US Steel Min. Co., LLC v. Helton

631 S.E.2d 559 COMPANY, LLC,

U.S. STEEL MINING Company,

Consolidation Coal Laurel Mining McElroy Company,

Run Coal Coal,

Company, Inc., Arch Mid-Vol Inc.,

Leasing, Virgi Coastal Coal-West

nia, LLC, Company, Inc., Elk Run Coal

Paynter Mining, Inc., Kingston Branch

Resources, Corpora Inc. Pioneer Fuel

tion, Peabody Holding Company, Inc., Below, Appellants

Petitioners Virgil HELTON,

The Honorable West

Virginia Commissioner, State Tax

Appellee.

No. 32528. Appeals Court of Virginia. Sept.

Submitted: 2005.

Decided: Dec. 2005.

Concurring Opinion of Justice

Davis Dec. 2005.

Concurring Dissenting Opinion Benjamin

Justice Jan. 2006.

Concurring Opinion of Justice

Albright Jan. Rose, III, Esq.,

Herschel H. R. Steven Broadwater, Esq., Office, Law Rose Charles- ton, Becker, Esq., Steven Harlan Paul A. Horowitz, Offerman, Esq., Esq., Suzanne Ina the coal that is mined York, NY, coal. Some of Brothers, Appel- for sell that New Coudert processed by appellants West lants. appellants to custom- Virginia is sold General, MeGraw, Jr., Attorney V. Darrell States; is, use the United ers for outside Attorney Stockton, Senior Assistant Stephen exported. the coal is Charleston, Appellee. General, for McDaniel, Meleady, Michael J. Esq., Perry briefs, appel- after the According to the Services, Depart- Legal Esq., WV Office adjoining earth separate coal from the lants Protection, Charles- ment of Environmental Virgi- a mine site West and rocks at Virginia De- ton, Curiae West for Amicus nia, typically transported to a is the coal Protection. partment of Environmental area, storage” then is taken nearby “raw Jr., Esq., Vaughn Law Vaughan, plant at mine Dennis R. a or near the preparation Charleston, Firm, Amicus Curiae The for is cleaned and sized where the raw coal site League, Inc. Municipal Virginia (and processed, by West freeze- be otherwise etc.). prepared coal that Then proofing, Charleston, McClung, Esq., for C. Jack exported onto rail- typically loaded will be Virginia Association Curiae West Amicus cars, by rail- hopper which are hauled road Officials, Inc. County port, where the coal engines to a coastal road Maroney, Esq., Maroney, P. Thomas the railroad cars into is transferred from Pancake, PLLC, Weaver, & Williams transported ship and Charleston, Vir- Curiae The West for Amicus destination. Federation, AFL-CIO. ginia Labor Goodwin, Johnny Esq., M. R. Thomas Virginia Tax appellee State The West Goodwin, LLP, II, Esq., & Goodwin Knisely, collecting responsible for Commissioner is County Charleston, The Amicus Curiae for production taxes that certain coal Virginia. of West Association Commissioners’ appellants like the are on entities for produce coal sale or other commer- Trivelli, Prac- Esq., The Calwell Vincent taxes, generally referred to tice, PLLC, for Amicus Curiae cial use. These Morgantown, taxes,” subject Trades Foundation. are the as “coal severance Affiliated Construction tion that West ance taxes are STARCHER, J. In the instant the Circuit Virginia’s coal constitutional. ease we Court Kanawha uphold a determina- production sever- County ing these coal severance the instant case. 22-3-32 [2002]; W.Va.Code, 11-12B-3 The current 11-13A-6 [1994].1 statutory provisions authoriz- [1997]; of each sev- language [2000]; taxes are found 22-3-11 ^[2005] 11-13A-3 slightly tax different. Gen- erance statute I. per- they impose erally speaking, tax Background & Facts privilege exercising the sons or entities A. extracting, reducing possession severing, sale, profit, or commer- producing companies that mine appellants are Virginia, and then cial use.2 process coal in issue, it of taxation at apparently 2. In terms of amount of these statutes Earlier versions principal appears particular provided basis some of forth in W.Va. in the instant is set involved Code, paid by appellants at issue amounts [2002], portion relevant 11-13A-3 case; do not indicate instant the briefs provides: which pertinent differences in relevant substantive (a) Upon every person Imposition statutory tax.— language earlier versions. The of those exercising engaging privilege of or continu- suggests some that there is Tax Commissioner severing, ing within this state in the business uncertainty of these statutes as to whether all possession produc- extracting, reducing to appel- challenged by directly of the all have been sale, profit use or commercial case; proceed we on the in the instant lants hereby be collected levied and shall there is taxes are at assumption all of the identified person exercising privilege every such issue. privilege tax. annual shipped Two taxes at issue the instant to an customer violates the and 11-13A-6 ease, codified [1997], W.Va.Code, are calculated as a 11-13A-3 ^[2002] “Imporri-Export Constitution, art. Clause” I, sec. United States cl.

percentage of the value of the mined and pertinent part: states in taxes, processed Three of the coal. codified shall, No State without the Consent of W.Va.Code, [2000], 11-12B-3 22-3-11 Congress, lay any Imposts the or Duties [2005], [1994], and 22-3-32 are taxes that are Imports on Exports, may or except what money calculated as amounts fixed as- absolutely necessary be executing for per sessed ton mined. inspection Laws.... cases, pursuant both practice to the began The instant case appel- when the regulations appellee Tax Commission- lants, foregoing in accordance with the stat- er, price either final the sales or the invoiced utes, years paid for several severance taxes tonnage of the is sold is used to mining based on their processing of coal taxes; calculate though even this final export, applied sold for and then ap- to the price tonnage may or measurement in fact be pellee Tax Commissioner for refunds. The only determined coal is delivered to appellants asserted their claim of unconstitu- ship. earner tionality Commissioner, before the Tax who Notably, purposes establishing for appellants’ denied the refund The claims. price sales and value for severance tax calcu- appellants appealed that decision to the Cir- lation, any transportation costs County, cuit Court of Kanawha in an preparation plant port to the and thereafter 27, 2004, May upheld order dated the Tax customer, paid if are absorbed or appellants Commissioner’s decision. The seller, by the are deducted from the actual appealed have the circuit court’s decision to price. adjusted price sales This sales used this Court. coal’s value for severance tax calcula- purposes tion industry par- referred to in Commissioner, According to the Tax lance as the coal’s “F.O.B. [‘Free Board’] liability current total refund for the taxes at price.3 Mine” (and issue in the instant case other related cases) pending high could be as as $360

B. dollars, interest; million including addi- argue appellants imposition tionally, annually million dollars $40 $50 coal severance taxes in legislatively-mandated connection with the future severance tax appellants’ mining processing of coal Virgi- revenue will not be collected if West (b) language dispositive Rate and legal measure tax.—The tax im- relation to the (a) posed in subsection of this section shall be issue before this Court—the actual constitutional- percent gross five value ity of the natural operation of the severance taxes in their produced gross resource as shown controlling effect. The statutes show that it is furnishing income derived from the sale or mining processing for of coal sale or producer.... thereof gives commercial use that rise a severance tax obligation. merely The sale of the coal is any aspects 3. Aside from constitutional of this calculating event that establishes the basis for ascertaining F.O.B. Mine method value coal’s tonnage purposes or value of the coal for purposes calculating Virginia's ascertaining the amount of tax due. It is the (for exports severance taxes use), both and domestic privilege producing and occasion of coal for sale appears to be the least burdensome feasi- commercial use that taxed. See discussion compliance standpoint ble method from a —be- of severance taxes at note 5 De novo infra. require expensive cause it does investment in appeal review on means that result and not preparation plant, scales at mine site or nor language reasoning used of the lower require paperwork; redundant and isit harmoni- decision, reviewing tribunal's is at issue. A court ous and consistent with normal commercial may affirm lower tribunal's decision on practice in the coal business. South, Morrison, grounds. See GTE Inc. v. (4th Cir.1999) ("if appellants F.3d language the administra- direct this Court to tive order reaches the correct result and statements Tax can be Commissioner and the law, findings circuit court's sustained as matter of we affirm on to the effect that West Virginia legal ground though agency coal severance taxes "accrue" at the even relied rationale”). time of coal’s sale. We do not believe this on a different tax was foreign purchaser; sales coal severance

nia’s imposed on oil while it was held therefore processing coal process; and tax was transit constitutionally invalid. duty that violated impost therefore Import-Export Clause.4 II. In 1976 focus

Standard, Review Tire sharp turn in Michelin analysis took a questions of presents statu This case Corp. Wages, interpretation application, and a tory L.Ed.2d constitutionality of sev of determination “duty” to Finding “impost” terms statutes, all of matters eral which a inherently ambiguous, recognizing be Additionally, as de novo. this Court reviews difficulty in longstanding in the case law 1 ex Syllabus Point of State rel.

we stated determining principled fashion when in a Awning Corp., & v. Window Haden Calco not in a stream of were were (1969): 524, 170 S.E.2d 362 153 W.Va. to import at time of taxation so as constitutionality a statute is of “When the by the exemption invoke the blanket set every construction reasonable questioned Clause, a Import-Export the Court “created to a the statute must be resorted of [impost and regime in which those terms constitutionality, to court order sustain an duty] drawn from are conclusions be any in favor of must be resolved doubt particular a assess- examination into whether constitutionality legislative en- type of exaction that was ment “was the 3, Syllabus, Willis Point v. actment.” by the Framers of regarded objectionable as ” (153 178). O’Brien, W.Va. 628 S.E.2d 151 Corp., 517 v. I.B.M. the Constitution.’ U.S. 1793, 1802, 843, 135 858 116 S.Ct.

U.S. (internal (1996) 124, citations 138 L.Ed.2d III. omitted). Discussion analysis adopted Court in Michelin position of that the support In their prompted on concerns that based coal severance taxes connec imposition of founding to write the fathers process appellants’ tion with the place: Clause in first shipped of to an ing thus Framers of the Constitution “Import-Export customer violates main concerns sought to alleviate three Constitution, Clause” of the United States committing power lay imposts and sole I, 10, 2, appellants principally art. sec. cl. imports the Federal Govern- duties Corp. rely of on the case Oil Richfield ment, power: the concurrent state with no 69, Equalization, U.S. 67 State Board 329 speak one Government must with Federal 156, L.Ed. 80 S.Ct. 91 regulating commercial relations voice when tariffs, Oil, foreign governments, and State California with Richfield relations, might foreign could a oil which affect sales tax on sale of a retail assessed implemented by the States consis- refinery government not be New California power; import tently exclusive Zealand. The Court found major be imposed were to source tax was when oil revenues California sales the Federal Government foreign into the hold of the revenue was delivered State; and diverted to the purchaser’s ship and into the control of a should 4. To Bros. v. ports to Coev. matically applied ous route or 29 Court looked L.Ed. support such Errol, Edwards, 715, [export] transportation 116 U.S. journey.”); 718-19 language in 262 conclusion, 517, 527, U.S. ^[1886] they (goods had "been started two earlier A.G. 6 S.Ct. Richfield ain Clause auto- Spalding became ex- 475, 478, continu- cases, 485, & indicates, have been been started exempt exports instant 486, 63, 91 67 L.Ed. L.Ed. at 91-92. As our discussion case are not Oil, loaded, on their 865, "after severance taxes nor after journey. 867 they 79-81, had been goods after 67 (goods became S.Ct. have issue loaded”.) at 161- clearly infra they

5 harmony might increasing among price the States be dis- of that and there- States, reducing Virginia with their fore competi- turbed unless seaboard coals’ entry, prohibited ports crucial tiveness the world market.5 levying on citizens of other respect But the same could be said with goods merely taxing flowing States any clearly legitimate state tax that is im- through ports their to the other States not posed fashion —like a workers’ com- favorably geographically. as situated pensation pay factory tax on the workers 285-86, 540-41, U.S. S.Ct. at 46 in plant exports that makes has —that omitted). (footnotes L.Ed.2d at 503 good effect increasing price subsequently exported. was policy-based approach The new Michelin adopted slightly modified to fit ex- price This mere increase is not the kind of ports Dept. Washington Revenue v. effect on adverse affairs —like caus- Cos., Washington Stevedoring Assoc. by foreign governments' retaliation —that 1388, 1403, L.Ed.2d required we think is under the Miche- (1978) (“[T]he approach Michelin lin/Washington Stevedoring approach. The apply involving exports should taxation appellants identify any do not such effect. imports.”). well as appellants any Nor identify do substan- (Container tial Corp., clear federal directive analysis The first element the Michelin supra) Virginia’s that West severance taxes applied exports is whether the tax violate. impinges government’s ability the federal speak regulating with one when voice com- analy- The second element of Michelin foreign

mercial governments. relations with sis, revenues, import an effect on federal Corp. In v. Container America Franchise largely exports; irrelevant in the case of Board, 159, 194, 103 2933, Tax 463 U.S. S.Ct. in the instant appellants do not 2955, 545, (1983), 77 L.Ed.2d 571-72 demonstrate such effect from West Vir- Court stated: ginia’s production. severance tax coal however, conducting inquiry, In we The third element of the Michelin/Wash keep must in mind that if a state tax ington Stevedoring analysis, ensuring a fair resonances, merely has but does system harmony among in commerce affairs, implicate foreign not we cannot states, coincides with the Commerce infer, explicit “[a]bsent some directive taxpayer test that the tax fall a with a Congress, from that treatment of for- state, apportioned, properly nexus to the be eign income at the federal level mandates discriminate, reasonably not relate to the Thus, by identical treatment the States.” provided by Washington services state. tax policy a state at variance with federal 754-55, Stevedoring, 435 U.S. at 98 S.Ct. at will voice” if it violate “one standard 1401-1402, 55 at Com- L.Ed.2d 700. This implicates foreign policy either issues presumptively merce Clause test is met must be left Federal Govern- the instant case because the clear ment or violates a federal directive. already has held that a coal is, The second of these considerations like in this those issue case survives Com- course, species essentially pre-emption analysis. merce Clause Commonwealth Edi analysis. Montana, 609, Company son (1981) (discussed (citations omitted, L.Ed.2d original). Id. italics in ).6 further infra appellants Virginia’s argue The that West production adversely fully arguments coal severance taxes We have reviewed the impact exports, question appellants the level of U.S. coal on the of whether the appellant's competi- competitiveness 5. The asserted "decreased result of asserted decreased Virginia’s export Virginia export tiveness” of West coal is called coal caused West West figures question into recent coal cited Virginia's possibility The coal severance taxes. by the Tax Commissioner. Maryland Virginia port that facilities might exports from due to suffer decreased even- argue appellants 6. The that there is a de- also Virginia non-discriminatory handed and West shipments Virginia coal West crease in unconstitutionally coal does severance taxes states, states, through especially port other as a Virginia sev- feature of the West coal instant ease are of This system, according appel- objectionable by regarded as erance

type that was lants, makes entire sever- under the therefore coal of the Constitution the Framers applied analysis. conclude ance tax unconstitutional when We foregoing Michelin exported including coal that are not. that — portion calcu- larger much of the tax that is recognition that their Miche- apparent just on the coal’svalue before lated based compelling arguments do have Zm-based after beginning loading process force, argue also appellants prepared. has mined and coal been analysis fully policy-based has not Michelin “in more mechanistic supplanted the recognized that sever- This Court has like Rich- approach earlier cases transit” value ance taxes include taxation Oil. loading rail cars by of the coal into added field is, producer the ini- the coal’s —that appellants point language in U.S. v. loading preparation plant tial I.B.M., supra, 116 S.Ct. at is, shipment at least combined with L.Ed.2d at 140: “The Court has processing, of the “taxable one directly on upheld a state tax assessed never Syllabus under the statutes. Point events” transit.”7 import Coal, Comm’r, Eagle Tax Kanawha LLC v. point to the fact that appellants then (2004).8 216 W.Va. 609 S.E.2d 877 percentage-of-value coal Virginia’s sev- However, Eagle in Kanawha this Court calculated based on valua- erance taxes are rejected argument the Tax Commissioner’s includes the cost of tion of the coal away that occurs further prepara- cars at the loading the coal into rail point mining process- from the initial and plant the “F.O.B. Mine” method. tion under calculating ing be in could used argue appellants, loading process, The taxation. part being “in tran- of the coal’s is propo- sit;” including loading process Eagle coal Kanawha thus stands for the and pi’ocess loading that sition that the initial the severance taxes’ ambit means within imposed goods processing company in coal and being is on that are the tax facility preparation properly at a coal is export transit. states, disharmony neighboring quoted language 7. The I.B.M. Court also from create between suggesting do even-handed and nondiscrimi- Michelin more than apply "nondiscriminatory prop- Maryland would natory Virgi- Clause erty taxes collected goods merely on are taxes in transit gasoline increase the cost of nia—like taxes—that 862, when the is assessed.” 517 U.S. at through transportation appel- those states. 1804, (citations S.Ct. at 135 L.Ed.2d at 140 omit- Virginia's simply not that West lants have shown ted). The nondis- instant are carry severance taxes with them unusual circum- shows, criminatory, but as the discussion Virginia’s neighbors. disturb West infra stances that property they imposed are are taxes nor argument suggests Appellants’ the absurd result "merely on that are in transit.” ports could make constitutional that states export goods through demand that states that ports non-discriminatory those remove otherwise taxes, production, local based on local costs of in loading fully processed The initial clean goods shipped order to maximize the volume shipment preparation plant at the is through they undoubtedly ports. As as much specified tax- activities viewed as a one Virginia taxpayers neighbors, love their are privilege event of min- able associated with constitutionally maximizing responsible However, any reloading ing in this state. jobs Virginia shipping Maryland, if to do transpires initial at coal that after the gutting public Appel- means their fisc. so own delivery preparation plant part of the is argument fundamentally the na- lants' misreads process, mining process, than rather system, our federal where the accordingly statutorily ture of interests de- falls outside of the diversity experimentation part served qualify lineated activities that significant retaining flexibility' processes performed in taxa- states taxable treatment necessity flexibility Virginia tion—a that of will have eco- Code 11-13A- coal set forth West 4(a)(1) (1987) 2003). impacts (Repl.Vol. nomic on other states—without all 4, Syllabus supra. offending Eagle, Point Kanawha cases the national Constitution. tana, 609, 2946, part production/min- as a of the coal viewed processing process; and once the L.Ed.2d 884 loaded, initially and thereafter Edison, In Commonwealth a Commerce begun the coal has its movement or transit (United Clause/Supremacy Clause States from the preparation plant toward a final Constitution, I, VI, Art. Sec. 3cl. and Art. destination, applicable statutes do not 2) challenge brought cl. was to Montana’s allow severance tax coal severance tax. The Montana coal sever- value, activity, during cost added ance tax at issue in Commonwealth Edison movement or transit. very similar to coal severance taxes holding Eagle of Kanawha is there- at issue in the instant case. Montana’s tax calculated, rates, fore consistent with that coal varying the view that was at on the value being” initially “is at tail loaded is end of of the it coal after has been “extracted and production” process, properly prepared mine,” “coal and is shipment Com- f.o.b. Edison, amenable to valuation for severance taxation monwealth note U.S. (Em- purposes; only once coal “has been” 101 S.Ct. at 69 L.Ed.2d at 891. added.) can process phasis loaded a “transit” enter into statutorily

that is excluded inclusion Supreme The United States Court held in severance taxation. Comm,onwealth Edison that Montana’s coal reason, Eagle For this tax,” the Kanawha deci property severance tax was “like a real supportive argu 624, 101 sion not appellants’ S.Ct. at 69 L.Ed.2d initially 899; ment being loaded at a and was tied to the diminution of (much preparation plant clearly less activity, future sources of economic the de “merely”) “in 4 pletion state, transit.” See note of the resource base supra.9 necessity supporting the social infra necessary structure that is to allow coal sev helpful A perspective the severance tax- erance to occur. Id.10 gained by es at issue this case can be examining Supreme opinion the U.S. Court’s One of the conclusions of the Montana Company Commonwealth Edison v. Mon- Court Commonwealth Edison Additionally, noteworthy argu- 9. it is at oral that from the earth in the first instance. Thereaf- ter, merely ment before Circuit Court of the Kanawha Coun- a sale the determines metal’s value ty, appellants' the stated: provides counsel “Once the coal and a measure for the a thus tax and is loaded onto the rail it the [of] cars enters zone operating time for collection... .The incidence _” immunity of [the] Clause precious is the tax severance of metals 17, Hearing Transcript, Trial Court November The South Dakota. State South Dakota 2003, added). p. (emphasis sales, 11 taxing profit is not or income which selling gold. Homestake makes from contradistinction, its In 10. Other have states severance taxes similar to taxing the state extrac- is Virginia's. upholding In the South Dakota Legisla- tion of natural resources. Our State tax, ture, the South Dakota court in Home organ people, is concerned Johnson, Mining Company stake v. 374 N.W.2d resources; also, depletion with the of natural it (S.D.1985) 357 staled: apparently concerned a loss of future of revenue and wealth. containing source ques- The Act here in statutes tion, Homestake, (emphasis Chapter 374 N.W.2d at 362-63 95 of the 1981 South Dakota Laws, original). “An a Session entitled: Act to enact matter, precious general As a relat- mineral severance tax In severance taxes are on metals.” 10-39-43, activity privilege only production, SDCL ed not to the states: “For but state, severing depletion precious metals in this there concomitant of natural resources imposed Although property a severance tax ...." a to a valua- leads decrease tax not, facto, legislative activity. ipso tax label does deter- tion and are business As reserves tax, language depleted through mining, mine the nature of a evi- the value of those coal legislative properties property pur- dences the intent to tax mineral for sev- declines future tax Merely poses. tana, erance not mineral sales. because See Commonwealth Edison Co. v. Mon- 624, 2957, gross receipts, the measure of the tax is does U.S. 101 S.Ct. at 69 (1981) (“mining not mean the nature tax is a sales L.Ed.2d at 898 of the coal de- State, unpersuasive We find pletes lax.... as- wealth of Homestake’s the resource base and thereby diminishing sertion that it is a tax sales because a sale a future source taxes (footnote triggers imposition activity”) of the tax. omit- The'sale economic ted). and citation Montana, Supreme cannot occur until there has been a severance The Court of address- tax is not immu 191, 198, that “a state severance 615 P.2d 847 held

State, 189 Mont. scrutiny by a under review from Commerce Clause nized decision —the in its Commonwealth Supreme Court imposed the tax is claim decision, the Mon- supra Edison of inter prior entry into the stream their —was imposed tax was Edison, tana coal severance state commerce.” Commonwealth before com- actually entered interstate had the coal 617, 101 2953, S.Ct. at 69 L.Ed.2d 453 U.S. at therefore, merce, the Montana did Supreme in Common Court Mont, Commerce Clause. 189 offend thereby accepted as implicitly wealth Edison 196-97, P.2d at 851. Montana court’s conclusion that correct coal severance the Montana by the Mon- response to this conclusion court, prior entry into the stream Supreme Court on coal its United States tana grow crops, their and even timber ing challenge ers to that state’s severance-tax-fund- (at engaged industry large companies previous opinion its least quoting from ed trust and State, timbering) regrows it cuts down. 189 Mont. the forests Edison Commonwealth (1980), mining companies producers ex- and oil But P.2d stated: irreplacea- the earth that is experience had shown that its tract wealth from Montana's strong justification for facts offer a be exhausted and ex- ble. Those high, mineral wealth could up severance taxes on natural ported left in Montana to make selective with little have irreplaceable Governor Link thus been its resources. Mon- resources. the loss of asserting ground painfully educated about the on sound constitutional been tana has exploited for the jolts follow when that a state whose coal is extreme economic out, entitled to depletes, benefit of rest the nation is the oil or the timber mine runs losing "just good many compensation a one forever still. We have saws come happens examples us what to our time harvest.” that teach Hellerstein, W. TAXA- State J. Hellerstein and STATE the riches of our Treasure hills when H4.17(2)(d) (2004) spent. TION: THIRD EDITION are State, (footnotes omitted). Trust v. 298 Mont. Montanans Coal intended, Thus, among are 996 P.2d compensate legislature, enacting things, the state for other The Maine tax, depletion bounty, explicitly permanent natural "Min- excise found: state's special historically primary Severance have been a are entitled consideration. eral resources and, wealth, attempt to make extractive indus- are valuable taxes are an source of economic removed, pay fair the natural resources as an economic tries their share for forever lost once quid pro supplies, services the and that State.” Me.Rev.Stat. 36-371- state to the asset 2852(2). quo concept the United has been validated Im- in the context of the Jerome and Wai- States The State Taxation treatise port-Export Clause. ter states: Hellerstein Furthermore, prohibits clearly per- can make out states foreign origin levying higher [or taxation based taxes on state suasive oil, imported exported] destination] goods, [or on other natural resources than other ground cannot read to accord im- subjects, exploitation but it on the preferential ported exported] goods treat- [or natural resources entails costs losses permits escape industty ment that from uniform taxes that far and benefits states regard op- imposed origin typical [or in involved industrial without exceed those sup- destination] services which the State Arthur A. Link of erations. Former Governor plies. some of the extraordi- North Dakota outlined nary mining Corp. Wages,423 Michelin Tire of coal de- costs to state strip fending L.Ed.2d at 504 state's coal severance his tax— sure, land, nondiscriminatory removing topsoil, To be allowance of fertile con- water, property increase sumption vast scarce ad valorem taxation amounts of goods purchased "inland” aquifers. water Such evi- cost interference with noted, already helps justify But as such taxa- selective on natu- consumers. dence excises actually quid pro quo for benefits tion is the industries and insulate them from ral resource taxing challenges ground they State. discrim- conferred on the that are 288-289, by comparison 46 L.Ed.2d inatory 423 U.S. at not even-handed at 505. taxes on non-natural resource with state’s Virginia distinguish between West does not industries. domestically exported Finally, defending high, and coal used coal that is selective sever- industries, imposing at issue in this the taxes taxes on the extractive ance argument: Virginia’s are severance taxes levied as the ex- and West have an additional states industries, quo provides quid pro the benefits State unlike most other indus- a tractive tries, permanent when its deplete loss the Stale suffers of the state. the natural resources sell, goods they are extracted. farm- natural resources create Manufacturers interstate commerce.11 Louisiana court —of preventing Land unfair “port-state” goods clearly taxation of that are Although a Commonwealth Edison was in export implicated by transit —is not West and not Commerce Clause case a case involv- Virginia’s tax, imposed severance which is Clause, Imporb-Export Supreme goods’ origin long they state of before acceptance Court’s of the Montana court’s any port, reach applied and are even-handed- providing conclusion—that the events the ba- ly production on all coal commercial ex-—for imposition sis for Montana’s coal a sever- port foreign countries, export to other prior entry ance tax occurred to the coal’s states, or to be used in-state.12 supports into interstate the anal- commerce — ogous conclusion that severance taxes like IV. Virginia’s imposed are West based upon activity prior that occurs mined Conclusion processed entry coal’s into tran- foregoing To review the points: sit. (1) Virginia’s West coal severance taxes appellants cite decision substantially are similar to coal severance Circuit, Explora Fifth Land Louisiana & taxes that have been to be found constitu- Company v. Corpora tion Pilot Petroleum Supreme Court; tional the United States tion, (5th Cir.1990) in support F.2d 816 (2) Virginia’s West coal taxes do of their the Import-Export contention that not against exports; discriminate coal prohibits imposition of the coal (3) Virginia’s West taxes do severance taxes the instant case. not policies Supreme offend the that Land, In Louisiana the State of Louisiana Court has said underlie the imposed jet a sales tax on fuel sold Clause; company pumped by Louisiana that com- (4) Virginia’s coal severance taxes pany shipment into a tanker Nova provide crucial revenue to the State Scotia. The Louisiana Land court found fairly reflects the costs to the State associat- that the tax was levied on the oil while oil production; ed transit; undisputedly and that policies (5) Michelin were offended when a No court in America has held that coal “port imposed state” goods unfair on Virginia’s severance taxes like West offend coming having ports. from states no Clause; Imporb-Export F.2d at 820-21. specific activity tax-related reasons,

For several find that the appellants clearly impli- we Loui- contend most persuasive siana Land case cates the Clause —the initial First, issues in instant loading case. the coal preparation coal at coal facilities severance taxes the instant case are clearly part nei- into rail cars —is taxes, Moreover, ther process. sales taxes nor excise transit initial are not undisput- process comprises por- a de minimis edly Additionally, in export transit. tion of the value of is included policy upon by Michelin-based relied Virginia’s the calculation of some of West 11. The U.S. found that this con- the facts of the As the instant case. Texas Su- by clusion the Montana court did not insulate preme the thing prop- Court stated: "It is one to tax review; severance tax from Commerce Clause state; erty that to has come rest within the it is review, upon upheld and that the Court the sev- quite pass- property merely another to tax is that erance tax. ing through way foreign to its final destina- being tion.” 910 at S.W.2d 914-915. The coal appellants' Virginia 12. Nor is the cited of case processed by appellants mined and the has been Company County Appraisal Indonesia v. Harris Virginia many in "at rest” West millions District, Tex.Sup.Ct.J. 910 S.W.2d years. being processed by The and coal mined (1995) case, persuasive. In that the court found appellants hardly "merely passing the merely question in that the were in Virginia through” dealing West we are Texas, —unless through exempt transit and therefore geologic with a not time and human frame. under the Clause from local property tax. This situation is far different from points foregoing of the In consideration the coal Nor is severed taxes. severance review, proper Virginia; applying and standard of through “merely West in transit” in that the coal severance taxes we conclude and, lastly, muster. question pass constitutional applicable to of review The standard hold, therefore, produc- that We question in in taxes coal severance in current tion taxes contained severance to affirm the taxes requires us instant W.Va.Code, 11-12B-3 earlier versions of beyond appears unless constitutional [1997]; [2002]; [2000]; 11-13A-6 11-13A-3 States offend United doubt [2005]; do not 22-3-11 and 22-3-32 [1994] Constitution. ImporL-Export of the offend the Clause amici, State, including county, Numerous I, Constitution, 10, cl. art. sec. United States bodies, docu- have filed briefs municipal 2.13 tax uses of the reve- menting the beneficial Ka- judgment of the Circuit Court of We need instant case. nue at issue County is affirmed. nawha undisputed submissions detail their magnitude importance great Affirmed. establish of the issues to our resolution attendant Justice, MAYNARD, dissenting. say it to case. Suffice the instant at issue in production severance taxes crystal It clear to me that least two reclama- critical environmental this case fund the basic taxes issue Many programs. public welfare tion § 11-13A-3 and severance in W.Va.Code directly are related programs these tax on coal in W.Va. the additional severance mining. of coal effects ll-13A-6(a), are unconstitutional un- Code in- Import-Export Clause as der the federal requested uphold the refunds To terpreted by Supreme Court resulting Richfield prospective loss appellants and Equalization, 329 Corp. v. Board Oil State production tax revenue L.Ed. body undisputedly blow again would —a be— public Virgi- fisc of West to the welfare was constitu- The issue nia and her citizens. tionality imposed upon an of California tax refinery oil to oil for the sale of the New question taxes If delivery government. of the oil Zealand unconstitutional, they clearly must of course purchaser pumping the oil into invalidated, regard without fiscal be purchaser’s ship pas- resulted in ruling. effect such sage completion title the sale the studied But for this Court to overrule the taxable incident. determin- which was Legislature Virginia decision improper impost was an deny people impose taxes —to certain meaning within the enacted their State the benefit of laws Clause, Supreme and of crucial revenue —a representatives reasoned: showing of strong clear the taxes’ inval- Delivery made into the hold of necessary. idity be would from the tanks located vessel vendor’s delivery the corn- showing the dock. That marked has been made. No such severance versions of tent Export art. any "export States 13A-3 Additionally, I, 22-3-32 are and final degree sec. [2002]; determined transit” 10, on coal W.Va.Code, ^[1994] jurisdiction to offend the cl. of the United States 11-13A-6 set Court or other court process, if 2., to constitute a forth because determined of the coal 11-12B-3 [1997]; current least other activities 22-3-1 tax is based to portion of the intrusive and Constitution, [2000]; and earlier production the United Import- compe- [2005]; 11- Dostert, Code, 2-2-10(cc) be to sever and find invalid and refundable tion tions are unconstitutional the entire severance proper remedy (1984) ("These statutory provisions are codifica- portion severability of basic constitutional transit W.Va. of the tax that is under West law.”). ^[1989] process 258, 269, tax due. (statutory provisions that —and 324 S.E.2d Virginia fairly severed); statutory Compare attributable law invalidate construc- See 402, 412 would W.Va. In re only

H Stevedoring improper of the movement of the oil line of cases is mencement true, Supreme It is as the Court several reasons. abroad. observed, at the time of of California First, it undisputed Supreme that the delivery the vessel California was has Court never overruled Oil. Richfield for its waters was not bound destina- Therefore, this Court should feel free to port. it from tion until started to move completely reject the law set forth pumped But the oil into the hold Supreme Second, Court in that case. vessel, passed it the control into of a Supreme Court has indicated that it never purchaser nothing and there was Michelin/Washington intended the Stevedor- equivocal in the transaction which created ing line of supplant cases to Richfield. probability oil even a would be Rather, plainly the Court distinguished has diverted domestic use.... Michelin/Stevedoring. from For Richfield clear It seems under the decisions which IBM, example, in Corp., United States v. 517 I, involving we have reviewed Article Sec- 1793, U.S. 116 S.Ct. 135 L.Ed.2d 124 9, Clause tion 5 of the Constitution that the (1996),the explained: Court export commencement of the would occur holdings Our Washington in Michelin and delivery than the oil no later into the Stevedoring interpret do not ... the Im- vessel. port-Export permit Clause to assessment 82-83,

Richfield, 329 U.S. at S.Ct. at 67 163- nondiscriminatory imports on taxes exports in transit. Michelin involved a tax goods, goods longer but the were no straightforward clearly analysis ap- This Washington transit. The tax in Stevedor- plicable to the instant case. The facts herein ing imports exports burdened while processed show that the moves into ex- transit, were still in but it did not fall port it transit as is loaded onto the train directly goods on the themselves.... facility. through the flood load From that point, train upheld travels to the dock where the The Court has never a state tax dumped convey- goods coal from each car is onto a directly import assessed transit_ directly or belt loads the coal into the which Significantly, vessel overseas. Thus, contrary to the Government’s train, coal is once the loaded onto the it contention, ImporWExport this Court’s cannot be diverted from destina- its overseas upheld validity Clause cases have not Further, dispute that tion. there is no sale generally applicable, nondiscriminatory of the coal occurs no than when the earlier imports exports taxes fall on railcars, coal is loaded onto the and that the think transit. We those cases leave us issue taxes at accrue at the time sale. express free to textual command follow the Thus, any application I believe that fair Export prohibit appli- Clause the law as articulated Oil to the any exported on Articles cation “laid Richfield undisputed facts the conclusion mandates State.” the so-called severance taxes issue IBM, 861-862, 517 U.S. at 116 S.Ct. at 1803- actually (citations omitted). Under the distinc- the Import-Export which violate Clause. Court, Supreme made because tion majority opinion ignore facts in this involve tax on chooses transit, Oil, by making Oil observa- the dubious Michelin/Wash- Richfield Richfield Stevedoring, Finally, Importr-Export ington applies. tion that “the focus of be- good analysis sharp took a in Michelin turn” Tire cause Oil remains law and Richfield case, Wages, directly it should Corp. controls this be fol- Washington Dept. L.Ed.2d lowed this Court. Washington explained precedent v. Assoc. Stevedor- has that “If of this Revenue Cos., yet application has in a 55 Court direct rejected in majority appears to rest on reasons some L.Ed.2d believe decisions, opinion’s rejection wholesale other line of lower [the court] directly Tire/Washington con- favor the Michelin should follow the case 12 288, 1075, Comm’n, 286, 69 S.Ct. prerogative 337 U.S.

trols, leaving to Court the this (1949)). 1077, Consequently, Rodriguez L.Ed. de 93 1366 overruling its own decisions.” Inc., Express, prohibit Import-Export does not Quijas v. Shear Clause son/American 484, 1917, 1921-22, 477, applicable, 109 S.Ct. imposing “generally 490 U.S. states 526 nondiscriminatory 104 L.Ed.2d if those taxes even v. exports.” ... States I.B.M. fall on United ease, majority opinion the instant 1793, 852, 1799, Corp., 517 U.S. 116 S.Ct. forth in upon relied the law set have should (1996) (citing Department 124 135 L.Ed.2d Application of that law the Washington v. Association Revenue the severance facts indicates that present Cos., Washington Stevedoring 435 U.S. issue, imposed on the coal taxes at (1978); Miche- 98 S.Ct. L.Ed.2d transit, is a moved tax after it is into Corp. Wages, 423 U.S. meaning of lin Tire W.L. upon within (1976)). 535, 46 For and is therefore un- 96 S.Ct. L.Ed.2d Import-Export clause reason, Accordingly, express- dissent.1 has I constitutional. Import- that the ly “rejected assertion DAVIS, J., absolutely prohibits all concurring. Export Clause taxa- exports.” Corp., I.B.M. tion of (Filed 2005) Dec. (citation omitted). 857, 116 S.Ct. at 1802 producing proceeding, In this several general mind, I these considerations With challenged tax taxpayers six state statutes (a) three the nature and address issues: violating Import-Export Clause as statutes; (b) of the purpose majority opinion, constitution.2 The federal taxes based assessment analysis, legal deter- relying upon sound (c) price; taxing the coal. sale none statutes violated the mined that of the Purpose fully The Nature and of the I concur A. Import-Export Clause. analysis. I majority decision have Statutes Severance Tax emphasize separately to chosen to write in this The statutes at issue case are analysis legal of the enunciated correctness nondiscriminatory. apply The statutes majority in the decision. production regardless of whether the sold United coal is to be States or within DISCUSSION is, That do not the statutes set out abroad. Supreme Court United States has provisions exported taxing coal or special long held that domestically. apply The taxes coal used “ immunity from local meant confer ‘was regard to the ultimate destination of without being exported, upon property taxation Further, the coal. the taxes do attach to eventually exported property to be to relieve is in within the transit or ” from its share of the cost of local services.’ meaning Clause.3 Co., Register Kosydar v. National Cash here, 62, 70, 2108, 2113, presentation For the sake 40 L.Ed.2d challenged (quoting taxpayers v. State have five severance tax Joy Oil Co. Tax 22-3-11, § majority W. the State's what be the ence to Va.Code brief 1. Because of I consider to counsel, analysis opinion's "Taxpayers’ open of the constitution in his insufficient indicated that challenged ality tribunal, in this of the other taxes ing remarks to the administrative to concur its conclusion those decline say contesting Taxpayers were seemed taxes are constitutional. § 22-3-11].” Va.Code [W. majority of the addressed in the 1. Two statutes majority correctly opinion noted § opinion, W. 11—13A—4and W. Va. Va.Code whether all as to record unclear 22-3-11, expressly listed in Code were not taxpayers challenging each of the statutes AND NATURE "KIND OF PROCEEDING OF question. taxpayers’ in the THE RULING BELOW” section having been contested lower brief However, § 11-13A-4 was courts. W. Va.Code C, squarely addressed Section 3. This issue in section the "DISCUSSION OF discussed 3 of infra. part taxpayers' brief. With refer LAW" Fourth, violating “mining as oper- statutes4 and reclamation tax, privilege imposed Clause: a severance ations fund tax” is sever- under W. Va. governments, § imposes ance tax for local a minimum Code 22-3-32. This statute a tax tax, mining op- “[u]pon every person and reclamation engaging this state tax, special privilege fund and a of severing, extracting, erations reclamation re- ducing possession tax. producing or coal for sale, profit or commercial Id. This use[.]” First, privilege the “severance tax” is set imposed tax is per the rate of ton of $0.02 § forth in W. Va.Code 11-13A-3. This stat- coal mined. Taxes collected under this stat- imposes “[u]pon every person ute a tax exer- placed ute are in a mining and reclamation cising privilege engaging continuing of or operations fund. The statute states that the severing, within this state in the business moneys in “solely such fund must be used extracting, reducing possession pro- purposes carrying statutory out those sale, coal, ducing profit or commercial use relating duties to the enforcement of environ- limestone or Id. With sandstone!.]” some mental regulatory programs for the coal in- exceptions, imposed this tax is at a rate of dustry imposed by chapter this and the gross 5% income derived from the sale Mining federal Surface Control and Reclama- of coal. tion Act of Id. 1977[.]” Second, gov- the “severance tax for local Finally, “special reclamation tax” is set § ernments” is out set under W. Va.Code 11- § out under W. Va.Code 22-3-11. Under imposes 13A-6. “[u]pon This statute a tax statute, imposed “every this a tax is per- on every person exercising privilege of en- conducting son mining opera- surface gaging continuing or within this state imposed Id. This tax is at the rate tions!.]” severing preparing business per ton of coal mined. The $0.03 (or coal), severing both preparing collected placed under this statute are to be sale, profit or commercial Id. This use[.]” special in a reclamation fund. It is further imposed tax is at a rate 0.35% of the sales provided the statute that the taxes collect- proceeds of coal. All the taxes collected ed for the fund expended are to be “for the under this statute are turned over to local reclamation and rehabilitation of lands which governments.5 subjected permitted surface operations and abandoned ... and where the Third, the “minimum tax” is set eligible land for abandoned mine land § under W. Va.Code 11-12B-3. This statute reclamation funds!.]” Id. imposes “every person a tax exercising privilege engaging imposed by within this state The coal severance taxes severing, extracting, reducing possession unique. juris- above are not statutes Other sale, producing profit coal for produce commer- dictions that coal have similar coal imposed See, cial Id. e.g., use[.]”6 This at a rate severance tax statutes.7 Ala.Code (1980) (“There levied, . per § ton of coal mined. hereby 40-Í3-2 $0.75 Only challenged' provides 4. five of the six statutes are 6. This further statute that "the mini- may imposed discussed herein. The sixth statute involved in mum severance tax on coal not be 11-13A-4, § produced W. Va.Code defines cer- ton of coal on or after the first thousand, aspects mining day April, tain be taxed. This two on which the sever- C, imposed by provisions statute is set out and discussed in Section ance tax is of [W. § § 11-13A-3].” Va.Code W. Va.Code 11-12B- infra. 3. 13A—6(b) ("Seventy-five 5. See W. Va.Code 11— percent proceeds levying net of this additional tax "Most of States raise revenue production. on coal shall be distributed ... to the various severance tax on mineral The first imposed by Michigan By counties of this state in which the such tax was in 1846. adopted type located at the time it was from the severed 33 States had some of sever- ground.... remaining twenty-five percent ance tax." Commonwealth Edison Co. v. Mon- tana, proceeds the net of this additional tax on coal 624 n. (1981) (citations among shall be distributed all the counties and 2957 n. 69 L.Ed.2d 884 state[.]”). omitted). municipalities of this law, products tax on all coal severed a severance other taxes to all

addition The tax is every person ground in Tennessee. sev- fi'om the privilege tax on excise Alabama.”); production Stat. in the state upon Kan. the entire levied ering coal within (2005) (“There 79-4217(a) hereby the fact that place is of the of sale or regardless §Ann. state.”); upon tax the severance delivery may excise made outside the imposed an coal[.]”); (“The Ky.Rev.Stat. 67-7-110(a) (2005) production § Tenn.Code Ann. (1978) (“For privilege of § 143.020 Ann. be levied for the use tax shall [coal] coal, to all in addition severing processing only and all governments of local benefit law, hereby imposed a tax is tax, except other taxes de- fi'om the revenues collected severing engaged in evex-ytaxpayer levied and collection ductions for administration this Common- coal within processing allocated to provided part, and/or for in this shall be (1997) § wealth[.]”); 47:631 La. Stat. Ann. products county from which such coal VII, (“Taxes by Article Section authorized severed.”); § Wy. Stat. Ann. 39-14- hereby are of Louisiana the Constitution (1999) (“There 4 of 103(a)(i) is levied a severance natural resources severed upon all levied for the gi'oss product of the tax on the value coal, lignite, including ... the soil from extracting privilege severing or both sur- ores[.]”); § Ann. 15-35- Mont. Stat. state.”). underground face (“A 103(1) (1995) imposed on tax is severance general purpose behind coal severance produced the state ton of coal each succinctly stated a commentator taxes was following with the schedule accordance as follows: Const, (“The (1979) 9, § ....”); art. Mont. support are advanced to Two rationales than one- dedicate not less legislature shall taxes. One is imposition of severance Qh) tax a trust severance fourth 7-26-6(A) (1993) impos- production or resource fund[.]”); §Ann. N.M. Stat. community for upon the host (“The es burdens tax on coal is measured severance By compensated. it should be which and saved. quantity of coal severed view, necessary sale, taxes are to re- transportation out of event is taxable levying jurisdiction damage for consumption pay New Mexico infrastructure, environment, lifestyle occurs.”); N.D. Cent.Code first whichever (“There (2001) hereby imposed heritage by extraction of natu- § is caused 57-61-01 industi’ial for sale for ral upon all coal severed resources.... by coal mines within state

purposes supporting imposition A second rationale 57-61-01.5(1) § tax[.]”); N.D. Cent.Code taxes is the need of the state of severance (“The (1995) shall tax commissioner state services, pay public for for revenues from the transfer revenue provided to the quite apart from those deposit treasurer for to the state this section industry. sevexing treasury, in the state special in a fund Lowe, an Issue John S. Severance Taxes as created, lignite hereby to be known as the Sectionalism, Energy Energy L.J. moneys must be used fund. Such research (1984). commentator has Another 360-61 land i*esearch reclamation for contracts purposes behind coal sever- addressed research, development, and projects and extensively more as follows: ance taxes products derived marketing lignite 5749.02(A) have § Increased coal severance rates lignite.”); Ohio Rev.Code (“For producing states to achieve a enabled coal purpose providing reve- variety policy goals designed to reduce mining and the state’s coal nue to administer production places meet the that coal regulatory program, to the burden l'eclamation goals The first of these is to management upon them. and resource environmental compensate state, tax revenue to af- use severance and to reclaim land needs of this generations for the irre- hereby the states’ future by mining, an tax is fected excise of their coal resource.... trievable loss privilege engaging levied on the by placing percent- accomplished from the soil This is of natural i’esourees state.”); tax revenue into age Ann. of the severance of this Tenn.Code or water 67-7-103(a) (1981) (“There to be hei'eby permanent trust fund drawn levied aid the states’ economies when the coal anee tax adequate schemes that ensure inevitably depleted. provide resources revenues to needs of im- areas, pacted preserving while the health goal A second increased severance industry. local coal producers to force coal taxes is internal- Harris, Daniel L. Western impact Coal Severance they impose upon ize the costs that Question Congress: Taxes and A State requires production the states. Coal addi- Sovereignty, 61 Or. L.Rev. 591-611 government expenditures tional state provide monitoring, environmental road construction, and other related services. It clear from the above discussion Despite strict state and federal reclama- the coal in severance statutes assailed laws, mining tion coal causes irreversible presumptively this case are a valid exercise damage to the land and to the sovereignty. natural of the State’s See Central Real- aquifers Indirectly, it. pro- Martin, 915, 920, beneath ty coal Co. v. 126 W.Va. 30 (1944) (“The public duction harms health power and S.E.2d 723 to tax well-being threatens the social mining property of and the citizens of a state is an states, by sovereignty communities. The including attribute derived from neces- sity, these costs in the calculation of and is one powers severance of the inherent rates, compel government.”). producers taxpayers attempt- coal The have to raise price strong by of coal to ed overcome this presumption levels that reflect the public production. making Import-Export argu- costs of coal two Clause ments that are discussed below. regulato-

Use of coal severance as taxes B. Assessment Severance Taxes ry mining mechanisms to control rates and upon Based Sale Price goal methods is another of increased sever- many instances, ance tax rates. In argument The first by taxpayers raised levels, states raise their severance tax that, is the extent amount price high enough of coal rise to re- exported coal severance is deter- duce the rate extraction. A ex- slower by exported price, mined sale the taxes traction rate can soften the harsh effects of violate the Clause.8 ar- This rapid development. Levying higher coal a gument disingenuous because looks by severance tax on coal mined undesir- in severance taxes isolation from the encourage producers able methods can purpose imposed. for which To objectionable use less methods. their argument, taxpay- buttress flawed rely upon Corp. ers v. State Richfield Equalization, 67 Board S.Ct. emergence The of state severance taxa- (1946). 91 L.Ed. a protecting tion as means of local inter- rapid development ests from coal a general affords involved tax that sales Richfield greater coal states imposed upon control over coal devel- the state of California the sale opment. light In history goods. upon of the all imposed mineral This tax was exploitation shortcomings entity. ... and sale of oil that was to a made aid, sovereign federal of state assertion The Court struck down tax as powers to increasing meet the violating Imporb-Export social and The Clause. produc- taxpayers economic demands coal in posi- created the instant ease take the surprise. tion has come as no rise proposition tion that stands Richfield fact, taxation, prohibits severance has been wel- as- comed as an of meeting upon effective means of a tax sessment based contract remotely place[d] upon price. Nothing distinctive demands each sale in Richfield producing state the new coal a proposition. rush. stands for such sim- tax, The legislatures producing ply proposition states stands for the that a determined, great crafting have shown regardless care in sever- of how it is cannot be mentioned, tax, previously 8. As I none of the sever- used to determine the of a amount applies impose taxing regardless ance taxes a different tax or meth- method of whether price od coal. To the extent that a sale coal is in the United Stales sold or abroad. entire mined in State. The tran- tax on coal that are imposed upon transportation, of the before value Exploration Land & Co. sit. See Louisiana State, of the originates Corp., F.2d Petroleum v. Pilot depletes wealth (5th Cir.1990) the resource base and to strike (applying Richfield State, thereby diminishing a future upon goods tax that down transit). activity. and economic source of taxes many respects, a tax is like a taxpayers in argument raised tax, property never been real wdiich has context this case was examined raising legitimate means of doubted as Edison Commonwealth Commerce Clause apart (quite situs revenue State Montana, 609, 101 Co. right State to from the of that other Commonwealth Edi- 69 L.Ed.2d proper- tax income derived from use of pro- by several Montana coal filed son was When, here, ty). general revenue tax ducers, utility in other their customers against interstate not discriminate does states, challenging Montana’s coal severance apportioned to activities commerce and the issues raised Common- tax. One of State, the State is occurring within the that the tax was discrimi- Edison was wealth policies, pursue free to its own fiscal unem- of Montana coal is natory “because 90% Constitution, by by if barrassed under contracts that shipped to other States practical operation of a tax the state has primarily to non-Mon- the tax burden shift power opportuni- to exerted its in relation utility companies and thus to citizens tana given, protection which it has to ties which Edison, 453 Commonwealth other States.” afforded, it has has to benefits which 617-18, The 101 S.Ct. at 2953-54. U.S. at by orderly an being the fact of conferred rejected argument and Supreme Court this society. civilized tax. coal severance upheld Montana’s Edison, 624-25, Commonwealth 453 U.S. tax that was severance The coal (internal quotation marks S.Ct. Montana, Virginia, by like allowed for omitted). and citations upon the be determined based the tax to price. Commonwealth Edison contract sale Although Edison was liti- Commomvealth statute, Montana’s “the that under stated gated in the Commerce context of the by coal is determined the ‘con- value of the Clause,9 opinion stands for nevertheless price’ which is defined as ‘the tract sales may impose a proposition that a state prepared ship- for price of coal extracted by is tax that determined ” Edi mine[.]’ ment f. o. b. Commonwealth coal, price regardless contract sale Montana, 1, 101 453 U.S. at 613 n. v. son Co. ultimately where the coal is destined. See importantly, 1. More Com (“For S.Ct. at 2951 n. (2005) 143.010(6)(a) Ky.Rev.Stat. § stated that “the Montana monwealth Edison during a processed and sold severed and/or regardless same rate computed at the gross reporting period, shall be the value coal, and there of the final destination taxpay- or receivable amount received suggestion no here that the tax is adminis (1995) er.”); § Mont.Code Ann. 15-35-103 departs this in a manner that tered (formula upon contract for tax based sale formula.” Edi even-handed Commonwealth 7-26-6(A) (1993) § price); N.M. Stat. Ann. son, at 2954. 453 U.S. at (“The sale, transportation taxable event Finally, in Commonwealth Edi the decision consumption of the out of New Mexico or placed Montana’s severance son occurs.”); Wy. whichever Stat. first general purpose: its proper context of (“The (1998) 39-14-103(b)(vii)(A) § Ann. Furthermore, be the question no value of extracted coal shall there can be sales arms-length may constitutionally selling price pursuant to an con- raise that Montana tract.”). general imposing revenue (1979). policies animating See Itel Containers 60 L.Ed.2d 336

9. "The Huddleston, 60, 77, Corp. the Commerce Clause are much the Clause and Int’l Line, County, 1095, 1106, Japan Angeles Ltd. v. Los same.” 122 L.Ed.2d 421 n. 1822 n. 441 U.S. 434. 449 14. 99 S.Ct. 1813. Taxing Loading C. of Coal legitimate seems to us to be a one for this purpose, they in which commence their taxpayers The final issue raised transportation final for movement from the ll-13A-4(a)(l). § involves Va.Code Un- W. origin state their of their desti- statute, processes der treatment this that are products nation. When the of the farm or part considered and are taxable collected, the forest are brought “[cleaning, breaking, sizing, include dust al- surrounding from the country to a town or laying, treating prevent freezing and load- serving station entrepot for that shipment.”10 Ky.Rev. for See Id. also particular region, whether on river or a 143.010(8) (“ (2005) § ‘Processing’ Stat. in- railroad, line of products yet such are not cleaning, breaking, sizing, allay- cludes dust exports; they process nor are expor- ing, treating prevent freezing, loading tation; exportation begun nor is until unloading any -purpose.” (emphasis are committed to the common carrier for added)); 39-14-101(a)(vii) Wy. Stat. Ann. transportation out of the (“ state ... their ‘Processing’ crushing, sizing, means destination.... Until then it is reasonable milling, washing, drying, refining, upgrading, regard only them as not within the state compressing, loading storing, ship- origin, added)). part of their general but as a (emphasis taxpayers ment [.]” state, mass of property subject of that pro- contend jurisdiction, there, and liable to taxation taxing shipment. hibits of coal for if not being taxed reason their in- majority opinion in this case has correct- exportation, taxed, tended ly but rejected argument. without discrimination, way the usual problem An in involving “essential cases manner property in which such is taxed in prohibition against the constitutional taxation the state. exports has ... been to decide whether a Coe, 525, 116 U.S. at S.Ct. 6 at 477. See process sufficient commencement of the Co., Kosydar v. Register National Cash 417 exportation has occurred so as to immunize 67, Coe). U.S. at S.Ct. at (discussing 94 2111 [goods] at issue from state taxation.” Co., Kosydar Register v. National Cash 417 The initial decisions Supreme Court 62, 67, 2108, 2111, 94 U.S. S.Ct. addressing 40 L.Ed.2d loading the issue of the actual (1974). early Supreme 660 An Court unloading activity vessels held that Errol, addressing this issue was Coe v. 116 was immune from local business taxes. See 517, 475, (1886). Comm’n, 6 S.Ct. 715 Puget 29 L.Ed. Sound Co. v. Tax 302 U.S. a shipment logs 90, 72, (1937); Coe involved Joseph that were 58 S.Ct. 82 L.Ed. 68 v. Co., Androscoggin 422, floated down the River for Carter & Weekes 330 U.S. 67 S.Ct. Lewiston, 815, manufacture and decision, sale in Maine. In 91 L.Ed. 993 a later logs 511, were detained Rogan, low water in the Canton Railroad Co. v. 340 U.S. Errol, Hampshire, 447, town New (1951), where a 71 S.Ct. L.Ed. the Su- against preme number of taxes were assessed them. subject. Court revisited the In Can- logs protested The owners of argued company assess- ton a railroad Im- ments, part, grounds in on the logs porh-Export prohibited Clause the state from goods were immune from taxation Im- taxing under the loaded and unloaded from its portAExport Supreme Supreme Clause. The Court of trains. The Court found that it did tax, Hampshire New sustained the and the not have to address that issue because the Supreme company United States actually perform Court affirmed. railroad did not so, doing provided following analysis: However, loading unloading. Coe the Court following in noted dicta: point There must a be of time when [goods] be governed exclusively carry cease to To means to or send law, abroad; begin gov- domestic to import bring means to into the protected by country. begin erned and the national law of Those acts and end at regulation, edge. commercial and that moment water’s The broader definition applies only priv- governments This statute severance tax for local under W. 11-13A-3, ilege § under W. Va.Code and the Va.Code 11-13A-6. Duty. Specifically, Impost or ordi- appellant tenders distorts analysis examined whether exaction meaning of It would lead nary the terms. policy the three consider- forest, mine, factory offended every back presence leading ations immunity of tax and create a zone land Clause[.] if the imagined. For han- never before part goods port were dling of Stevedoring, 98 S.Ct. at 1400 435 U.S. hauling process, so would them omitted). (internal Using the test citations perhaps min- points distant or from Michelin, Supreme Court found under manufacturing them. The ing them Washington’s loading tax on and unload- no process make differ- would phase ing goods Import-Export did not violate long fact ence so Clause: had arrived as

committed approach A similar demonstrates imports. Washington application business occupation stevedoring tax to threat- at 449. Canton, U.S. at 71 S.Ct. policy. no ens Department Revenue The decision First, ability the tax not restrain the does Washington Washington Association of for- of the Federal Government conduct Cos., Stevedoring 435 U.S. eign policy. general business tax that As (1978), departure marked a 55 L.Ed.2d virtually applies to all businesses ban Supreme Court’s earlier from State, any special protec- it has not created unloading incident of taxing the tariff. The assessments this case tive Stevedoring goods. The decision exported only upon entirely conducted business imposed by the state of Wash a tax involved foreign Washington. No business within companies and unload that loaded ington on Respondents, there- or vessel taxed. exported goods ves imported ed fore, impediment no have demonstrated found that courts the state seis. regulation posed by upon the the tax Clause and tax violated trade States. United precedents Puget Sound Second, the Washington the effect of Commission, Tax Co. v. is import on federal revenues identical to (1937), Joseph v. 72, 68 and Carter L.Ed. 82 merely The tax the effect Michelin. 815, Co., 422, 330 67 S.Ct. 91 U.S. & Weekes compensates the State for services and (1947).11 appealed case 993 was L.Ed. by Washington protection extended to the Supreme States Court. to the United stevedoring Any business. indirect effect determining tax violated whether the imported on the demand for because Clause, Import-Export loading of the tax value Corp. Tire that under Michelin noted ships unloading from them them is even 276, 535, 423 S.Ct. Wages, 96 46 v. W.L. effect less substantial than the of the di- (1976), analysis under that L.Ed.2d 495 property tax on im- rect ad valorem changed dramatically: Clause had ported goods themselves. all cases that tax- Previous had assumed Third, prevent to desire interstate and on imports exports es on rivalry vary signifi- and friction does not processes importing exporting purpose cantly primary Michelin, by the Before banned Clause. Import-Ex- Commerce Clause. The third primary consideration was whether the therefore, port policy, Clause is vindicated or imports review ex- tax under reached taxpayer upon if the tax rea- falls .... ports State, properly sonable nexus discriminate, re- apportioned, does not approach Michelin initiated a different provided by reasonably lates to services ig- It Import-Export Clause eases. the State.... simple question whether nored then, Michelin, Instead, analyzed analysis of imports. Under the [goods] were application Washington business of the tax to determine whether the nature the Commerce Clause. courts found the tax violated 11. The lower also

19 occupation stevedoring tax to violates taxable privi- as event associated with the state.”); policy lege mining ImportAExport no there- Tradewater Co. v. Ky., Min. Revenue Cabinet Com. qualify “Impost fore should not as 551, (Ky.1988) 753 S.W.2d 552 (“Loading for Duty” subject to the ban of the absolute shipment processing plant at the is the last Clause. step in continuing mining process.”); 754-55, Stevedoring, 435 U.S. at 98 S.Ct. at Pipe Corp. Portland Line v. Environmental (internal omitted). 1401-02 citation Comm’n, (Me.1973) Improvement A.2d 1 307 Stevedoring proposition stands for the that (holding upon imposed off-loading of taxing “loading the service of or unloading” rather upon oil than oil itself and was not imported exported goods does not offend Clause). prohibited by Import-Export taxpayers Clause. The foregoing analysis, Based I re- attempted distinguish Stevedoring by have spectfully concur. arguing that the tax in that case imposed goods. point on the actual This BENJAMIN, J., concurring, part taken, well because the decision in Stevedor- dissenting, part. expressly stated it did “not reach (Filed 2006) 4, Jan. question of applicability of the Miche- agree I with the of majori- conclusions approach directly lin when a State taxes decision, reasons, ty albeit for different imports exports Stevedoring, transit.” majority of coal-related taxes1 at issue 23, U.S. at 435 734 n. 98 at 1403 n. S.Ct. do violate the Clause of However, problems two exist with the tax- the United States I Constitution. do not payers’ attempt distinguish application issue, agree applied, that all taxes at as Stevedoring imposed loading the tax Specifically, that, constitutional. conclude U-13A~4(a)(l). § under W. Va.Code pursuant Corporation v. First, ll-13A-4(a)(l) W. Va.Code is not Equalization, 69, Board State 329 U.S. 67 a tax on coal. The tax is on the (1946), specific L.Ed. 80 two “loading” shipment. service coal for This coal-related taxes found W. Va.Code exactly what in Stevedoring. was taxed §§ 11-13A-1 seq.,2 applied, et violate the Second, that occurred the in- Import-Export Clause. I am further of the stant was not the commencement of “in that, opinion pursuant Hope Natural Gas transit,” purposes Imporb- for the Hall, 135 S.E. Co. W.Va. Export only Clause. The coal be would con- (1926), aff'd. “in actually sidered transit” once it was (1927), scope L.Ed. these two train Richfield, cars. See 329 U.S. at part restrained to remove (“[T]he S.Ct. at 164 commencement of the each application such tax’s which consti delivery would occur no than later the Import-Export of tute violation the Clause. [goods] the (emphasis of into vessel.” Relating to A. State Taxes Coal at Issue added)).12 Coal, Eagle See also Kanawha Virgi- LLC Tax Comm’r State by any of A tax is still a tax. other name To nia, 616, 623, S.E.2d W.Va. appeal to all taxes at in this refer issue (“The fully processed loading initial simply suggests as “severance” taxes errone- preparation plant coal at ship- ously clean for only activity which creates tax liability is one of specified ment activities is the coal from the earth viewed removal of 22-3-11), rely (W. taxpayers' attempt upon Special § 12. The Va.Code Tax on Richfield barring loading simply per- the tax on not Mining Coal Production for the and Reclamation suasive, prohibit not (W. 22-3-32). because did a tax Operations § Fund Va.Code Richfield rather, "loading”; prohibited on the service of it taxing California from was in transit oil that after These "Section 13A" are the Basic Sever- 2. taxes ship. it was loaded onto a (W. 11-13A-3) § Tax ance Va.Code the Addi- (W. § tional Severance Tax on Coal Va.Code 11- 1. The taxes which I do not conclude violate the 6(a)). These 13A" taxes derive “Section 13A— Import-Export Clause are Minimum Sever- Privilege from the Severance and Tax Business (W. 11-12B-1, seq.), § Tax ance Act Va.Code et 11-13A-1, (W. seq.). §§ ofAct Va.Code et Mining Surface Coal and Reclamation Act These are a Imporb-Export also Clause. taxes activities create State.3 Other of this taxes, Severance Tax Act” such as tax under “Minimum liability treat- for some ll-12B-3(a), § at W. Va.Code and a found of coal for processes ment production tax on under the Sur- special primary before this issue shipment. Mining Reclamation Act for face not the name which is therefore Mining Operations Fund and Reclamation attach to the taxes seeks to State wishes § 22-3-32. at W. Va.Code Both taxes taxes, found collect, op- their but whether such respect are similar activities Import^Export effect, violate the eration and the which the taxes taxed measures States Constitution. United Clause imposed. are It is these similarities which Corp. Board v. State See distinguish taxes from “Section these two 69, 84, Equalization, problematic taxes” I find under 13A which 164, L.Ed. 80 ImporUExport Clause. Here, at are I taxes issue more believe These two non-“Section 13A taxes” tax “privilege” taxes which re- termed properly extracting, “severing, reducing privilege being tonnage on a in taxes assessed sult ” sale, producing profit coal for possession taxes based an “ad valorem basis or taxes in or commercial use” and measure the of the value added to percentage specified per ton terms of “cents by appellants. engaged activities certain sale, profit ... pi'oduced or commercial specif- these operation and effect of It is this ll-12B-3(a), § W. Va.Code 22-3-32. use.” appeal taxes in this ic coal-related at issue Thus, taxes, tonnage these are “ad valo- propriety is determinative ” value taxes. rem Therefore, disagree I with the taxes. such specific lack of a delinea- majority decision’s principal these differences between operation consideration of the tion and and the “Section 13A taxes” are that taxes the coal-related taxes issue. It is effect of beyond taxes do not tax activities these operation consideration effect this and that production the coal measure believe, which, I is crucial to per each such taxes of “cents ton of coal terms binding sale, effect of the profit the determination produced or commercial applicable to the precedent application Id. I do find that their use.” appeal. questions on this Clause of the offends States Constitution.5 United Taxes” 1. Non-“Section ISA 2. “Section ISA Taxes” taxes identi- There are two4 coal-related 13A by appellants in their brief at issue on As with non-“Section taxes” relat- fied the “Section 13A taxes” at issue appeal do not violate the ed this which believe appeal. suggested strongly argument Tax Appellee this As noted Commissioner that litiga- brief, proper for the in this in his is some confusion whether reason issue there compensated contesting appel- appellants this tax tion is the desire the State to because implicate appellants’ receive tax in manner or to otherwise "sever- lants seemed to this in some proceeds permanent arguments proceeding for the removal of administrative be- ance” tax I find nor a natural resource from the state. low. Neither the administrative decision misleading Virginia may argument Judge since West decision below reference this Kaufman's being apply dispute. Whatever such "severance" taxes whether coal is tax as confusion below, Virginia manifestly state. mined in West or some other existed this tax is not different argument § operation W. Va.C.S.R. 13A-2a.5.2. While this in its from the other delineated non- political appeal, ultimately have some it is 13A” herein. "Section considered irrelevant, my opinion, the outcome of this is the Yet another "severance" tax Additional appeal. The issue this Court is not the before Severing Privilege Coal under the Tax on attach to a name which the State wishes to tax it Act, Compensation Workers' Debt Reduction tax, collect, by but whether that seeks to. ll-13V-4(a). § W. Va.Code This tax found operation, violates I, until November 2005. did not become effective the United States Constitution. being Appellants this tax have not listed as dispute appeal. tax the Surface Coal Min- 4. An additional under argue "pro- Special might whether the ing 5.While one term and Reclamation Act for the Recla- Fund, 22-3-11(h) activity ducing” § taxable incident or W. extends a mation found at Va.Code by being export, subject a specified appellants the stream of and thus as issue on into is not (or taxes; is, coal, appeal privilege “severing preparing on this or coal both engaging coal) upon privilege in cer- severing sale, preparing profit for specified Although tain activities. denom- or commercial use.” Whether there a upon privileges, inated as taxes the taxes are language substantive difference in this is not operation upon and effect the activities readily apparent. specified privileges. as Their calculation is taxes”, Unlike the non-“Section 13A both upon percentage based a of the value of the the basic and additional severance taxes un- by coal enhanced such activities. der Section 13A tax following also “[t]he The “Section 13A taxes” at issue arise (and processes pro- treatment the treatment Privilege under the and Business Severance thereto) necessary cesses or incidental when Specifically, Tax Act of 1993. as delineated applied by operator the mine owner brief, by appellants in their a there is “basic mined in ... Cleaning, [coal] this state[:] § tax” 11- severance found at W. Va.Code breaking, sizing, allaying, treating dust (b) (f), 13A-3(a), and an “additional sev- prevent freezing [of coal] tax”, § erance found at W. 11-13A- Va.Code ll-13A-4(a). shipment.” W. Va.Code 6(a).6 language by similar to that used Also unlike the non-“Seetion 13A taxes” taxes”, the non-“Section 13A the Section 13A taxes, tonnage imposed by which are imposes “basic tax” a coal tax on the “Section 13A a value tax taxes” is derived “severing, extracting, reducing possession percentage from a of the ultimate sale of the sale, producing profit or commercial by producer. coal The Section 13A basic use” activities. The Section 13A “additional slightly imposes specified per- tax” tax in uses different lan- terms of guage, specifying centage gross the activities it taxes as “of the value”7 as shown condemnation, exported by appellants do not believe that was extracted or refuse, possible statutory gob because of the definition of pile, recovered from a or other waste production. Support for this conclusion is found source. Imported in this Court’s decision in Gilbert Hard woods, Dailey, W.Va. Inc. 280 S.E.2d 7. value” is in W. "Gross defined Va.Code 11- "whether issue Gilbert was 13A-2(c)(6) [coal], as "the market value of the processing through tip- of raw coal Gilbert's severed, vicinity the immediate where deter- ples part severing, of the ‘business of ex- application post production pro- mined after tracting, reducing possession producing generally applied by industry cesses to obtain sale, profit under [coal]" commercial use commercially marketable or [coal].” usable Occupation the State's then Tax. Business [coal], ‘gross reported "For value' is to be as 280 S.E.2d at 265. Id. This Court ruled (A) (or processed follows: For severed or [coal] production purposes that "[t]he for the during processed) both severed and and sold language just quoted] [of the ends when the coal reporting period, gross gross pro- value is possession is reduced to on the surface.” Id. at taxpayer.” ceeds received or receivable Accordingly, 280 S.E.2d at I am the ll-13A-2(c)(6). W. Va.Code There follows sub- opinion that none of the activities taxed (B) (F) paragraphs through paragraph production/tonnage taxes extends to coal (c) W. subsection Va.Code 11-13A-2 which stream, beyond which well the time "gross reported how is to be in a describe value” production when ends. Consolidation Coal Com- (c), variety Subparagraph for ex- situations. States, (2005), pany v. United 64 Fed.Cl. 718 sale, ample, provides that "[i]n absence of Export, Import-Export, not an Clause case is not gross value be the fair market value for shall contrary. There the federal reclamation grade quality.” of similar Note that [coal] upon produced". fee exaction fell "coal "Pro- statutory "gross definition of value” in de- expansive meaning duced” had a more in that claring "gross reported how value” is to be respect context than it does with to the non- "gross is sold value is the states relating "Section 13A taxes” to coal at issue gross proceeds received receivable the tax- herein proceeds” forego- payer.” "Gross as used defined in W. definition is Va.Code 11—13A— by appellants 6. Not referenced in their brief as a value, 2(b)(5) meaning money “the whether in appeal tax at issue on this is a tax property, actually proceeding or other from the recovery extraction and of coal from a refuse tangible property personal gob sale or lease of pile, pile or from other waste sources and any property subsequent processing, washing prepara- for the cost of without deduction the sale, expenses produce profit kind.” In W. sold or leased or tion thereof to coal for 13A—3(a), Legislature de- Va.Code the has commercial use under the Severance and Busi- 11— gross pro- Privileges the [coal] ness Tax Act of found at W. clared that "the value of by gross Apparently, derived [is] Va.Code ll-13A-3e. none of the duced as shown income set forth in the United States Constitution. from the sale of the derived gross income applicable precedent im- that supplemental tax I do not believe 13A The Section coal. an- percentage ignored of the or minimized because of a should be poses tax terms “pre- liking. of cases is more to a court’s the coal severed other line “value”8 and/or gross “proceeds” by Rodriguez Quijas pared” as shown de Shearson/Ameri Inc., the coal. Express, the sale of derived from can (1989), 1917, 104 L.Ed.2d 526 the United principal differences be- Accordingly, the Supreme lower States Court admonished at issue on this coal-related taxes tween the precedent direct has “[i]f [its] courts 13A taxes” appeal are that the non-“Section application yet appears in a to rest production of beyond the not tax activities do rejected in line of deci- other reasons some tonnage taxes are and that such the coal sions, should follow the case lower [the court] tax activities 13A taxes” The “Section -taxes. directly controls, leaving Su- to [the coal, including of the beyond production overruling preme] prerogative Court shipment, and loading the coal for 484, 109 decisions.” 490 U.S. oto percentage of a the tax in terms measure 1921-22, 104 L.Ed.2d gross of the coal as shown the value or value proceeds gross de- by gross income is, shipment like the loading of coal for such, by of the coal. As the sale rived coal, activity a taxable under the by “Section 13A taxes” include tax fixed § 11-13A- “Section 13A taxes.” W. Va.Code of the coal component of enhanced value 4(a). appellant’s For coal which is iiTetriev- activity producer load- by of the derived ably foreign for a market and which destined shipment. provisions under the of the “Section is taxed taxes”, loading coal for final 13A of the B. transportation, its concomitant irrevoca- fair perhaps understandable that It is foreign ble commitment of the coal to of a disagree on the outcome minds would market, passage of title results the latest applicable The law case such as this. completion of The “Section the sale.11 by appeal are no means issues raised in this payed 13A the amount of tax to be taxes” set application of non-diver- subject simple to a percentage gross as a value of the Indeed, might under- gent one case-law. price the coal. as determined the sale standably hope that the United States Su- Necessarily price included this sale within opportunity preme would take Court by the component of enhanced value added clarity area of constitu- bring a new to this shipment. loading of the coal for final near future. tional law the Therefore, readily apparent that the tax by the coal dedicated for a is, believe, is set value of fundamental to our consid- It I foreign value has appeal market after that coal’s the issues raised eration of activity prece- been enhanced Court embrace and enforce apparent violation of the United States dent protects rights provisions Clause.12 which best ascertain, producer.” becomes disagree. is difficult to [of coal] from the sale income”, "gross proceeds”, The coal enters the stream unlike is not "Gross segregated statutorily commerce the moment it is from do- defined. irretrievably mestic coal and is committed to statutorily "Value” 8. "Gross value” is defined. early foreign That occur as as the market. not. during pile removal of the coal from the coal certainly loading, final occurs no later that "prepared” 9. The tax uses the term additional reaching a coal car destined for a for- tax. "processed” than as used the basic rather eign market. "gross income.” 10. The basic tax uses the term 12.Although Tax now disa- Commissioner reasoning employed legal may argue he in his earlier irrevocable commit- vows 11. One that this response might decision and in his market take administrative ment of the coal to the court, time, petition appeal he in the circuit place when the coal earlier in such as (1) immediately following Contrary porl shipping. therein conceded that final arrives at the immediately processing position it is when the coal moment time, Recognizing obligation precedent, our I argument, with full with all Issue believe that we must abide the United ramifications be decided.” 435 U.S. at 757, Supreme interpretation 23, Indeed, States Court’s of the n. 98 S.Ct. at 1403. in the ImporL-Export in Clause as set forth Rich- more of recent ease United States v. Interna disagree IOil. therefore with the ma- [“I.B.M.”], tional Business Corp, Machines field my jority colleagues 843, 116 1793, 135 and believe that Rich- S.Ct. L.Ed.2d 124 rule, “stream-of-export” (1996), Oil’s rather Supreme the United States Court field than, believe, policy as rule13 set “contrary stated that to the Government’s in Corp. Wages, contention, forth Tire Michelin Imporb-Export this Court’s 276, 535, (1976) U.S. 46 L.Ed.2d upheld Clause cases have not validity Department Revenue v. Association generally applicable, nondiseriminatory taxes Washington Stevedoring Companies, 435 that fall or imports exports in transit.” U.S. 862, 116 55 L.Ed.2d 682 517 S.Ct. at 1804.14 (1978), provides precedent that should respect With to taxes the value of judicial control the outcome the issues products or in the export, stream of Ias appeal. raised on this are, believe the “Section 13A taxes” there- My problem majority opinion with the respectfully disagree fore reasoning with the presume that it seems to Oil’s majority opinion that, of the and conclude in Richfield “stream-of-export” rule has been overruled Supreme the words of the Court in Rodri- disregarded by or the United States Su- guez Quijas, precedent “directly de which preme Court policy favor of Michelin’s controls” the appeal issues raised this taxes, respect here, rule with on goods Oil. Richfield products in export. or the stream of majority opinion Supreme asserts that 1. Oil Richfield sharp Court “took a turn” in Michelin. essence, Import-Export Distilled to its not, Sharp or applied turn has not been pro- Clause the United Constitution States exports to state taxes on in transit. “lay[ing] hibits from any Imposts states _” acknowledged Exports Court ... Duties on United States Washington Stevedoring Constitution, I, that it did not reach Art. See. 2. For pur- Cl. question in that “the applicability poses analysis, of a I believe approach of the Michelin questioned when a State di- appeal the taxes are “Im- rectly imports exports posts in transit or Duties.” 329 U.S. at 67 S.Ct. at Michelin, As in years Implicit any decided less than three 160. consideration of the ago, prefer Import-Export we defer decision until a ques- ease Clause are basic two (1) pertinent presented. product facts At that “export”?, tions: when is a customers, placed foreign power; import stream to exclusive revenues were (2) "[taxpayer's major coal enters the stream source of revenue Federal [mine]”, placed when it is onto rail cars Government and should not be diverted to the States; "liability question among harmony might for the taxes in accrues the States law, sale, States, statutory under the at the be disturbed time unless seaboard with their cases, ports entry, prohibited crucial these which is after the coal has entered levying foreign taxes on of other continuous stream citizens States cus- taxing goods merely flowing through tomers.” their ports to the other States not situated as favor- ably geographically. analysis approach 13. The Michelin examined 285-286, (foot- 423 U.S. at 96 S.Ct. at 540-541. whether the tax exaction offended omitted.) “[t]he my opinion, on its conclusion that (2) tax an a on such is there and when gave the of ques- rise to accrual both incident which Oil addresses export? Richfield export process”. step in of that case. the the of the facts tax was a context tions the believe, added.) are, (Emphasis I determinative Id. answers Those appeal. in this of the issues the resolution of are, believe, phrases I of highlighted The Supreme Court was navigating Oil the the issues in the importance In Richfield “exportation” “operation the or appeal. phrases, These concerned case on product] began. “incident,” incident,” a abroad” effect,” [of “movement “taxable product of the thereof “accrual”, commencement require The consideration. some product makes the an foreign market accept the Cali- Supreme did not the The Court Oil, the held that Court In export. activity inci- that the or fornia court’s view Richfield became oil, product at issue in the tax was the that state’s excise dent taxed it into the time was delivered “export” at an conducting of and that the a retail business vessel, time sea-going at which hold of a the only the gross receipts from sales were of a custom- the control passed it into Rather, the ruled of tax. Court measure the the er, being probability no oil there “operation the tax and effect” of use. be diverted domestic thereafter would the oil. a tax on the sale of was that was at S.Ct. at 164. tax, words, a sales In the tax was other implicitly the conceded California court Oil, had assessed a California In Richfield describing completion the as the the of sale against the of tax retail sales seller/deliverer Supreme the “taxable incident”. When receipts gross the the oil measured gave which “[t]he incident Court said protested and The seller transaction. the step in rise the accrual of the tax was a levy of claiming that the the a sought refund export process”, “incident” was the ImporUExport Clause. As tax violated receipts from the Court, gross sale sale itself. The Supreme interpreted by the California of the tax on the sale itself was the measure as an excise tax was described the California of tax on the con- and not the measure conducting a retail privilege for the con- ducting a because the gross retail business receipts measured business “tax- ducting of a business was not retail a tax on the sale or It was not from sales. “[t]he using phrase, able incident”. States While United the sale. because gave rise to the [taxable] incident which said that it Supreme Court tax”, Supreme accrual California court’s construc- was bound [tax- “[t]he law, determined that sale tion, the Su- being matter of state liability able] incident” which created preme that that determination Court found 84-85, tax.15 Id. the California question was not determinative S.Ct. at deprived taxpayer 164-65 of a the tax whether right, stating turns not issue “[t]hat federal Rich- Accordingly, opinion am the the state has the characterization which that a proposition for the Oil stands field tax, operation but on given export only a tax an if coal-related tax is effect”. 329 U.S. (1) activity involving incident the coal is or added.) (Emphasis with, to, simultaneously subsequent taxed exportation, commencement Supreme Court then made much of a The court, activity namely, contributes or relates that incident by the California concession determines value of the coal delivery of the oil ‘resulted “that liability. I do amount of the tax not believe completion and the passage title (Em- be a tax on an sale, ”. Id. such a coal-related would taxable incident’ added.) involving holding export if the or incidents Court’s activities phasis prior to the commencement coal occurred tax was unconstitutional that the California based, though exportation even measure Clause was under Dictionary English Language, commonly of law is House 15. "Accrue” in context meaning present Unabridged “to become understood as Edition right demand.” The Random enforceable prior activities not be goods” taxes on such to the value of the ] “relate! “upon until after the commencement goods ascertainable fell a service distinct from the Accord, Washington ”, and, exportation. consequence, of the Ste- their vahie as a the vedoring. upon tax could not “be considered taxation

the themselves”. U.S. at added.) 2. The “Section 13A Taxes” and The (Emphasis 1403. In this Import-Export Clause case, loading the tax the on of the coal relat- to, upon, fell part ed of the of value latest, I loading At the that the of believe the coal that loading was attributable to the train, appellant’s coal onto a unit like the Accordingly, thereof. tax a the became tax delivery of the oil into the hold in vessel’s upon export the itself.16 Oil, marked the commencement of Richfield the movement abroad and made the coal an conclude, therefore, I application that the “export”. Loading commenced the when West Virginia’s of 13A herein “Section taxes” for a foreign coal which dedicated deliv- was offends the of the ery segregated was from domestic coal and United States to Constitution the extent that falling ended not the coal into the rail such upon calculated based the car, contended, as some have but the by loading, value added to the coal since coal was on the floor of rail “Load- the cars. export-stream the then in was the of ing” filling included the of the cars. If that upon commerce.17 Taxes calculated based so, it inappropriate not would to prior entry activities which occur to the coal’s speak or a of a loaded rail car vessel. loaded export into the stream not do violate the Import-Export Clause. appellants’ This act which made “export” also a “taxable was incident” under C. Operation Limitation Privilege the Severance and Business Tax ISA “Section Taxes” ll~13A-3(a), §§

Act of W. 1993. Va.Code 6(a). 4(a), and The tax on that was incident to on In deference Richfield by appellants’ determined in the precedent in Hope basis this Court’s Nat- gross by gross coal’s value as shown Gas, ural I would restrain activities gross sale. income derived This 11-13A-1, §§ taxed under W. et Va.Code value/gross component a income included seq., within narrower than limits the words loading value income attributable express ground Code those sections that, a taxable incident the words Legislature that the did not intend to violate Oil, step export was “a in the provision any of the United States Constitu- process”. appellants engaged Since tax- accomplish I tion. would restraint activity able that made the coal an deleting from the 13A taxes” two “Section thereby incurred an added measure loading of coal onto a unit train for incident, liability because export shipment activity, as a taxable was, my operation tax in and effect requiring Tax for tax com- Commissioner opinion, on the itself. putation purposes case to subtract the this Washington loading Court in the contribution such made which proceeds Stevedoring point gross value/gross case was careful to out of the coal sold Washington stevedoring appellants that the tax on did customers.18 paid by sup- Conversely, appellants price. anything, If entire tax Edison Commonwealth 16. my opinion respecting ports for non-"Section 13A taxes” related to value of the non-“Section entirely contrary opinion upon pre-export my the coal that was based 13Ataxes.” is also not It activities, and did offend 13A taxable therefore "Section taxes.” Montana did shipment. Clause. coal for Montana, severability W. Va. Commonwealth Edison 18.The clause contained (1981), provides support for 69 L.Ed.2d 884 Code 11-13A-21 further There, Legislature commerce in not relevant. this clause the conclusion intended activity was limited to the taxed under the taxed restrain activities Privilege liability Act of each ton of coal mined with the tax and Business Tax Severance percentage offend United measured contract sales those do not the act the val- reasoning Hope Commissioner] Nat- enforce Court’s this find within the state and before to the issues in this ue thereof be relevant ural toGas Gas, ques- interstate commerce.”19 102 W.Va. the tax in enters Hope Natural case. In “every so-holding, person engag- S.E. that taxed at 586. tion one continuing this state within Court observed: sale, producing business however, presumption, is a There oil, use, any coal, gas, natural lime- profit, or intend Legislature did not to violate product, stone, other mineral or fell- sand In provisions of the federal constitution. sale, profit, or use.” for timber fact, duty to “re- it has been declared our 275, 135 S.E. at 583. The amount W.Va. at operation of the strain the statute within “equal to the value of the of the tax was import” its narrower limits than words by the gross pro- as produced shown articles interpretation that a literal when satisfied by the from the sale thereof ceeds derived by Leg- include not intended the will cases multiplied [by specified certain producer ... Consequently, we islature. are warrant- gas, In the of natural the Id. rates].” presuming Legislature did ed in that of “one and seventeen-twentieths rate was include, mean to as element of Id. percent.” one value, gross proceeds of so much of contended, among things, other that Hope in com- the sale an article interstate gas natural that applied to its tax as represented merce as is the cost through pipe system line transported its transportation, oper- and we restrain the Pennsylvania in customers Ohio sold to accordingly. ation of the statute Commerce Clause the United violated (internal 135 S.E. at 583 102 W.Va. Tax Commissioner States Constitution. added.)20 omitted). (Emphasis citations is no tax on the sale of that “there contended gas pro- of the transportation Except for limited on the this restraint sale from the thereof.” W.Va. ceeds operation of 13A taxes” and the “Section Rather, gross “the 135 S.E. 584. resulting Commis- subtraction Tax simply taxable measure price sales sioner, deny Im- I the remainder of would commodity.” Hope, on the other Id. port-Export challenges appellants based hand, that tax act evidenced contended I would the Tax Oil. order gross proceeds to plain tax the intention appellants to Commissioner to return commerce. sales in interstate only that of “Section 13A taxes” amount held “that the Commis- which were derived the contribution [Tax This proceeds final made to may gross loading not treat the which sioner] gross value/gross proceeds of the coal plaintiff’s the state as the sales outside worth state, appellants foreign to customers. but that Tax sold gas [the of the within the Gas, Therein, Legislature Hope In activities. Natural Constitution. States gas provided: transportation the natural while in inter- gross proceeds. commerce to the In state added applica- any provision of article or the If case, product exportation, were the such adjudged any shall reason be tion thereof gross receipts purposes could not include any competent jurisdiction by invalid, to be court by transportation value and would added affect, judgment impair shall not such purposes value to be limited for tax have article, the remainder of said but or invalidate becoming part product before operation provi- shall be confined stream. directly involved the controver- sion thereof judgement sy such shall have been in which Significantly, 20. the United States rendered, provi- applicability and the such Court, affirming Hope deci- Natural Gas persons or circumstances shall to other sions sion, very that defi- "indicated] noted this Court thereby. be affected rulings purpose and that follow here” nite Va.Code§ W. 11-13A-21. plain opinion and ”[t]he [this Court's] result of require comput- Gas, final decree the tax Hope 19. Natural a commerce clause well, gas at and not upon the ed value of incidents of a tax and measure involved 286, 288, 47 S.Ct. at essentially 274 U.S. at the same the "Sec- otherwise.” processing except tion taxes” for the 13A ALBRIGHT, Justice, situation, concurring. Chief face. In all severance taxation constitutionally preclud- could be said to be (Filed 2006) Jan. ed.1 separately points. several write make Legislature Our drew its extensive ex- majority concurring I commend the perience industry crafting with the coal careful, opinions scholarly, prin for then- mining. severance taxes on coal The lines analysis cipled of a difficult issue. All of the Legislature has do drawn not unconstitu- acknowledged members this Court have tionally stray into the area of taxation of drawing appropriate principled deci- goods that merely are transit. easy sional lines this area of is not an law fact, they evenly applied are to coal that task; opinions and these done have so. only in-state, move move in other domestic appropriate It emphasize commerce or move in commerce. Virginia, through courts, State of West our They specifically tailored to avoid taxa- our legislative executive branch and our tion of transit provide costs con- branch, strong present has a historic and taxpayers venience to the affected appropriate regulation basis for of coal our payment calculation and of the taxes at issue industry for protection of our land in this case. people promote well-being of this Legislature’s decision to base the tax industry major which a in is factor our state’s selling price on the of less actual Likewise, economy. good the state has rea- transportation costs, has been criticized on fairly privilege removing son to tax the of its ground that it to tax seeks “value added” nonrenewable natural resources from the after the has coal been severed from the ground, giving attention to the economic ben- ground. respectfully suggest I that the “val- gained by owners, efit their to the substantial argument just added” plan ue erroneous. by people social costs incurred our and our long experience of the State of West process, state in the and to the need to Virginia ascertaining the “value” of coal support an economic social infrastructure taught easy has our state that there no profit- which extractive industries can of “litmus test” “value.” ably operate. disagree I strongly suggestion By way with the example, a thick or a seam thin partially concurring partially may yield product high dissent- seam of coal a by value, opinion Benjamin, very high Justice at footnote low heat little or with con- a export taminants, slate, rock, test “in workable tran- methane or other ma- sit” by is whether there has been an “irrevoca- terial mixed in. Calculation of “value” ton) ble foreign weight (by by acreage commitment” to the prior to remov- problem results, yield wildly divergent market. The this “test” can with al at sub- (as Benjamin’s separate opinion Justice ac- stantial variance from the true “value” knowledges), any Thus, accurately number of various events coal. measuring the “value” might be as an being classified such “irrevocable wealth natural resource removed might example, ground commitment.” For a mine privi- from the the exercise of the opened be production mining with as lege its be seen must as difficult just purpose, sole opened point as mines have been task. out would method solely primarily nearby by Legislature essentially serve electric chosen — generating suggested price any transportation facilities. Under the the coal less sale test, every leaving ton the coal face of fair such cost—is as and accurate a measure as event, mine any could said be “in transit” can be devised. calculation of tax, separation from the moment of at the based on as “value” defined (2004), mining production vary bright-line 1. Coal methods can 609 S.E.2d 877 draw a substantially, loading, blending, cleaning, completion distinction initial load- re-loading occurring sequences. also, in difference ing; exports, corre- situation, Recognizing Virginia West tax stat- sponds logical beginning "in to the of an regulations, interpreted utes and in Kanawha process. transit” Coal, Commissioner, Eagle LLCv. Tax 216 W.Va. relatively especially at the low Legislature, 631 S.E.2d 586 comparison by the law specified rate Virginia, Plaintiff STATE West yields jurisdictions, an in other rates Below, Appellee exercise of state’s eminently reasonable concession taxing power. The further not be calculat- that the tax need Legislature MILLS, constitutes paid a sale is had

ed and before Defendant Marvin Steve grace taxpayer Below, and is Appellant. act of to the industry. reasonable concession No. 32551. imposing the tax be- This mechanism avoids ability pay and likewise there is an fore Appeals Supreme Court of paying “estimates” such devices as avoids Virginia. subject to later shipped, the coal is when finally adjustments a “real value” is Sept. 2005. Submitted in the market- the actual sale determined Decided Nov. transportation costs are place and the actual price. for deduction from sale determined concurring Benjamin’s partially

Justice dissenting opinion disapproves partially added” the coal tax on the “value case. But the

loading process the instant

only of coal onto “value added” relatively minimal cost of the

a rail car scooping up dumping

mechanical act of car. A tax on the cost of

the coal into the approved in

“loading” precisely what was

Washington Department Revenue Asso Compa Washington Stevedoring ciation of

nies, 758, 98 S.Ct. (1978). event, the reve

L.Ed.2d 682 Virginia’s gained portion

nue of West recognized being de

severance tax must be incurred in some manner

minimis and

every the coal is to be deliv whether in-state, commerce or in

ered domestic

foreign commerce.

Finally, majority opinion gives full def- fact that Oil test

erence to the the Richfield opin- explicitly not been overruled. The

has viability of such a

ion notes that the future question has been called into

mechanistic test Wages, Corporation v. Michelin Tire 46 L.Ed.2d 495

Therefore, proper- majority of this Court approach,

ly to the Michelin also looked agree supportive all

question.

Accordingly, I concur. notes policy leading presence considerations Clause: Accordingly, 14. isit incorrect to cite I.B.M. sought proposition The Framers of the Constitution thus "general- prohibit imposing to alleviate three main ...: concerns the Fed- does not states from speak ly applicable, nondiseriminatory eral Government must with one voice if taxes even regulating exports.” commercial relations with those taxes fall on ... That was the tariffs, I.B.M., foreign governments, might argument Government’s which the Su- relations, 852, 862, imple- rejected. preme affect could not be U.S. at consistently mented the States with that S.Ct. at

Case Details

Case Name: US Steel Min. Co., LLC v. Helton

Court Name: West Virginia Supreme Court

Date Published: Jan 12, 2006

Citation: 631 S.E.2d 559

Docket Number: 32528

Court Abbreviation: W. Va.