Summary
In Consolidation Coal Co. v. Bowers (1963), 174 Ohio St. 228, 22 O.O.2d 222, 188 N.E.2d 419, we held that car retarders, which are pieces of equipment that are hooked to a coal car as it approaches a tipple for loading processed coal, were not exempted. The car retarders were not exempted because they were used after the coal was mined and processed.
Summary of this case from Internatl. Salt Co. v. TracyOpinion
No. 37370
Decided February 20, 1963.
Taxation — Sales and use taxes — Conveyance of electric power constitutes "transportation," when — Power lines and equipment not used "directly" in mining — Car retarders employed in loading processed coal — Not used directly in mining.
APPEAL from the Board of Tax Appeals.
The appellant is engaged in strip mining coal. Its mine in question comprises an area of approximately 400 square miles of real estate. An electric drill is used to drill holes in the ground, into which explosives are placed and detonated by electricity passing through electric wires placed into the holes. This process loosens the earth over the coal so it may be removed by stripping shovels. After a stripping shovel removes the overburden from the vein of coal, electric drills are used to drill holes in the coal, in which holes explosives are used to loosen the coal. Electrically operated loading shovels then load the coal into trucks or cars for transportation to a preparation plant and tipple where it is processed and loaded into railroad cars for shipment and sale. Electrically powered pumps are used to remove water which flows into the holes following the excavation of the coal.
During the period of time involved in this proceeding, seven stripping shovels were in operation at the mine, all of different sizes and requiring different voltages for their operation.
This mining procedure continues daily, requiring all the equipment to move ahead as the mining progresses, thus requiring the location of the power lines to be constantly changed from place to place.
The various pieces of electrically powered equipment require different currents. The appellant purchases the electric power at the entrance to the mine property at 69,000 volts and distributes it over the mine property through approximately 70 miles of movable power lines to the various pieces of mining equipment where the voltage is cut down by transformers to that required to operate each particular piece of mining equipment.
In making the sales and use tax assessments, the Tax Commissioner assessed purchases of all the power lines and electrical equipment incidental thereto located on the mine property used in the mining operation and served through such transformer but not such transformer or power lines leading therefrom to the mining equipment.
An assessment was also made on the purchase of car retarders, which are pieces of equipment attached to the preparation plant and tipple. Such a piece of equipment is hooked onto a railroad car as it approaches the tipple for loading the processed coal, controls the movement of the car underneath the loading boom and tipple, and releases the car after it has been loaded and is ready for transportation by the railroad to a consignee.
The order of the Tax Commissioner assessing sales and use taxes on the purchases of the above-described items of tangible personal property was affirmed by the Board of Tax Appeals.
An appeal from the decision of the Board of Tax Appeals brings the cause to this court for review.
Mr. Robert E. Scott, for appellant.
Mr. Mark McElroy, attorney general, and Mr. Robert J. Kosydar, for appellee.
The question presented in this appeal is a factual one as to whether the electrical transmission lines and equipment incidental thereto employed by appellant to transport electric power to appellant's mining equipment, up to but not including the last transformers, and the car retarding equipment were used directly in mining coal, and, thus, the purchases of such items were excepted from the sales and use taxes by Sections 5739.01 and 5741.01, Revised Code.
Section 5739.01, Revised Code, provides in part:
"`Retail sale' and `sales at retail' include all sales except those in which the purpose of the consumer is * * * to use or consume the thing transferred directly in the production of tangible personal property for sale by * * * mining."
Section 5741.01, Revised Code, has basically the same definitive provisions as to the word, "use," and basically the same exceptions for use-tax purposes.
The electric power is received at the entrance to appellant's mining property at a voltage that is not usable for the mining machinery until it passes through the transformer immediately ahead of the mining equipment to be served.
The conveyance of electric power by means of these electric transmission lines for use in mining is a "transportation" of electric power. Thus, the transmission lines and equipment incidental therto are not used "directly in the production of tangible personal property for sale by * * * mining," and the purchases of such property are not excepted from the sales and use taxes.
Paragraphs one and two of the syllabus in the case of General Motors Corp. v. Bowers, Tax Commr., 164 Ohio St. 574, read as follows:
"1. The conveyance of electrical energy by means of wires and mechanical devices incidental thereto from one place to another for use in manufacturing constitutes a transportation of such energy.
"2. Where the principal use of property claimed to be used `directly in' a particular activity is in transportation to or from that activity, as distinguished from transportation which is a part of that activity or between essential steps of that activity, such use is not `directly in' such activity within the meaning of Section 5739.01, Revised Code. (Paragraph one of the syllabus of Powhatan Mining Co. v. Peck, Tax Commr., 160 Ohio St. 389, approved and followed.)"
The car retarders used by appellant are not used directly in any mining or processing operation, but are used as transportation devices to assist in loading coal after it is completely mined and processed. The only function of a car retarder is to hold a railroad car in place while it is being loaded. This is neither mining nor processing.
The purchases of such car retarders and parts are not excepted from the sales and use taxes.
The decision of the Board of Tax Appeals is neither unreasonable nor unlawful and is, therefore, affirmed.
Decision affirmed.
TAFT, C.J., ZIMMERMAN, MATTHIAS, O'NEILL, GRIFFITH, HERBERT and GIBSON, JJ., concur.