment and supplies used to prepare a site in anticipation of mining operations to be conducted at that site.

Generally, machinery, equipment, parts (and foundations for those parts), and supplies that are predominantly used directly in mining operations will be excluded from Pennsylvania sales and use tax. Pa. Stat. Ann. tit. 72, sec. 7201(k)(8); 61 Pa. Code sec. 32.35(a).

However, some equipment and supplies used in site preparation may not qualify for the exclusion, even if the property is considered "essential" or is required by law. A Pennsylvania sales tax regulation states that this exclusion does not apply to property or services used in the "construction, reconstruction, alteration, remodeling, servicing, repairing, maintenance or improvement of real estate." Accordingly, equipment or supplies used to "remove trees and clear ground preparatory to extraction activities is not deemed to be directly used" are therefore not eligible for the exclusion from sales and use tax.

As a result, most equipment used in mining site preparation will be subject to tax. However, the foundation directly under the drilling rig is excluded from tax. The regulation specifically states that "foundations" are among the items excluded from tax, despite the fact that it is connected taxable equipment used to build rigging pads.

Additionally, the construction of ponds or other storage areas used to store fresh water or raw materials prior to their use in drilling or hydraulic fracturing is not considered a mining activity for purposes of the tax exclusion. Therefore, any equipment used in the construction of these items will be subject to tax. However, if the pond will be used to "control or abate pollution generated in the mining operation," it will be excluded from tax. Any materials used in the construction of that pond, such as liners, sand and gravel, would be excluded from sales and use tax.

About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at or call 866.578.8193.

Texas Releases Detailed Guidance on Exempt Organizations

Thursday, October 18th, 2018 -The Texas Comptroller has released a publication that provides detailed information on how sales and use tax a...

Telephone Answering Services Taxable in Arkansas

Tuesday, October 16th, 2018 -The Arkansas Department of Finance and Administration recently ruled that the service of answering calls on be...

Washington Provides Guidance on Lodging Tax for Online...

Friday, October 12th, 2018 -The Washington Department of Revenue released updated guidance that provides tax reporting information for bed...

Economic Nexus in West Virginia

Wednesday, October 10th, 2018 -The West Virginia State Tax Department announced that it will require remote sellers to begin collecting sales...

Idaho Provides Guidance on the Exemption for Medical...

Monday, October 8th, 2018 -The Idaho State Tax Commission recently released guidance that explains Idaho's sales and use tax laws for buy...

Arkansas Does Not Follow Federal Law on Foreign Income

Friday, October 5th, 2018 -The Arkansas Department of Taxation and Finance recently released an opinion that says the state does not conf...