KRS § 143.010 — KY Code / Title XI / Chapter 143 / Section 143.010
143.010 Definitions for chapter
Status: in_force

143.010 Definitions for chapter.

As used in this chapter:

(1) "Department" means the Department of Revenue;

(2) "Coal" means and includes any material composed predominantly of hydrocarbons

in a solid state;

(3) "Severed," "severing," or "severance" means the physical removal of coal from the

earth;

(4) "Ton" means a short ton of 2,000 pounds. The number of tons shall be determined

at the first point at which the coal is weighed;

(5) (a) "Taxpayer" means and includes any individual, partnership, joint venture,

association, or corporation engaged in severing and/or processing coal in this

state. In instances where contracts, either oral or written, are entered into by

which persons, organizations, or businesses are engaged to mine or process

the coal but do not obtain title to or do not have an economic interest therein,

the party who owns the coal or has an economic interest shall be the taxpayer.

(b) For purposes of this chapter, a taxpayer possesses an economic interest in coal

where the taxpayer has acquired by investment any interest in coal and

secures, by any form of legal relationship, income derived from the severance

or processing of coal, to which he must look for a return of his capital. A party

who has no capital investment in the coal or who only receives an arm's length

royalty shall not be considered as having an economic interest;

(6) "Gross value" is defined as follows:

(a) For coal severed and/or processed and sold during a reporting period, gross

value shall be the amount received or receivable by the taxpayer;

(b) For coal severed and/or processed, but not sold during a reporting period,

gross value shall be determined as follows:

1. If the coal is to be sold under the terms of an existing contract, the

contract price shall be used in computing gross value; and

2. If there is no existing contract, the fair market value for that grade and

quality of coal shall be used in computing gross value;

(c) In a transaction involving related parties, gross value shall be the amount

received or receivable from the first noncontrolled sale by the related parties.

If coal is sold to a related party for consumption, gross value shall not be less

than the fair market value for coal of similar grade and quality;

(d) In the absence of a sale, gross value shall be the fair market value for coal of

similar grade and quality;

(e) If severed coal is purchased for the purpose of processing and resale, the gross

value shall be the amount received or receivable during the reporting period

reduced by the amount paid or payable to the registered taxpayer actually

severing the coal;

(f) If severed coal is purchased for the purpose of processing and consumption,

the gross value shall be the fair market value of processed coal of similar

grade and quality reduced by the amount paid or payable to the registered

taxpayer actually severing the coal;

(g) In all instances, the gross value shall not be reduced by any taxes, including

the tax levied by KRS 143.020, royalties, sales commissions, or any other

expense; and

(h) In all instances, transportation expense incurred in transporting coal shall not

be considered as gross income from the property;

(7) "Reporting period" means the period for which each taxpayer shall compute his tax

liability and remit the tax due to the department. The reporting period shall be

monthly. However, the department may, under certain conditions, authorize a

quarterly reporting period;

(8) "Processing" includes cleaning, breaking, sizing, dust allaying, treating to prevent

freezing, or loading or unloading for any purpose. "Processing" shall not include:

(a) Acts performed by a final consumer who is not a related party to the person

who severed and/or processed the coal if such acts are performed only at the

site where the coal is consumed for purposes of generating electricity;

(b) The act of unloading or loading for shipment coal that has not been severed,

cleaned, broken, sized, or otherwise treated in Kentucky; or

(c) The use of electromagnetic energy on coal to reduce moisture, ash, sulfur, or

mercury in the coal;

(9) "Related party" means two (2) or more persons, organizations, or businesses owned

or controlled directly or indirectly by the same interest. Control shall exist if a

contract or lease, either written or oral, is entered into whereby one (1) party

mines or processes coal owned or held by another party and the owner or

lessor participates in the mining, processing, or marketing of the coal or

receives any value other than an arm's length passive royalty interest. In the

case of related parties, the department may apportion or allocate the receipts

between or among the persons, organizations, or businesses if it determines

that the apportionment or allocation is necessary in order to more clearly

reflect gross value;

(10) (a) "Transportation expense" means:

1. The amount paid by a taxpayer to a third party for transporting coal from

the mine mouth or pit to a processing plant, tipple, or loading dock; and

2. The expense incurred by a taxpayer using his own facilities in

transporting coal from the mine mouth or pit to a processing plant,

tipple, or loading dock.

(b) "Transportation expense" shall not include:

1. The cost of acquisition, improvements, and maintenance of real

property;

2. The cost of acquisition and operating expenses of mining and nonmining

loading or unloading facilities; or

3. The cost of acquisition and operating expenses of equipment used to

load or unload the coal at the mine, processing facility, and mining and

nonmining loading facility;

(11) "Registered taxpayer" means a taxpayer who holds a valid coal tax certificate of

registration required under KRS 143.030(1) and the certificate of registration was

valid for the period in which his coal was sold;

(12) "Above-drainage" means coal in a coal bed that outcrops at the surface within a

mine permit area and that is accessed at the outcrop location;

(13) "Below-drainage" means coal in a coal bed that does not outcrop at the surface

within a mine permit area and that is accessed by mine slopes or other openings that

penetrate the coal a minimum of thirty (30) feet below the surface drainage level;

and

(14) "Mining ratio" means the amount of bank cubic yards of surface material that must

be removed before a ton of coal can be mined.