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Department of Revenue, Finance & Admin. Cabinet v. Roanoke Cement Co., LLC

Court of Appeals of Kentucky

February 21, 2014

DEPARTMENT OF REVENUE, FINANCE & ADMINISTRATION CABINET, COMMONWEALTH OF KENTUCKY, APPELLANT
v.
ROANOKE CEMENT COMPANY, LLC, APPELLEE

APPEAL FROM FRANKLIN CIRCUIT COURT. HONORABLE THOMAS D. WINGATE, JUDGE. ACTION NO. 11-CI-01416.

BRIEF FOR APPELLANT: Kevin Branscum, Office of Legal Services for Revenue, Frankfort, Kentucky.

BRIEF FOR APPELLEE: R. Benjamin Crittenden, Frankfort, Kentucky.

BEFORE: CAPERTON, COMBS, AND THOMPSON, JUDGES. ALL CONCUR.

OPINION

Page 2

COMBS, JUDGE:

The Department of Revenue, Finance and Administration Cabinet, appeals from an opinion and order of the Franklin Circuit Court affirming a final order of the Kentucky Board of Tax Appeals rendered in favor of the taxpayer. We affirm.

As part of the administrative proceedings undertaken below, the parties stipulated to the following facts: Roanoke Cement Company, LLC owns and operates a limestone quarry in Virginia; its principal place of business is in Norfolk, Virginia. During the period at issue in this appeal, March 31, 2007, through January 31, 2009, Roanoke Cement also owned and operated a limestone quarry in Salem, Kentucky. The Kentucky quarry produced limestone aggregate which Roanoke Cement sold to customers and transported through the interstate river systems of the central portion of the United States. Roanoke Cement sold approximately 99% of the limestone aggregate severed from its Kentucky quarry to out-of-state customers. In the majority of these transactions, the purchaser arranged for the transportation (most often by barge) of the limestone aggregate from Roanoke Cement's quarry. In those instances, title and risk of loss passed from Roanoke Cement to the purchaser at the time the limestone aggregate was loaded onto the barge at Roanoke Cement's quarry on the Cumberland River.

Pursuant to the provisions of Kentucky Revised Statute[s] (KRS) 143A.020, Roanoke Cement was required to pay mineral severance tax on the gross value of the limestone aggregate that it severed from its Kentucky quarry. This tax was duly remitted.

Pursuant to the provisions of KRS 143A.035, a credit is allowed against the mineral severance tax imposed where the limestone is " sold to a purchaser outside of this state" by a taxpayer " who sells in interstate commerce not less than sixty percent (60%)" of the limestone it severs. Roanoke Cement's sales were made almost exclusively to out-of-state purchasers for shipment through interstate river systems, and its sales rate of 99% far exceeded the " not less than 60%" portion of the statute. Therefore, Roanoke requested a refund of its overpaid taxes.

In a final ruling issued on November 19, 2009, the Department of Revenue denied the request. It concluded that Roanoke Cement was not entitled to the tax credit since the disputed sales of limestone aggregate had been consummated in Kentucky and Roanoke Cement did not sell at

Page 3

least 60% of its limestone in " interstate commerce."

Once its request for a refund was denied, Roanoke Cement filed an appeal with the Kentucky Board of Tax Appeals. Upon its review, the Board concluded that the meaning of the statute was plain: the tax credit is available to offset the tax imposed upon the value of limestone sold to out-of-state purchasers -- no matter where the sale is consummated -- as long as the taxpayer sells 60% of its limestone in interstate commerce. The Board concluded that the vast majority of Roanoke Cement's sales were made in interstate commerce. In its order rendered August 25, 2011, the Board held that Roanoke Cement clearly met the statutory requirements for the tax credit under ...


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