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

Wednesday, April 18th, 2012

 
 
Share
Link
Pennsylvania
General

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 www.ttrus.com or call 866.578.8193.

Louisiana Sales Tax Rates and Exemptions Set to Change...

Friday, May 25th, 2018 -Louisiana's sales tax rates and exemptions are set to change July 1, 2018, when several 2016 law changes will ...

Florida Exempts Generators Used in Assisted Living...

Thursday, May 24th, 2018 -Florida recently adopted an emergency rule on exempt sales of emergency generators for use at nursing homes an...

Washington Penalty Reduction Program

Monday, May 21st, 2018 -Businesses that apply to register with Washington's Marketplace Fairness Penalty Reduction Program by June 30,...

Fuel Used to Heat Detached Garages Taxable in Maine

Monday, May 21st, 2018 -Maine Revenue Services recently released a publication explaining that sales tax applies to fuel that is used ...

Cloud Software No Longer Taxable in Indiana

Thursday, May 17th, 2018 -Effective July 1, 2018, cloud software will no longer be taxable in Indiana. Indiana taxes the sale, lease,...

Sales Tax Increase in the Historic Triangle Region of...

Monday, May 14th, 2018 -Effective July 1, 2018, there will be an additional one percent (1%) regional sales and use tax imposed in the...