Publication 510 - Excise Taxes - 2004 (Page 22 of 48) in pdf

from the ground. Determine vested ownership

clean it, size it, or apply any other process con-

The tax is based on the weight of each tire.

without regard to any contractual arrangement

sidered mining under the rules for depletion. In

The tax does not apply to tires that weigh 40

for the sale or other disposition of the coal or the

this case, the tax applies only when you sell the

pounds or less. The tax rates are shown in the

payment of any royalties between the producer

coal. The tax does not apply to coal used as fuel

Form 720 instructions.

and third parties. A producer includes any per-

in the coal drying process since it is considered

Determination of weight. Do not include

son who extracts coal from coal waste refuse

to be used in a mining process. However, the tax

metal rims or rim bases in figuring the total

piles (or from the silt waste product that results

does apply when you use the coal as fuel or as

weight of a tire. But include in the total weight,

from the wet washing of coal).

an ingredient in making coke since the coal is

the wire, staples, darts, clips, and other material

The tax is not imposed on coal extracted

not used in a mining process.

or fastening devices that form a part of the tire or

from a riverbed by dredging if it can be shown

You must use a constructive sale price to

are required for its use.

that the coal has been taxed previously.

figure the tax under the 4.4% rate if you use the

Consider studs as part of a tire, and include

coal in other than a mining process. Base your

Tax rates. The tax on underground-mined

them in the total weight. The total weight of a

constructive sale price on sales of a like kind and

coal is the lower of:

tubeless tire includes the weight of the air valve

grade of coal by you or other producers made

and stem or any other mechanism that functions

•

$1.10 a ton, or

f.o.b. mine or cleaning plant. Normally, you use

as a part of the tire and is used in connection

the same constructive price used to figure your

•

4.4% of the sale price.

with inflating the tire or maintaining its air pres-

percentage depletion deduction.

sure.

The tax on surface-mined coal is the lower of:

When you sell tires with metal rims or rim

Blending. If you blend surface-mined coal

•

bases attached, you must keep records estab-

with underground-mined coal during the clean-

55 cents a ton, or

lishing what portion of the total weight of the

ing process, you must figure the excise tax on

•

4.4% of the sale price.

finished product represents the tire without the

the sale of the blended, cleaned coal. Figure the

metal rim or rim base.

tax separately for each type of coal in the blend.

Coal will be taxed at the 4.4% rate if the selling

Base the tax on the amount of each type in the

Alternative method of determining weight.

p r i c e

i s

l e s s

t h a n

$ 2 5

t o n

f o r

blend if you can determine the proportion of

If you have received permission from the IRS,

underground-mined coal and less than $12.50 a

each type of coal contained in the final blend.

you may determine total weight of tires that you

ton for surface-mined coal. Apply the tax propor-

Base the tax on the ratio of each type originally

manufactured and sold using the average

tionately if a sale or use includes a portion of a

put into the cleaning process if you cannot deter-

weight for each type, size, grade, and classifica-

ton.

mine the proportion of each type of coal in the

tion.

blend. However, the tax is limited to 4.4% of the

See Revenue Procedure 92 – 82 in Cumula-

Example. If you sell 21,000 pounds (10.5

sale price per ton of the blended coal.

tive Bulletin 1992 – 2 for several alternative

tons) of coal from an underground mine for

methods you can use to determine tire weight.

$525, the price per ton is $50. The tax is $1.10 ×

Exemption from tax. The tax does not apply

to sales of lignite and imported coal. The only

10.5 tons ($11.55).

Special rule, manufacturer’s retail stores.

other exemption from the tax on the sale of coal

The excise tax on tires is imposed at the time the

Coal production. Coal is produced from sur-

is for coal exported as discussed next.

tires are delivered to the manufacturer-owned

face mines if all geological matter (trees, earth,

retail stores, not at the time of sale.

Exported. The tax does not apply to the

rock) above the coal is removed before the coal

sale of coal if the coal is in the stream of export

is mined. Treat coal removed by auger and coal

Tires on imported articles. The importer of

when sold by the producer and the coal is actu-

reclaimed from coal waste refuse piles as pro-

an article equipped with taxable tires is treated

ally exported.

duced from a surface mine.

as the manufacturer of the tires and is liable for

Coal is in the stream of export when sold by

Treat coal as produced from an underground

the tire excise tax when the article is sold (ex-

the producer if the sale is a step in the exporta-

mine when the coal is not produced from a

cept in the case of an automobile bus chassis or

tion of the coal to its ultimate destination in a

surface mine. In some cases, a single mine may

body with tires).

foreign country. For example, coal is in the

yield coal from both surface mining and under-

Tires exempt from tax. The tax does not ap-

stream of export when:

ground mining. Determine if the coal is from a

ply to the following items.

surface mine or an underground mine for each

1) The coal is loaded on an export vessel and

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ton of coal produced and not on a mine-by-mine

Tires of extruded tiring with an internal

title is transferred from the producer to a

basis.

wire fastening agent.

foreign purchaser, or

•

Determining tonnage or selling price. The

Recapped or retreaded tires if the tires

2) The producer sells the coal to an export

producer pays the tax on coal at the time of sale

have been sold previously in the United

broker in the United States under terms of

or use. In figuring the selling price for applying

States and were taxable tires at the time

a contract showing that the coal is to be

the tax, the point of sale is f.o.b. (free on board)

of sale.

shipped to a foreign country.

mine or f.o.b. cleaning plant if you clean the coal

•

Tire carcasses not suitable for commercial

Proof of export includes any of the following

before selling it. This applies even if you sell the

use.

coal for a delivered price. The f.o.b. mine or

items.

•

f.o.b. cleaning plant is the point at which you

•

Tires for use on qualifying intercity, local,

A copy of the export bill of lading issued

figure the number of tons sold for applying the

and school buses. For tax-free treatment,

by the delivering carrier.

applicable tonnage rate, and the point at which

the registration requirements discussed

•

A certificate signed by the export carrier’s

you figure the sale price for applying the 4.4%

earlier under Requirements for Exempt

agent or representative showing actual ex-

rate.

Sales apply.

portation of the coal.

The tax applies to the full amount of coal

sold. However, the IRS allows a calculated re-

•

Qualifying intercity or local bus. This is

A certificate of landing signed by a cus-

duction of the taxable weight of the coal for the

any bus used mainly (more than 50%) to trans-

toms officer of the foreign country to which

weight of the moisture in excess of the coal’s

port the general public for a fee and that either

the coal is exported.

inherent moisture content. Include in the sale

operates on a schedule along regular routes or

•

If the foreign country does not have a cus-

price any additional charge for a freeze-condi-

seats at least 20 adults (excluding the driver).

toms administrator, a statement of the for-

tioning additive in figuring the tax.

Qualifying school bus. This is any bus

eign consignee showing receipt of the

Do not include in the sales price the excise

substantially all the use (85% or more) of which

coal.

tax imposed on coal.

is to transport students and employees of

Coal used by the producer. The tax on coal

schools.

Tires

applies if the coal is used by the producer in

Credit or refund. A credit or refund (without

other than a mining process. A mining process

interest) is allowable on tax-paid tires if the tires

means the same for this purpose as for percent-

Tax is imposed on the sale by the manufacturer

have been:

age depletion. For example, the tax does not

of tires of the type used on highway vehicles and

•

apply if, before selling the coal, you break it,

made all or in part of rubber.

Exported,

Page 22

Publication 510 - Excise Taxes - 2004 Page 22

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