Indiana Administrative Code › Title 45 - DEPARTMENT OF STATE REVENUE › Article 2.2 - SALES AND USE TAX › Rule 5 - Exempt Transactions of a Retail Merchant › Section 5-9 - Sales of manufacturing machinery, tools and equipment to be directly used by the purchaser in extraction and mining

Current through July 10, 2024
Authority: IC 6-8.1-3-3
Affected: IC 6-2.5
Sec. 9.
(a) In
				general, all purchases of tangible personal property by persons engaged in
				extraction or mining are taxable. The exemption provided in this regulation
[45 IAC 2.2]
extends only to manufacturing machinery, tools,
				and equipment directly used in mining or extraction. It does not apply to
				materials consumed in mining or extraction.
(b) The state gross retail tax shall not
				apply to sales of manufacturing machinery, tools, and equipment which are to be
				directly used by the purchaser in extraction or mining.
(c) Manufacturing machinery, tools, and
				equipment to be directly used by the purchaser in the extraction or mining
				process are exempt from tax provided that such machinery, tools and equipment
				are directly used in the production process; i.e., they have an immediate
				effect on the item being produced by mining or extraction. Property has an
				immediate effect on the article being produced if it is an essential and
				integral part of an integrated process which produces tangible personal
				property.
-EXAMPLES-
(1)
				Crushed stone is produced in a mining, production, and processing operation
				that begins with stripping overburden from an area to be mined, continues with
				the extraction and crushing of the stone, and ends with the stockpiling of the
				stone, which allows moisture to drain and evaporate from the washed stone,
				thereby reducing moisture levels to a standard more generally acceptable to
				stone purchasers. Because of the functional interrelationship of the various
				steps and the flow of the work-in-process, the total process comprised by these
				activities is integrated.
(2) Coal
				is produced in a surface mining operation that begins with the clearing of
				surface obstacles and overburden from the land above the coal deposit to be
				mined, continues with the removal of waste material and with the extraction of
				the coal, continues further with the transportation from the coal seam to the
				processing facility, continues further with the refilling and grading of the
				mined area with overburden and waste material from a subsequently mined area,
				continues further with the cleaning of the coal, and ends with the stockpiling
				of the coal to allow moisture to drain and evaporate from the washed coal,
				thereby reducing moisture levels to a standard more generally acceptable to
				coal purchasers. Because of the functional interrelationship of the various
				steps and the flow of the work-in-process, the total process comprised of such
				activities is integrated. The following items are exempt:
(A) Equipment used to modify the energy
				purchased for the surface mining process if the equipment is used to modify the
				energy for use by exempt equipment;
(B) Pumps and hose used to remove water or to
				divert water from the active pit area;
(3) "Coal is produced in an underground
				mining operation that begins with the boring of a shaft from the surface to the
				coal deposit to be mined, continues with the removal of waste material and the
				extraction of coal, continues further with transportation from the coal seam to
				the processing facility, continues further with the installation of roof
				supports and the coating of walls with rock dust to prevent mine explosion and
				collapse, continues further with cleaning of coal, and ends with the
				stockpiling of coal to allow moisture to drain and evaporate from the washed
				coal, thereby reducing moisture levels to a standard more generally acceptable
				to coal purchasers. Because of the functional interrelationship of the various
				steps and the flow of the work in process, the total process comprised of such
				activities is integrated." The following are exempt:
(A) Continuous miners used to bore the shaft,
				cut the coal, and load it into shuttle cars.
(B) Shuttle cars used to transport the coal
				from the continuous miner to the feeder breaker at the end of a conveyor belt
				or other off-highway transportation system.
(C) The feeder breaker which breaks the large
				lumps of coal and feeds the coal onto the conveyor belt which carries the coal
				outside the mine where it is stockpiled or transported to the processing
				facility.
(D) Electrical cable
				supplying electricity to exempt production equipment in the underground mine as
				part of an electrical distribution system.
(E) Equipment used to modify the energy
				purchased for the underground mining process if the equipment is used to modify
				the energy for use by exempt equipment.
(F) Pumps and hose used to remove water from
				the underground mine.
(4) The following types of equipment
				constitute essential and integral parts of the integrated production process
				and are, therefore, exempt. The fact that such equipment may not touch the
				work-in-process or, by itself, cause a change in the product is not
				determinative.
(A) A drag line used to remove
				overburden and other waste materials from the pit to be mined.
(B) Earth-moving equipment used to dig a
				ditch to divert a stream crossing the area to be mined.
(C) Electrical cable supplying electricity to
				exempt production equipment in the field as part of an electrical distribution
				system.
(D) Dozers used in
				refilling and covering over a previously mined pit with the overburden removed
				from the next pit being mined.
(E)
				Equipment used in a coal wash plant to clean the coal prior to sale to
				customers.
(F) Equipment used to
				blend different grades of coal together so that the final product meets
				customer specifications regarding quality and sulfur content.
(5) Because of the lack of an
				essential and integral relationship with the integrated production process in
				Example (2), the following types of equipment are not exempt:
(A) Earth-moving equipment used to construct
				a parking lot next to the mining area and to construct a road leading from the
				parking lot to the main highway.
(B) Vehicles used to transport workers to and
				from the mining area.
(C) Pickup
				trucks used by supervisors in overseeing and directing the mining
				operations.