Opinion ID: 1335334
Heading Depth: 1
Heading Rank: 4

Heading: State Taxes Relating to Coal at Issue

Text: A tax by any other name is still a tax. To refer to all taxes at issue in this appeal simply as severance taxes suggests erroneously that the only activity which creates tax liability is the removal of coal from the earth of this State. [3] Other activities also create liability for some of the taxes, such as treatment processes and the loading of coal for shipment. The primary issue before this Court is therefore not the name which the State wishes to attach to the taxes it seeks to collect, but whether such taxes, by their operation and effect, violate the Import-Export Clause of the United States Constitution. See Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69, 84, 67 S.Ct. 156, 164, 91 L.Ed. 80 (1946). Here, I believe the taxes at issue are more properly termed privilege taxes which result in taxes being assessed on a tonnage basis or an  ad valorem  taxes based upon a percentage of the value added to coal by certain activities engaged in by appellants. It is this operation and effect of these specific coal-related taxes at issue in this appeal which is determinative to the propriety of such taxes. Therefore, I disagree with the majority decision's lack of a specific delineation and consideration of the operation and effect of the coal-related taxes at issue. It is this consideration of the operation and effect of each such tax which, I believe, is crucial to the determination of the effect of the binding precedent applicable to the Import-Export Clause questions on this appeal. 1. Non-Section 13A Taxes There are two [4] coal-related taxes identified by appellants in their brief at issue on this appeal which I believe do not violate the Import-Export Clause. These taxes are a tax under the Minimum Severance Tax Act found at W. Va.Code § 11-12B-3(a), and a special tax on coal production under the Surface Mining and Reclamation Act for the Mining and Reclamation Operations Fund found at W. Va.Code § 22-3-32. Both taxes are similar with respect to the activities taxed and the measures by which the taxes are imposed. It is these similarities which distinguish these two taxes from the Section 13A taxes which I find problematic under the Import-Export Clause. These two non-Section 13A taxes tax the privilege of severing, extracting, reducing to possession or producing coal for sale, profit or commercial use and measure the taxes in terms of specified cents per ton of coal produced ... for sale, profit or commercial use. W. Va.Code § 11-12B-3(a), § 22-3-32. Thus, these are tonnage taxes, not  ad valorem  value taxes. The principal differences between these taxes and the Section 13A taxes are that these taxes do not tax activities beyond the production of the coal and that they measure the taxes in terms of cents per ton of coal produced ... for sale, profit or commercial use. Id. I do not find that their application offends the Import-Export Clause of the United States Constitution. [5] 2. Section 13A Taxes As with the non-Section 13A taxes related to coal, the Section 13A taxes at issue on this appeal are privilege taxes; that is, taxes upon the privilege of engaging in certain specified activities. Although denominated as taxes upon privileges, the taxes are in operation and effect upon the activities specified as privileges. Their calculation is based upon a percentage of the value of the coal enhanced by such activities. The Section 13A taxes at issue arise under the Severance and Business Privilege Tax Act of 1993. Specifically, as delineated by appellants in their brief, there is a basic severance tax found at W. Va.Code § 11-13A-3(a), (b) and (f), and an additional severance tax, found at W. Va.Code § 11-13A-6(a). [6] In language similar to that used by the non-Section 13A taxes, the Section 13A basic severance tax imposes a coal tax on severing, extracting, reducing to possession and producing for sale, profit or commercial use activities. The Section 13A additional severance tax uses slightly different language, specifying the activities it taxes as severing coal, or preparing coal (or both severing and preparing coal) for sale, profit or commercial use. Whether there is a substantive difference in this language is not readily apparent. Unlike the non-Section 13A taxes, both the basic and additional severance taxes under Section 13A also tax [t]he following treatment processes (and the treatment processes necessary or incidental thereto) when applied by the mine owner or operator to [coal] mined in this state[:] ... Cleaning, breaking, sizing, dust allaying, treating to prevent freezing and loading [of coal] for shipment. W. Va.Code § 11-13A-4(a). Also unlike the non-Section 13A taxes which are tonnage taxes, the tax imposed by the Section 13A taxes is a value tax derived from a percentage of the ultimate sale of the coal by the producer. The Section 13A basic tax imposes tax in terms of a specified percentage of the gross value [7] as shown by the gross income derived from the sale of the coal. The Section 13A supplemental tax imposes tax in terms of a percentage of the value [8] of the coal severed and/or prepared [9] as shown by the gross proceeds [10] derived from the sale of the coal. Accordingly, the principal differences between the coal-related taxes at issue on this appeal are that the non-Section 13A taxes do not tax activities beyond the production of the coal and that such taxes are tonnage taxes. The Section 13A taxes tax activities beyond the production of the coal, including the loading of the coal for shipment, and measure the tax in terms of a percentage of the value or gross value of the coal as shown by the gross income or gross proceeds derived by the sale of the coal. As such, the tax fixed by the Section 13A taxes include a component of enhanced value of the coal derived by the activity of the producer loading coal for shipment.