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.
Effective: July 1, 2013
History: Amended 2013 Ky. Acts ch. 119, sec. 18, effective July 1, 2013. -- Amended
2008 Ky. Acts ch. 182, sec. 1, effective July 15, 2008. -- Amended 2005 Ky. Acts ch.
85, sec. 534, effective June 20, 2005. -- Amended 2000 Ky. Acts ch. 478, sec. 1,
effective July 14, 2000. -- Amended 1994 Ky. Acts ch. 133, sec. 1, effective July 15,
1994. -- Amended 1990 Ky. Acts ch. 163, sec. 7, effective July 13, 1990; and ch.
177, sec. 4, effective July 13, 1990. -- Amended 1988 Ky. Acts ch. 331, sec. 2,
effective July 15, 1988. -- Amended 1978 Ky. Acts ch. 189, sec. 1, effective July 1,
1978. -- Created 1972 Ky. Acts ch. 62, Pt. II, sec. 1.
Legislative Research Commission Note (7/1/2013). Under the authority of KRS
7.136(1), the Reviser of Statutes has modified the internal numbering of subsection
(10) of this statute from the way it appeared in 2013 Ky. Acts ch. 119, sec. 18. The
words in the text were not changed.
Notes of Decisions
US Steel Min. Co., LLC v. Helton, 631 S.E.2d 559 (W. Va. 2006).
· cites it 4× “§ 15-35-103 (1995) (formula for tax based upon contract sale price); N.M. Stat. Ann.”
Cimmaron Coal Corp. v. Dep't of Revenue, 681 S.W.2d 435 (Ky. Ct. App. 1984).
· cites it 2× “” KRS 143.010(6), (ll)(b). We are unable to distinguish the difference between transporting coal to one’s own processing plant and transporting coal to a processing plant that has purchased the coal from the miner.”
Clay Cnty. v. Leslie Cnty., 531 S.W.2d 524 (Ky. Ct. App. 1975).
“By KRS 143.010, “severance” is defined to mean “the physical removal of coal from the earth,” and “taxpayer” is defined to mean any person “engaged in severing coal.”
Revenue Cabinet, Commonwealth of Kentucky v. Pyramid Mining Co., 741 S.W.2d 662 (Ky. Ct. App. 1987).
· cites it 4× “(emphasis added) Transportation expense is defined in KRS 143.010(11) which provides as follows: (11) Transportation expense shall mean: (a) The amount paid by a taxpayer to a third party for transporting coal from the mine mouth or pit to a processing plant, tipple, loading…”
Revenue Cabinet v. Brown Badgett, Inc., 771 S.W.2d 819 (Ky. 1989).
· cites it 9× “Aside from the exemptions set forth in Section (11) of KRS 143.010, a taxpayer should not be entitled to claim an item as a nonmining transportation expense under Kentucky law unless he has shown that such cost was not used to increase his depletion allowance under Section…”
Commonwealth, Revenue Cabinet v. South Hopkins Coal Co., 734 S.W.2d 476 (Ky. Ct. App. 1987).
· cites it 4× “Although the company included the $1,765,048 lump sum payment from TVA in its gross income, it excluded it from “gross value” under KRS 143.010(6) when it filed its severance tax return for the audit period in question.”
Vericoals, Inc. v. Revenue Cabinet, 869 S.W.2d 49 (Ky. Ct. App. 1994).
· cites it 4× “Vericoals, is the taxpayer liable for coal severance taxes as Unit Coal had an economic interest in the coal and severed the coal; (2) the economic substance, and not the form, of the agreement between Vericoals and Unit Coal governs who had an economic interest in the coal; (3)…”
Revenue Cabinet v. South East Coal Co., 791 S.W.2d 374 (Ky. 1990).
· cites it 3× “To resolve the questions presented, we must construe various provisions of KRS 143.010. South East Coal Sales Company is a wholly owned subsidiary of appellee, South East Coal Company, and is a “related party” within the meaning of KRS 143.”
Revenue Cabinet v. Hoke Co., 697 S.W.2d 163 (Ky. Ct. App. 1985).
“The controlling statute is KRS 143.010(6) (enacted 1972, prior to its amendment effective July 1, 1978).”
— Ky. Rev. Stat. § 143.010(10) — 1 case
Vericoals, Inc. v. Revenue Cabinet, 869 S.W.2d 49 (Ky. Ct. App. 1994).
“Vericoals, is the taxpayer liable for coal severance taxes as Unit Coal had an economic interest in the coal and severed the coal; (2) the economic substance, and not the form, of the agreement between Vericoals and Unit Coal governs who had an economic interest in the coal; (3)…”
— Ky. Rev. Stat. § 143.010(11) — 3 cases
Revenue Cabinet, Commonwealth of Kentucky v. Pyramid Mining Co., 741 S.W.2d 662 (Ky. Ct. App. 1987).
“(emphasis added) Transportation expense is defined in KRS 143.010(11) which provides as follows: (11) Transportation expense shall mean: (a) The amount paid by a taxpayer to a third party for transporting coal from the mine mouth or pit to a processing plant, tipple, loading…”
Revenue Cabinet v. Brown Badgett, Inc., 771 S.W.2d 819 (Ky. 1989).
“Aside from the exemptions set forth in Section (11) of KRS 143.010, a taxpayer should not be entitled to claim an item as a nonmining transportation expense under Kentucky law unless he has shown that such cost was not used to increase his depletion allowance under Section…”
— Ky. Rev. Stat. § 143.010(3) — 1 case
— Ky. Rev. Stat. § 143.010(5) — 2 cases
Vericoals, Inc. v. Revenue Cabinet, 869 S.W.2d 49 (Ky. Ct. App. 1994).
“Vericoals, is the taxpayer liable for coal severance taxes as Unit Coal had an economic interest in the coal and severed the coal; (2) the economic substance, and not the form, of the agreement between Vericoals and Unit Coal governs who had an economic interest in the coal; (3)…”
— Ky. Rev. Stat. § 143.010(6) — 6 cases
Cimmaron Coal Corp. v. Dep't of Revenue, 681 S.W.2d 435 (Ky. Ct. App. 1984).
“” KRS 143.010(6), (ll)(b). We are unable to distinguish the difference between transporting coal to one’s own processing plant and transporting coal to a processing plant that has purchased the coal from the miner.”
Revenue Cabinet, Commonwealth of Kentucky v. Pyramid Mining Co., 741 S.W.2d 662 (Ky. Ct. App. 1987).
“(emphasis added) Transportation expense is defined in KRS 143.010(11) which provides as follows: (11) Transportation expense shall mean: (a) The amount paid by a taxpayer to a third party for transporting coal from the mine mouth or pit to a processing plant, tipple, loading…”
Commonwealth, Revenue Cabinet v. South Hopkins Coal Co., 734 S.W.2d 476 (Ky. Ct. App. 1987).
“Although the company included the $1,765,048 lump sum payment from TVA in its gross income, it excluded it from “gross value” under KRS 143.010(6) when it filed its severance tax return for the audit period in question.”
Revenue Cabinet v. Brown Badgett, Inc., 771 S.W.2d 819 (Ky. 1989).
“Aside from the exemptions set forth in Section (11) of KRS 143.010, a taxpayer should not be entitled to claim an item as a nonmining transportation expense under Kentucky law unless he has shown that such cost was not used to increase his depletion allowance under Section…”
— Ky. Rev. Stat. § 143.010(6)(a) — 3 cases
Commonwealth, Revenue Cabinet v. South Hopkins Coal Co., 734 S.W.2d 476 (Ky. Ct. App. 1987).
“Although the company included the $1,765,048 lump sum payment from TVA in its gross income, it excluded it from “gross value” under KRS 143.010(6) when it filed its severance tax return for the audit period in question.”
Revenue Cabinet v. South East Coal Co., 791 S.W.2d 374 (Ky. 1990).
“To resolve the questions presented, we must construe various provisions of KRS 143.010. South East Coal Sales Company is a wholly owned subsidiary of appellee, South East Coal Company, and is a “related party” within the meaning of KRS 143.”
— Ky. Rev. Stat. § 143.010(6)(e) — 1 case
— Ky. Rev. Stat. § 143.010(6)(g) — 1 case
Cimmaron Coal Corp. v. Dep't of Revenue, 681 S.W.2d 435 (Ky. Ct. App. 1984).
“” KRS 143.010(6), (ll)(b). We are unable to distinguish the difference between transporting coal to one’s own processing plant and transporting coal to a processing plant that has purchased the coal from the miner.”
— Ky. Rev. Stat. § 143.010(8) — 3 cases
Revenue Cabinet, Commonwealth of Kentucky v. Pyramid Mining Co., 741 S.W.2d 662 (Ky. Ct. App. 1987).
“(emphasis added) Transportation expense is defined in KRS 143.010(11) which provides as follows: (11) Transportation expense shall mean: (a) The amount paid by a taxpayer to a third party for transporting coal from the mine mouth or pit to a processing plant, tipple, loading…”
— Ky. Rev. Stat. § 143.010(9) — 1 case
Revenue Cabinet v. South East Coal Co., 791 S.W.2d 374 (Ky. 1990).
“To resolve the questions presented, we must construe various provisions of KRS 143.010. South East Coal Sales Company is a wholly owned subsidiary of appellee, South East Coal Company, and is a “related party” within the meaning of KRS 143.”
— Ky. Rev. Stat. § 143.010(ll)(a) — 2 cases
Revenue Cabinet v. Brown Badgett, Inc., 771 S.W.2d 819 (Ky. 1989).
“Aside from the exemptions set forth in Section (11) of KRS 143.010, a taxpayer should not be entitled to claim an item as a nonmining transportation expense under Kentucky law unless he has shown that such cost was not used to increase his depletion allowance under Section…”
— Ky. Rev. Stat. § 143.010(ll)(b) — 1 case
Revenue Cabinet v. Brown Badgett, Inc., 771 S.W.2d 819 (Ky. 1989).
“Aside from the exemptions set forth in Section (11) of KRS 143.010, a taxpayer should not be entitled to claim an item as a nonmining transportation expense under Kentucky law unless he has shown that such cost was not used to increase his depletion allowance under Section…”
— Ky. Rev. Stat. § 143.010(ll)(c) — 1 case
— Ky. Rev. Stat. § 143.010(ll)(d) — 2 cases
Revenue Cabinet v. Brown Badgett, Inc., 771 S.W.2d 819 (Ky. 1989).
“Aside from the exemptions set forth in Section (11) of KRS 143.010, a taxpayer should not be entitled to claim an item as a nonmining transportation expense under Kentucky law unless he has shown that such cost was not used to increase his depletion allowance under Section…”
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