KRS 143.025: Determination of taxable gross value of severed coal.

(1) Taxpayers severing coal in Kentucky and partially or wholly processing the coal

outside of Kentucky thereafter and taxpayers severing coal outside of Kentucky and

partially or wholly processing the coal in Kentucky thereafter shall determine and

report the gross value of the coal by application of the following formula:

(a) Determine the direct cost of severing or processing the coal in Kentucky as

defined in paragraphs (d) and (e) of this subsection.

(b) Determine the direct cost of severing or processing the coal outside of

Kentucky as defined in paragraphs (d) and (e) of this subsection.

(c) Exclude from paragraphs (a) and (b) of this subsection transportation expense

and overhead cost as defined in paragraph (f) of this subsection.

(d) Include in the dir ect cost of severing coal: black lung excise tax; contract

mining, less transportation expense contained therein; cost depletion;

depreciation; development; equipment rental; explosives; fuel; labor and

associated expenses; maintenance; reclamation; royalt ies when based on tons

severed; and wheelage.

(e) Include in the direct cost of processing coal: depreciation; equipment rental;

fee processing; fuel; labor and associated expense; maintenance; and refuse

disposal.

(f) Include in the overhead costs: commis sions; freight yard and siding expense;

general expense; general insurance and supervision; general office expense;

idle time expense; inventory adjustments; mine closing expense; officers'

salaries; percentage depletion; quality analysis; scale and weighman's expense;

transportation expense and taxes, including sales, coal severance, property,

franchises, and state income taxes.

(2) For purposes of computing the formula under this section, any expense which is not

directly attributable to either the severi ng or processing of the coal shall be

classified as an overhead cost.

(3) Direct cost determined in subsection (1)(a) of this section divided by the total of

direct cost determined in subsection (1)(a) of this section and the direct cost

determined in subsection (1)(b) of this section and the result multiplied by the gross

value of the coal shall equal the proportion of gross value which is subject to the tax

levied under KRS 143.020.

(4) Any taxpayer determining taxable gross value as provided in this sect ion shall

submit supporting computations and classifications of cost with each coal tax

return, unless the department authorizes the taxpayer to submit the supporting

information on a basis other than monthly.