The severance tax does not apply to severed materials stockpiled, transported or used in any other way by the producer until the materials are sold.
Materials sold for use outside the State of Alabama are subject to the severance tax unless the materials are never transported on Alabama roads. To qualify for the exemption, the materials must be loaded into a non-road conveyance (railroad car or barge) at the producer’s site.
Only lime and limestone used for agricultural purposes are exempt. Producers and purchasers qualifying for the exemption must be registered with the Department of Agriculture and Industries.
Only lime and limestone used for pollution control or abatement purposes are tax exempt; provided they meet the requirements for sales tax exemption in the State of Alabama.
Materials which are specifically subject to the tax (i.e. sand and clay) are taxable even if it they are mixed with other materials. Top soil and dirt are not usually considered to be “natural minerals” and are not subject to the severance tax.
If the producer uses severed materials for fill on his property then the severed materials are not taxable. However, if a producer sells severed material to a purchaser who may use the materials for fill, then the materials are taxable at the point of sale.
A purchaser claiming an exemption shall provide the producer with the proper documentation which includes the full name and address of the purchaser, the date of sale, the type of product purchased, the product usage, and shall state that the severed materials will be used by an exempt entity or used for an exempt purpose. Purchasers that do not maintain proper documentation may be liable for the tax.
The federal government and the State of Alabama, along with their agencies and political subdivisions, including municipalities, counties, and city and county school boards, are sovereign governmental entities. Direct purchases by sovereign governmental entities are not subject to the tax. Direct sales to contractors working for these entities are not exempt.
If a producer uses the natural minerals as a part of a “furnish and install” contract then the material used by the producer would not be subject to the tax. However, if the producer sells the natural minerals to a contractor who completes a real property contract, the natural minerals sold would be subject to the tax.
Tangible personal property is property that is not attached to the earth at the time it is sold.
A producer should attempt to determine the tonnage of materials sold. A producer, who is unable to determine the tonnage, may use a conversion rate of 2 tons to 1 cubic yard as an alternative method.
The severance tax applies at the point the natural minerals are sold by the producer to a purchaser.
Revenue collected under this act is sent in quarterly installments to the county commission in the county where the materials were severed.
It is due by the 20th day of the month next succeeding the month of sale or delivery whichever occurs first.
The return/payment must be submitted electronically through My Alabama Taxes myalabamataxes.alabama.gov on or before the due date before 3:45 p.m.
The producer must collect the tax from the purchaser at the point of sale or delivery and remit the tax to the Alabama Department of Revenue. The producer must remit the tax even if he fails to collect the tax from a purchaser.
The purchaser should pay the tax at the time of delivery or point of sale of the natural minerals.
Natural minerals are taxed at $0.10 per ton.
Lime or limestone used for agricultural purposes or for pollution control or abatement purposes, rock dust used for settling coal dust in underground mines or similar uses, any natural minerals used for the purpose of producing Portland cement, processed sand used in the foundry cores, mold, and linings, clay that produces lightweight aggregate, nor any chert including county or municipality owned chert facilities, marble and marble by-products, iron ore, quartzite, coal, oil and natural gas.
All natural minerals, including sand, gravel, sandstone, granite, shale, clay, dolomite, limestone, and any other mineral listed as such by the Geological Survey of Alabama (http://www.gsa.state.al.us/) that is not specifically excluded from taxation. Other taxable minerals include bauxite, salt, and silicon.
All persons severing earthen materials in Coosa County must file the Coosa County Earthen Materials Severance Tax Report. All persons severing graphite in Coosa County must file the Coosa County Graphite Severance Tax Report. All persons severing coal within Jackson County must file the Jackson County Coal Severance Tax Report.
Local solid minerals are coal, graphite, and earthen materials that consist of sand, clay, silt, loam, dirt, gravel, rock, sand-gravel, and sand-clay.
Returns should be filed electronically via My Alabama Taxes (MAT) at myalabamataxes.alabama.gov. Return schedules may be keyed into MAT or a schedule template may be used to import the return. Templates may be accessed HERE. Fillable tax forms can be found HERE. It is mandatory that return payments over $750 are made electronically.
Items such as depreciation, return on investment, labor expenses, materials and equipment rentals, administrative and overhead costs, fuel costs, insurance and certain transportation costs. In addition, certain marketing costs are allowed. Please refer to Revenue Rule 810-8-6-.01 for detailed information concerning the valuation of oil or gas at the point of production or allowable deductions.