95-092
Response
December 22, 1995
Request
W.
Val Oveson
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, UT 84134
Dear
Mr. Oveson:
The
XXXXX division of XXXXX owns and mines coal from two permitted mines in XXXXX
County. Virtually all of the coal from these mines is consumed in the Company's
power plants in his area. We have
recently received the opportunity to sell some excess coal from our mines to a
foreign buyer.
As
a result we are requesting a ruling that the coal sold from our mines will
qualify for the Utah Steam Coal Tax Credit provided for in Section 59-7-604,
Utah Code Annotated.
FACTS:
A
Japanese company has contracted with XXXXX, ("XXXXX") to supply steam
coal from Utah. XXXXX is a company that
does business in Utah and is not affiliated to XXXXX. XXXXX, acting as an agent of this Japanese company entered into a
coal supply agreement with XXXXX, to supply steam coal from its XXXXX coal
mines.
Under
the terms of the Agreement between XXXXX and XXXXX, XXXXX is to mine the coal
from one of its two permitted mines in XXXXX, (either the XXXXX or the XXXXX
mine). XXXXX transports the coal to the
XXXXX in XXXXX, Utah where title transfer's to XXXXX as the coal is loaded on
the rail cars. The coal is then
transported by rail to the XXXXX in XXXXX and loaded on board a ship for
transporting to Japan, where it is consumed.
SECTION
59-7-604:
It
is my understanding that this provision provides for $1.00 per ton tax credit
against any taxes imposed by this chapter or Chapter 8, for each ton of coal
sold from a Utah mine to a foreign purchaser.
To be entitled to this credit the taxpayer must extract the coal from
the taxpayers permitted mine and the coal must be sold to a purchaser outside
the United States.
Furthermore,
this credit applies to coal sales on or after 1993 and then only to the extent
these sales are in excess of a base. The base is the tons of Utah steam coal
sold by the taxpayer to a purchaser outside the United States in 1992 from the
taxpayer's permitted mine.
RULING
REQUEST:
Therefore,
XXXXX is requesting a ruling that the coal sold from either of its two permitted
mines in XXXXX County to XXXXX, as an agent of a Japanese company would be
entitled to the Utah coal tax credit.
XXXXX's
is selling the coal from a permitted mine.
The coal is for a purchaser outside the United States via an agent of
the foreign, purchaser. This is
reflected by the fact that when XXXXX transfer's title to the coal in XXXXX,
Utah, such coal is in transit to its ultimate foreign destination, Japan.
This
credit applies to coal sold in excess of the number of tons XXXXX sold from its
Utah mines in the XXXXX taxable year. As stated above, XXXXX owns and operates
the XXXXX and XXXXX coal mines in XXXXX County Utah. These mines primarily supply coal to the XXXXX power plants in
XXXXX County. No coal was sold to a
purchaser outside the United States in XXXXX, therefore all the coal sold in
XXXXX and after from our Utah mines, to a purchaser outside the United States
would be eligible for the $1.00 per ton credit.
I
have discussed this transaction with XXXXX, your Tax Audit Manager for
Corporation's. He implied, that based
on these facts, which I presented to him over the phone, XXXXX should be
entitled to the tax credit because the coal it destined for a purchaser outside
the United States. As a resulted XXXXX
indicated the staff would probably support XXXXX request for the tax credit
from the Utah State Tax Commission.
If
you need any additional facts or information my phone number XXXXX, fax number
XXXXX and my mailing address at XXXXX is XXXXX. I thank you for your consideration of this matter.
Sincerely,
XXXXX
XXXXX
RE: Advisory Opinion - Steam Coal Credit
Dear XXXXX,
We
have received your request for an advisory opinion regarding the steam coal
credit. We find as follows:
A
credit is allowed against corporate taxes imposed under chapters 7 and 8 of
Title 59 of the Utah code for each ton of Utah steam coal sold from a permitted
mine to a purchaser outside the United States.
§59-7-604 Utah Code Ann. To
qualify, the coal must be sold to a purchaser for shipment outside the country,
and the coal must be exported outside the United States within a reasonable
time. Utah Admin. Rule R865-6F-23. The sale must exceed the tons of coal sold
during the 1992 tax year to the purchaser for export, and the credit applies
only to that excess.
As
you have described it, the transaction between XXXXX and XXXXX qualifies for
the credit because:
1. the steam coal is sold from a permitted
mine.
2. the sale is to a purchaser who exports the
coal outside the United States within a reasonable time, and
3. the sale exceeds sales for export in
1992.
Because
XXXXX made no sales for export in tax year XXXXX, all sales for export in tax
years XXXXX and after qualify for the credit until the credit is repealed in
tax year XXXXX.
Please
let us know if we can answer any other questions.
For
the Commission
Alice
Shearer
Commissioner