Search Category: Producers

Buyer’s Responsibility – Mining

Buyer’s responsibility when making exempt purchases

You must keep records of all your purchases and show whether you paid tax on them.

  • Records must show what you bought, when you bought it, how much you paid for the goods, and how much tax you paid.
  • Your accounting records must include the standard books and records maintained in a business.
  • Keep all your records for at least four years. (You may need to keep them for seven years if you don’t file sales tax returns).

Use tax

When you buy, use, or store taxable goods in Idaho, but don’t pay sales tax when you buy them, you owe use tax.

You may owe use tax if:

  • You buy goods from an internet retailer that doesn’t collect tax
  • You buy a taxable item from a seller that didn’t charge sales tax because the seller has your exemption certificate on file
  • You buy an item in a state that doesn’t have sales tax, then bring the item to Idaho
  • You change how you use an exempt item. (See If you change the primary use of an item.)
  • You take ore from your resale inventory (e.g., gravel) and use it in your business

Learn more about use tax on our Sales/Use Tax page.

Change Use of Exempt Item – Mining

If you change the primary use of an item

If you buy an item exempt to use in a mining activity, it becomes taxable if you stop using it in a mining activity. You must then pay tax on the fair market value of the item.

Note: The opposite isn’t true. If you pay tax on an item because you use it in a non-mining activity, you can’t claim a tax credit if you begin to use it in a mining activity.

Taxable Items – Mining

The production exemption guide lists items that are always taxable. Taxable items that are specific to miners include:

Underground mining taxable purchases

  • Equipment used in exploration activities
  • Equipment used for venting or conditioning the air of the mine – if it becomes a part of the real property
  • Equipment used for drainage of the mine if part of the real property
  • Maintenance and equipment used to maintain and clean up mining equipment
  • Equipment and supplies used for sampling and assaying, other than for quality control

Aboveground, open pit mining taxable purchases

  • Equipment used in exploration and discovery activities
  • Equipment, materials, and supplies used in real property improvements
  • Equipment and supplies used to maintain and clean up the mine and mine equipment
  • Equipment and materials used in land reclamation activities
  • Equipment and vehicles used to transport people
  • Equipment and supplies used to transport finished products
  • Equipment and supplies used to transport ore and overburden between geographically separated sites, processing plants, or displosal sites if:
    • A substantial break in the production process occurs, and
    • The activity doesn’t further the processing of the ore by sorting, sizing, or grading
  • Equipment and supplies used in personnel support activities

Note: If the equipment is primarily used for ore extraction purposes, it isn’t taxable.

Other taxable mining purchases

  • Office, maintenance, or janitorial equipment and supplies
  • Marketing, promotional, sales, or distribution equipment and supplies
  • Equipment and supplies to analyze or model financial results

Motor vehicles

Motor vehicles that are required to be licensed are almost always taxable. This includes vehicles with restricted-use plates and recreational-use stickers.

Mining Activities that Qualify for the Production Exemption

Businesses that qualify for the exemption

To be eligible for 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.

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

Taxable Items – Lumber Manufacturing

The production exemption guide lists items that are always taxable. Taxable items that are specific to lumber manufacturers include:

  • Equipment and supplies used for filing blades, such as grinders and grinding wheels
  • Equipment used for loading lumber products onto railway cars and trucks
  • Generators used to produce electricity to power non-production equipment (co-generation equipment)
  • Equipment and materials used for shipping
    Examples:
    • Strapping or binders used to secure lumber on railroad cars or trucks
    • Airbags and lumber used as dunnage
  • Shop equipment and supplies used to make repairs
    Examples:
    • Hand tools
    • Power tools and compressors, including their accessories
    • Welders and cutting torches, including the gas you use to operate them
    • Solvents, cleaners, degreasers, shop rags
    • Paint, even if used for production equipment
  • Office, maintenance, or janitorial equipment and supplies
  • Marketing, promotional, sales, or transportation equipment and supplies
  • Equipment and supplies to analyze or model financial results

Motor vehicles

Any motor vehicle that’s required to be licensed for use on public roads is taxable. This includes vehicles with restricted-use plates and recreational-use stickers.

Laws and Rules for Lumber Manufacturing

Learn more about exemptions for lumber manufacturing:

Learn more about Idaho tax statutes 

Learn more about our Rules 

Sales by or to Lumber Manufacturers

Selling the lumber you manufacture

Wholesalers

If you only sell goods to a customer who will resell them, you may be a wholesaler. Read more in our Wholesalers guide.

Retailers

If you sell to a final consumer, you might be a retailer. Read more in our Retailers guide.

Examples of sales you must collect tax on if you’re a retailer:

  • Selling finished lumber to a contractor or employee
  • Selling finished lumber to buyers who don’t resell them
  • Selling firewood for bonfires or campfires
  • Selling equipment or promotional items to customers who don’t resell them

A retailer must get an Idaho seller’s permit, charge sales tax, file sales tax returns, and forward the tax to the Tax Commission.

Don’t charge tax if the goods you’re selling are:

  • Sold for resale, and the buyer gave you a completed pdf Form ST-101 – Sales Tax Resale or Exemption Certificate, or
  • Never taxed in Idaho
    Example: Firewood burned to provide heat to a building or for domestic home use isn’t taxable in Idaho. You might not need an Idaho seller’s permit if you only sell firewood for these purposes.

Vendors that sell to lumber manufacturers

  • If you sell to lumber manufacturers, don’t charge sales tax on exempt items if the buyer gives you a completed exemption certificate (e.g., ST-101).
  • If you have a completed certificate on file, don’t collect sales tax on exempt sales to the lumber manufacturer in the future.

Note: Not everything is exempt for lumber manufacturers. You must charge tax on items that aren’t exempt from sales tax. Read more on making sales in our Retailers guide.

Exemption Certificates – Lumber Manufacturing

To buy an item exempt from sales tax, give the seller a completed exemption certificate.

ST-101, Idaho Resale or Exemption Certificate

pdf Form ST-101 – Sales Tax Resale or Exemption Certificate

Fill in the form:

  1. Write the name and address of both the seller and your business at the top.
  2. In section 2 “Producer Exemptions,” check the box for the producer exemption(s) you qualify for.
  3. List any products you produce on the line at the bottom of section 2.
  4. Under “Buyer,” at the bottom of the page, sign the form. Fill in the rest of the fields (name, title, EIN or driver’s license information, and date).
  5. The seller should keep the form and not charge you tax on exempt items in the future.

Optional short version of ST-101

  • Retailers can print or stamp a short version of the ST-101 on sales invoices, or
  • Buyers can print the short version on their purchase orders.
  • This shorter version must be completed for each sale. The wording must be:

I certify that the property I’ve purchased will be used by me directly and primarily in the process of producing tangible personal property by mining, manufacturing, processing, fabricating, or farming, or as a repair part for equipment used primarily as described above. This tax exemption qualifies if this statement is signed by the buyer and the name, address, and nature of the buyer’s business are shown on the invoice. Any person who signs this certification with the intention of evading payment of tax is guilty of a misdemeanor.

[Indicate spaces for NATURE OF BUSINESS and SIGNATURE OF BUYER]

Retailers should keep a copy of the sales invoice showing the stamped or printed exemption.

Multijurisdictional

You can use the Uniform Sales and Use Tax Certificate – Multijurisdiction when you buy from out-of-state businesses that are registered Idaho retailers instead of Form ST-101 if:

  • You’re a multi-state taxpayer, and
  • You’ll resell the goods you buy

Instructions:

  1. Write the name and address of both the seller and your business at the top.
  2. Check the box for “Retailer” if you sell to end users or “Wholesaler” if you sell to buyers who’ll resell the goods.
  3. Write your Idaho seller’s permit number in the ID section.
  4. Sign and fill in the bottom of the form.
  5. The seller should keep the form and not charge you tax in the future.

Note: Everything you buy using the Multijurisdiction exemption certificate is exempt because you can use it only for goods you’ll resell.

Remember: Even if you buy from a seller that has your exemption certificate, not everything is exempt.

  • Some items are always taxable.
  • Some items are taxable if they’re not used in qualifying activities.

Buyer’s Responsibility – Lumber Manufacturing

Buyer’s responsibility when making exempt purchases

You must keep records of all your purchases, and show whether you paid tax on them.

  • Records must show what you bought, when you bought it, how much you paid for the goods, and how much tax you paid.
  • Your accounting records must include the standard books and records maintained in a business.
  • Keep all your records for at least four years. (You may need to keep them for seven years if you don’t file sales tax returns.)

Use tax

When you buy, use, or store taxable goods in Idaho, but don’t pay sales tax when you buy them, you owe use tax.

You may owe use tax if:

  • You buy goods from an internet retailer that doesn’t collect tax
  • You buy a taxable item from a seller that didn’t charge sales tax because the seller has your exemption certificate on file
  • You buy an item in a state that doesn’t have sales tax, then bring the item to Idaho
  • You change how you use an exempt item. (See If you change the primary use of an item.)
  • You take lumber from your resale inventory and use it in your business.

Learn more about use tax on our Use Tax page.

Change Use of Exempt Item – Lumber Manufacturing

If you change the primary use of an item

If you buy an item exempt to use in a lumber manufacturing activity, it becomes taxable if you stop using it in a lumber manufacturing activity. You must then pay tax on the fair market value of the item.

Note: The opposite isn’t true. If you pay tax on an item because you use it in a non-lumber manufacturing activity, you can’t claim a tax credit if you begin to use it in a lumber manufacturing activity.