39-14-403. Imposition.

(a) Taxable event. The following shall apply:

(i) There is levied a severance tax on the value of the gross product for the privilege of severing or extracting bentonite in the state. The severance tax imposed by this article may be in addition to other taxes, including but not limited to the ad valorem taxes imposed by W.S. 39-13-104.

(b) Basis of tax (valuation). The following shall apply:

(i) Bentonite shall be valued for taxation as provided in this subsection. Based upon the information received or procured pursuant to W.S. 39-14-407(a) or 39-14-408(a)(i), the department shall annually value the gross product for the preceding calendar year, in appropriate unit measures of all mines and mining claims from which valuable deposits are produced, at the fair market value of the product at the mouth of the mine where produced, after the mining or production process is completed;

(ii) In the event the bentonite is sold at or prior to the mouth of the mine without further movement or processing, the fair market value shall be the total mineral sales revenue received or receivable by the individual producer less amounts paid or payable by the producer for exempt royalty;

(iii) In the event the bentonite is not sold at the mouth of the mine by bona fide arms-length sale, or, except as hereafter provided, if the product of the mine is used without sale, the department shall determine the fair market value of bentonite in accordance with paragraph (iv) of this section;

(iv) The department shall determine the value of bentonite for severance and ad valorem tax purposes as follows:

(A) For bentonite sold away from the mouth of the mine, the taxable value shall be calculated by adding to each producer's actual direct cost of mining per unit, an allocation of indirect costs, overhead and profit, per unit, as determined by the method prescribed in subdivision (I) of this subparagraph plus nonexempt royalty and production taxes per unit:

(I) The allocation of indirect costs, overhead and profit, shall be determined initially and effective with the implementation of this section, by first calculating a bentonite industry wide percentage add-on factor, determined as prescribed in subdivision (II) of this subparagraph, and second by multiplying this initial industry factor times each producer's actual average direct mining costs to mine-mouth per unit, excluding royalty and production taxes. This add-on amount shall be computed prospectively for each producer each year as prescribed in subdivision (III) of this subparagraph;

(II) The industry factor shall initially be determined by an audit of 1989 production data conducted in accordance with the provisions of subdivision (IV) of this subparagraph. The initial industry factor shall be the same for all producers for 1990 which shall represent the base line year. The subsequent add-on factors for each producer will be determined each year as defined in subdivision (III) of this subparagraph;

(III) Subsequent adjustments to the add-on amount as initially determined under the provisions of subdivision (II) of this subparagraph and as subsequently determined under the provisions of this subdivision shall be recalculated each year with the base year being the initial year of this act. The recalculated add-on amount per unit for each producer shall be determined by multiplying the previous, or initial, add-on percentage amount by the difference between each individual bentonite producer's percentage increase or decrease in mining costs per unit from the percentage increase or decrease in sales price per unit and then adding this amount to the initial industry wide or previous percentage add-on factor. Sales price per unit for purposes of this formula shall be the weighted average sales price per unit for each producer based on the actual arms-length sales of milled bentonite used for taconite, foundry and drilling mud applications (including crushed and dried shipments), where user destinations are known to be in the United States and Canada. Packaged sales of bentonite in these three (3) categories shall be included after deducting the packaging premium. The packaging premium shall be calculated by subtracting the weighted average sales price per ton of bulk sales in these three (3) categories from the weighted average sales price per ton of package sales in these three (3) categories. If substantial arms-length transactions, which are at least five percent (5%) of total transactions in a particular category, do not exist for a producer in a specific targeted sales category, average pricing determined from arms-length transactions in that specific category by all producers shall be imposed. In no event shall the value of the bentonite product include any processing functions or operations regardless of where the processing is performed. As used in this subsection, direct mining costs include but are not limited to mining labor including mine foremen and supervisory personnel whose primary responsibility is extraction of bentonite, supplies used for mining, mining equipment, fuel, power and other utilities used for mining, maintenance of mining equipment, depreciation of mining equipment, reclamation, ad valorem property taxes on mining equipment, transportation of bentonite from the point of severance to the point of valuation and any other costs incurred prior to the point of valuation that are directly and specifically attributable to the mining operation. Royalty and production taxes shall be excluded from mine mouth cost for purposes of computation. In no event and under no circumstances shall the value of bentonite be less than the direct mining costs plus nonexempt royalty and production taxes;

(IV) At four (4) year intervals and for the base year the taxable value per unit for each producer shall be revised using the proportionate profits method. Each producer's add-on factor shall be adjusted to provide the taxable value equivalent to the value derived using the proportionate profits method with a direct cost ratio. The direct cost ratio shall be total direct mining costs divided by total direct mining, processing and transportation costs. The sales price per unit, as described in subdivision (III) of this subparagraph, shall exclude all royalties and production taxes. The taxable value shall be derived based on an audit of the most current completed year's data conducted in the producer's offices. Should the audit not be performed, the producer's factor shall be adjusted according to subdivision (III) of this subparagraph until the audit is performed, and then the revised factor shall be applied prospectively. Thereafter, the revised factor for each producer shall be adjusted according to subdivision (III) of this subparagraph.

(v) The value of the gross product shall be the fair market value of the product at the mouth of the mine where produced, after the mining or production process is completed;

(vi) Except as otherwise provided, the mining or production process is deemed completed when mineral product reaches the mouth of the mine. In no event shall the value of the mineral product include any processing functions or operations regardless of where the processing is performed;

(vii) Except as otherwise provided, if the product as defined in paragraph (vi) of this subsection is sold at the mouth of the mine, the fair market value shall be deemed to be the price established by bona fide arms-length sale.

(c) Taxpayer. The following shall apply:

(i) In the case of the gross product of all mines and mining claims produced under lease, the lessor is liable for the payment of ad valorem taxes on the product removed only to the extent of the lessor's retained interest under the lease, whether royalty or otherwise, and the lessee or his assignee is liable for all other property taxes due on production under the lease;

(ii) Any taxpayer paying the taxes imposed by this article on any valuable deposit may deduct the severance taxes paid from any amounts due or to become due to the interest owners of such valuable deposit in proportion to the interest ownership;

(iii) Any person extracting valuable products subject to this article and any person owning an interest in the valuable products to the extent of their interest ownership are liable for the payment of the severance taxes imposed by this article together with any penalties and interest.