Idaho State Tax Commission

Mining: Production Exemption

Do you own or operate a mine that removes minerals from the earth and processes those minerals for sale? Or are you a custom miner that performs qualifying services for a miner? If so, you might qualify for the production exemption.

If you qualify for the production exemption, you can buy some equipment and supplies without paying sales or use tax.

Businesses that qualify for the exemption

To be eligible for the this exemption, your business must:

  • Engage in a qualifying mining activity. This includes:
    • Developing a mine that has known deposits
    • Operating a mine — underground; aboveground, open pit (including gravel pits when the gravel will be sold at retail)
    • Drilling holes to help move the ore
    • Blasting
    • Breaking ore for easier removal from the mine
    • Removing ore from the mine
    • Backfilling mined-out areas
    • Further processing ore for sale
  • Be primarily devoted to mining. One way many businesses satisfy this requirement is that they devote the majority of their business operations to qualifying mining activities. Example: Spending more than 50% of the business' working time and activities mining ore.
  • Own the ore you mine and process.
  • Sell the ore you mine and process. Either your business or someone else must sell the ore at retail.
  • Report your business' profit or loss on an income tax return.

Note: Exploring for ore isn't a qualifying activity.

OR

Be a custom miner. Your business performs a qualifying mining activity for a miner and receives money or other compensation for the work.

Examples:

  • Drilling
  • Blasting
  • Breaking ore
  • Removing ore from the mine
  • Backfilling mined-out areas
  • Further processing ore for sale

Custom mining doesn't include:

  • Services performed on real property
  • Clearing land
  • Transporting ore
  • Exploring for ore

A custom miner doesn't have to own the ore that's mined or processed as long as the owner of the ore sells it.

Separately operated business segment

A separately operated business segment can also qualify. It can be a division, branch, or even a cost center. You must keep separate accounting records for the business segment to qualify as a separately operated business segment. This includes recording income, expenses, wages, and assets of the business segment separately. You must also have employees dedicated to operating the separate business segment.

Example:

Your business devotes 40% of its business operations to removing ore from a mine and 60% hauling ore from the mine to a processing plant. Removing ore from the mine is an exempt activity, but hauling ore isn't. Because your business doesn't spend the majority of its business activities in a qualifying activity, you don't qualify for the mining exemption. Your mining activities might qualify for an exemption if you make them a separate operation.

Businesses that don't qualify for the exemption

This exemption is only for businesses that devote the majority of their business operations to qualifying mining activities trying to make a profit. Operations that aren't eligible for the exemption include:

  • Mining as a hobby
  • Mining ore for personal use
  • Mining ore for use by your business

Page last updated July 24, 2018. Last full review of page: July 24, 2018.

This information is for general guidance only. Tax laws are complex and change regularly. We can't cover every circumstance in our guides. This guidance may not apply to your situation. Please contact us with any questions. We work to provide current and accurate information. But some information could have technical inaccuracies or typographical errors. If there's a conflict between current tax law and this information, current tax law will govern.