Section 130.350  Coal Exploration, Mining, Off Highway Hauling, Processing, Maintenance and Reclamation Equipment

 

a)         General.  Notwithstanding any other provision of this Section, the exemption provided in this Section is effective through June 30, 2003.  On and after July 1, 2003, the tax applies to sales of coal exploration, mining, off highway hauling, processing, maintenance and reclamation equipment.  Prior to June 24, 1996, notwithstanding the fact that the sales may be at retail, the Retailers' Occupation Tax Act does not apply to sales of coal exploration, mining, off highway hauling, processing, maintenance and reclamation equipment costing $250 or more.  The exemption also applies to individual replacement parts for coal exploration, mining, off highway hauling, processing, maintenance and reclamation equipment when the replacement part costs $250 or more.  Equipment and parts sold by the linear foot or similar measurement qualify for the exemption if the cost of the total length sold in an individual transaction or sale exceeds $250.  The exemption also applies to equipment and replacement parts costing $250 or more purchased for lease if those items are used primarily (more than 50%) in the activities noted above. The exemption does not apply to motor vehicles required to be registered pursuant to the Illinois Vehicle Code  [625 ILCS 5]. On and after June 24, 1996, the exemption is not conditioned upon the $250 purchase threshold requirement.

 

1)         This exemption applies only to equipment used primarily in coal exploration, mining, off highway hauling, processing, maintenance and reclamation.  Use of the equipment in any other exploration, mining, off highway hauling, processing, maintenance or reclamation will not qualify for this exemption.  Excluded from this exemption are motor vehicles required to be registered pursuant to the Illinois Vehicle Code.  Special mobile equipment other than motor vehicles may qualify for the exemption if it is used primarily in coal exploration, mining, off highway hauling, processing, maintenance or reclamation.  This exemption does not include supplies (such as chemicals, rust inhibitors, adhesives and explosives), coolants, lubricants, items of personal apparel (such as gloves, shoes, hats, helmets, coveralls, masks, mask air filters, belts, harnesses or holsters) or fuel of any type.

 

2)         "Coal Exploration" means the search for coal.  Exploration includes, but is not limited to, excavating and drilling to locate coal deposits.

 

3)         "Mining" means the extraction of coal from the earth by underground and surface mining and includes the extraction of coal by the mine owner or operator or his nonpurchaser successors from the waste or residue of prior mining.

 

4)         "Off Highway Hauling" means carrying or transporting and would include transport of overburden, waste material, including gob from the processing facility for disposal, and coal from the coal seam to the processing facility by conveyors or unlicensed vehicles.

 

5)         "Processing" means preparation activities performed directly on the coal which are necessary for converting coal into a finished product so that it is ready for sale.  Processing includes, but is not limited to, sizing, crushing, drying and washing.

 

6)         "Maintenance" means keeping coal exploration, mining, off highway hauling, processing, maintenance and reclamation equipment in a state of repair and efficiency.

 

7)         "Reclamation" means conditioning areas affected by mining operations. Examples of reclamation activities include, but are not limited to, backfilling, grading, seeding and planting.

 

8)         "Replacement Parts" means parts that are used to replace parts of qualifying equipment and that require periodic replacement.  To be considered a replacement part, the part must be purchased for the purpose of being installed and must, in fact, become a physical component part of coal exploration, mining, off highway hauling, processing, maintenance or reclamation equipment. Prior to June 24, 1996, there is a requirement that such replacement parts cost $250 or more.  On and after June 24, 1996, there is no such limitation.

 

9)         "Kits" means commercially-packaged sets of parts which are ordered from a manufacturer, inventoried, and sold by a retailer as a single item.  Prior to June 24, 1996, a kit will be treated as a single item for purposes of the $250 per item limitation.  The $250 per item limitation is also satisfied when an item to be used primarily in a qualifying activity is assembled by the retailer at the time of sale from components selected by the purchaser and which is sold as a unit if the unit, as sold, costs $250 or more. On and after June 24, 1996, there is no such limitation.  An exempt example would be a "tire assembly" comprised of the rim, tire, foam filling and valve stem.

 

b)         Exempt Activities

            By way of illustration and not limitation, the following activities will be considered to constitute coal exploration, mining, off highway hauling, processing or maintenance:

 

1)         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 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 processing of the coal, and ends with the stockpiling of the coal to allow moisture to drain and evaporate from the washed coal.  By way of illustration and not limitation, the following equipment is exempt:

 

A)        Equipment used to drill holes for blasting material to dislodge the overburden and to transport the blasting material.

 

B)        Equipment used to remove overburden and other waste materials from the pit to be mined.

 

C)        Equipment used to modify the energy purchased for the surface mining process if the equipment is used to modify the energy for use on exempt equipment.

 

D)        Pumps and hose used to remove water or to divert water from the active pit area.

 

E)         Equipment used to load the overburden, waste material or coal to be transported to the processing facility into off highway haulage trucks or onto a conveyor system.

 

F)         Unlicensed off highway haulage trucks or a conveyor system to transport overburden, waste material or coal to the processing facility.

 

G)        Equipment used in grading, refilling and covering over a previously mined pit with the overburden removed from the next pit being mined.

 

H)        Tangible personal property used in or for the purpose of temporarily storing raw coal before processing is exempt if the raw coal is ultimately processed for resale and is in fact resold.

 

I)          Equipment used in a coal wash plant to clean the coal prior to sale to customers.  Equipment used primarily in the cleaning, sizing, or grading of coal in a coal preparation plant may qualify as manufacturing machinery and equipment (see Section 130.330).

 

J)         Equipment used to blend different grades of coal together so that the final product meets customer specifications regarding quality and sulfur content.

 

2)         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 the 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 explosions and collapse, continues further with the processing of coal and disposal of waste material from the mine and processing facility, and ends with the stockpiling of coal to allow moisture to drain and evaporate from the washed coal.  By way of illustration and not limitation, the following equipment is 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 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)        Equipment used to modify the energy purchased for the underground mining process if the equipment is used to modify the energy for use on exempt equipment.

 

E)         Pumps and hose used to remove water from the underground mine.

 

F)         Equipment used to install roof bolt supports and side rib bolt supports to prevent mine collapse.

 

G)        Equipment used to coat mine walls with inert limestone as the coal is removed to prevent explosions caused by the escape of volatile materials.

 

H)        Equipment installed as improvements to real estate in underground mining such as elevators, rail, ventilating and illuminating systems.

 

I)          The use of equipment in the construction, reconstruction, alteration, remodeling, servicing, repairing, maintenance or improvement of underground mine structures.  Materials, such as lumber, steel, concrete, rock and other building materials, qualify for the exemption only when used in underground mine structures.

 

J)         Additions to exempt underground rail conveyors, ventilating and illumination systems due to the progression of mining will be considered as exempt, as long as, prior to June 24, 1996, the addition is valued at $250 or more.  On and after June 24, 1996, there is no such limitation.

 

K)        Longwall equipment consisting of shields, shearers, face conveyors and related equipment.

 

L)         Tangible personal property used in or for the purpose of temporarily storing raw coal before processing is exempt if the raw coal is ultimately processed for resale and is in fact resold.

 

M)       Equipment used in a coal wash plant to clean the coal prior to sale to customers.  Equipment used primarily in the cleaning, sizing, or grading of coal in a coal preparation plant may qualify as manufacturing machinery and equipment (see Section 130.330).

 

N)        Equipment used to blend different grades of coal together so that the final product meets customer specifications regarding quality and sulfur content.

 

O)        Roof bolt supports and side rib bolt supports to prevent mine collapse.

 

3)         By way of illustration and not limitation, the following maintenance equipment is exempt:

 

A)        Unlicensed maintenance and welding trucks used for field repair of exempt equipment.

 

B)        Lathes, drill presses, air compressors and welders used to work repair parts.

 

C)        Mobile and overhead cranes.

 

4)         By way of illustration and not limitation, the following coal exploration equipment is exempt unless registered pursuant to the Illinois Vehicle Code:

 

A)        Drill rigs used to drill exploration core holes.

 

B)        Water trucks used in the drilling process.

 

C)        Winch and casing trucks used in the drilling process.

 

D)        Field maintenance trucks used to make repairs on field equipment.

 

E)         Air compressors.

 

c)         Nonexempt Activities

            By way of illustration and not limitation, the following activities will not be considered to constitute coal exploration, mining, off highway hauling, processing or maintenance:

 

1)         The use of equipment in the construction, reconstruction, alteration, remodeling, servicing, repairing, maintenance or improvement of real estate except for underground mine structures.  Material, such as lumber, steel, concrete, rock and other building materials, will not qualify for the exemption except when used in underground mine structures;

 

2)         the use of equipment in research and development for new uses of coal;

 

3)         the use of equipment, trailers, sheds or structures in management, sales or other nonproduction, nonoperational activities including production or extraction scheduling, purchasing, receiving, accounting, fiscal management, communications, security, marketing, product exhibition and promotion, personnel recruitment, selection or training;

 

4)         the use of equipment to prevent or fight fires or other mining hazards, protective supplies such as face masks, gas masks, helmets, gloves, coveralls, goggles, or first aid equipment and supplies, even though such equipment and supplies may be required by law;

 

5)         the use of equipment for general ventilation, heating, cooling, climate control or general illumination not specifically required for the exploration, mining, off highway hauling, processing, maintenance or reclamation operation;

 

6)         facilities for storing coal after extraction and processing;

 

7)         front-end loaders, cranes, equipment used to load coal onto trucks, railcars or barges for delivery to customers.

 

d)         Sales to Lessors of Coal Exploration, Mining, Off Highway Hauling, Processing, Maintenance and Reclamation Equipment

 

1)         For the exemption to apply, the purchaser need not, himself, employ the equipment in coal exploration, mining, off highway hauling, processing, maintenance or production.  If the purchaser leases the equipment to a lessee who uses it primarily in a qualified manner, the sale to the purchaser-lessor will be eligible for the exemption.

 

            A supplier may exclude such sales from his taxable gross receipts if the purchaser-lessor provides him with a properly completed certificate and the information contained therein would support a reduction if the sale were made directly to the lessee.

 

2)         Should a purchaser-lessor subsequently lease the equipment to a lessee who does not use it primarily in a way that would qualify for the reduction, the purchaser-lessor will become liable for the tax which he previously did not pay.

 

e)         Purchaser Certification

            Certificates must be executed by the purchaser.  The certificate must include the seller's name and address, the purchaser's name and address and a statement that the property purchased will be used primarily for coal exploration, mining, off highway hauling, processing, maintenance or reclamation.  Sellers may accept blanket certificates, but have the responsibility to obtain and keep all certificates as part of their books and records.  If a retailer accepts the certificate and the purchaser does not, in fact, use the equipment in a qualifying manner, the purchaser will be liable to the Department for the tax.  Equipment which is initially used primarily in a qualifying manner and, having been so used for less than one-half of its useful life, is converted to nonqualified uses, will become subject to tax at the time of conversion.  Replacement parts purchased initially for use in a qualifying manner and used in a nonqualifying use will become subject to tax at the time of use.

 

(Source:  Amended at 28 Ill. Reg. 11268, effective July 21, 2004)