State v. Nelson Bros., Inc.
| Decision Date | 21 October 1981 |
| Parties | STATE of Alabama v. NELSON BROTHERS, INC. Civ. 2863. |
| Court | Alabama Court of Civil Appeals |
Charles A. Graddick, Atty. Gen., and Herbert I. Burson and B. Frank Loeb, Asst. Attys. Gen., for appellant.
Gerald D. Colvin, Jr. of Bishop, Colvin & Johnson, Birmingham, for appellee.
This appeal by the state is from a judgment holding that certain explosive magazines and anfo bins used in the strip mining of coal were subject to a use tax of 11/2% rather than 4% as assessed by the Revenue Department. The appellee shall be referred to as the taxpayer.
The taxpayer manufactures anfo and also sells and distributes high explosives and detonators primarily to operators of coal strip mines, who utilize the explosives to break and loosen up the overburden over the coal to enable its removal with draglines and mechanical shovels. There is no profitable method now used for dispelling that overburden without the use of blasting tools. Explosives, and their use, are controlled by and are under the regulations of the Bureau of Alcohol, Tobacco and Firearms of the United States (A.T.F.).
Anfo is in pellet form and is composed of a mixture of ammonium nitrate and fuel oil. It is used as an oxidizer, the primary explosive, in blastings. Being a non-cap sensitive product, anfo requires a booster consisting of any type of dynamite or high explosive in order that it may be detonated. The booster, however, must first be exploded by a cap, cord or other detonator.
By A.T.F. laws and regulations, two magazines are required to be kept on the "mine permitted property," one for boosters and the other for detonators. Those regulations require that the magazines be constructed of 1/4 inch steel with a non-sparking hardwood lining and with no exposed metal inside. It must be bullet proof. Two covered locks are required upon it to prevent the magazines from being opened by cutting its locks with either a torch or a hacksaw. It is violative of the federal law to keep any blasting caps or primers on the job site without these magazines. They are on skids and are movable with proper machinery. The magazines used by the taxpayer measure five feet in each dimension. Photographs of the magazines were introduced into evidence.
The bins are also on skids and, likewise, are required to be kept at the mining site when bulk anfo is employed as the primary explosive. Anfo is ordered from the taxpayer by their mine company customers as it is needed. Since the bins will hold only from 30 to 40 tons of anfo, and since, on a busy day, a mine will use 100 tons of anfo, the taxpayer must resupply their customer's bins several times during such days. It is delivered to the job site by taxpayer's trucks, which haul from 20 to 22 tons per load. The taxpayer's truck backs to the top of the bin, and, by means of an auger on the truck, the anfo is unloaded from the vehicle into the bin.
The mining companies have specialized trucks which load the anfo into the blasting holes. It is a hydraulic truck which augers the material out of the vehicle into the blasting hole. Those trucks normally hold from 8 to 10 tons of anfo.
The amount of anfo exploded daily varies greatly. On certain days, 100 tons, or more, will be used, then a day or so may pass without any explosive being required. The truck that loads the anfo into the blasting holes on busy dates must be refilled with anfo many times from the bin. Those trucks have trap doors in their tops. The truck is driven under the bin and the truck's trap door is aligned under a trap door situated on the bottom of the bin. The truck driver pulls a lever on the bin and the anfo flows into the truck by gravity. The only method whereby bulk anfo is loaded onto the mine company's specialized trucks is by using this bin system. The only testifying witness stated that the bin had a direct, integral part in the mining process, as the strip mining of coal is presently practiced.
The bins and the magazines are owned by the taxpayer and are placed upon the strip mining sites as a service to their customers.
The legal controversy is whether the bins and magazines are taxable at the 4% rate under subsection (a) or at the 11/2% rate under subsection (b) of section 40-23-61 of the Code of Alabama (1975). Pertinent parts of those subsections are as follows:
(a) An excise tax is hereby imposed on the storage, use or other consumption in this state of tangible personal property ... at the rate of four percent of the sales price of such property, except as provided in subsection (b) and (c) of this section.
(b) An excise tax is hereby imposed on the storage, use or other consumption in this state of any machines used in mining, quarrying, compounding, processing and manufacturing of tangible personal property, purchased at retail ... at the rate of one and one-half percent of the sales price of any such machine; provided, that the term "machine," as herein used, shall include machinery which is used for mining, quarrying, compounding, processing or manufacturing tangible personal property, and the parts of such machines, attachments and replacements therefor, which are made or manufactured for use on or in the operation of such...
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