BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
STEAMBOAT STONE SUPPLY, INC. )
FROM A NOTICE OF VALUATION FOR ) Docket No. 2006-50
TAXATION PURPOSES BY THE MINERAL )
TAX DIVISION OF THE DEPARTMENT )
OF REVENUE (Production Year 2005) )
FINDINGS OF FACT, CONCLUSIONS OF LAW, DECISION AND ORDER
APPEARANCES
James Lewis, President, Steamboat Stone Supply, Inc. (Steamboat Stone or Petitioner), appeared pro se on behalf of Petitioner.
Elizabeth B. Lance, Assistant Attorney General, and Martin L. Hardsocg, Senior Assistant Attorney General, appeared on behalf of the Wyoming Department of Revenue (Department).
JURISDICTION
The State Board of Equalization (Board) shall review final decisions of the Department on application of any interested person adversely affected. Wyo. Stat. Ann. § 39-11-102.1(c). A taxpayer’s appeal must be filed with the Board within thirty days of a Department final decision. Rules, Wyoming State Board of Equalization, Chapter 2 § 5(a). Steamboat Stone timely appealed the final decision of the Department, and the Board has jurisdiction to decide this matter.
STATEMENT OF THE CASE
Beginning in 2003, Petitioner collected moss rock from lands in Carbon County, Wyoming, which it marketed and sold at various locations throughout the United States. Before beginning its operations in Carbon County, Petitioner obtained the necessary permits, including a Letter of Authorization (LOA) mining permit from the Wyoming Department of Environmental Quality (DEQ).
On October 18, 2005, the Department sent a memorandum to all Wyoming LOA mining permit applicants, including Petitioner. The memorandum notified the applicants for the first time that they were required to file annual gross products and severance tax returns with the Department. [Exhibit 503]. In February, 2006, Petitioner filed its 2005 annual gross products return with the Department, and on March 8, 2006, entered into a plan with Department for payment of its 2005 severance tax. [Exhibit 501]. On March 15, 2006, the Department sent Petitioner a Notice of Valuation for Taxation Purposes valuing Petitioner’s mineral production for ad valorem tax purposes. [Exhibit 500].
On April 7, 2006, Petitioner filed an appeal with this Board. Petitioner claims it should be exempt from paying severance and ad valorem taxes because it was not informed earlier that a tax would be due and owing for collecting and selling moss rock. [Exhibit 502]. The Department counters that Petitioner was responsible for inquiring and determining whether or not its moss rock collection activities were taxable. During the appeal process Petitioner raised an additional issue concerning whether its activities were subject to severance and ad valorem taxation.
The Board, Alan B. Minier, Chairman, Thomas R. Satterfield, Vice Chairman, and Thomas D. Roberts, Board Member, held a hearing on Petitioner’s appeal on November 28, 2006.
We affirm the decision of the Department.
CONTENTIONS AND ISSUES
From the documents filed by the parties and their statements during the hearing, we discern two issues the Petitioner and the Department would have us address:
1. Whether Petitioner’s moss rock collection activity in Carbon County, Wyoming, is subject to severance and ad valorem taxation?
2. Whether the Petitioner is excused from paying severance and ad valorem taxes on its 2005 mineral production in Carbon County, Wyoming, because the Department failed to timely notify Steamboat Stone of its potential tax obligation?
FINDINGS OF FACT
1. In 2005, Petitioner collected lichen covered rock, commonly referred to as moss rock, from lands in Carbon County, Wyoming. The moss rock was sorted into three types: veneer, which is four to six inches thick used for fireplaces and architectural details; dry stack, which is six to twelve inches thick used in rock walls; and boulders which are two feet by two feet or larger used in landscaping work. [Hearing Recording].
2. After collection and sorting, the moss rock was placed on pallets, loaded onto trucks, covered with carpets for protection, strapped down, and transported to purchasers.
3. In 2005, Petitioner sold moss rock to customers located throughout the United States. There were, however, no sales made for projects in Wyoming. [Hearing Recording].
4. There is no dispute Petitioner collected moss rock from land in Carbon County which it sold at various locations throughout the United States; nor is there a dispute about the amount of moss rock collected or its value. [Hearing Recording; Exhibit 500].
5. Mr. Lewis, the president of Steamboat Stone, testified on behalf of Petitioner. He has been involved in the stone supply business in Wyoming since 1991. [Hearing Recording].
6. Prior to establishing Steamboat Stone, Mr. Lewis co-owned and operated Caveman Stone Supply. From l991 to l994, Caveman Stone Supply collected moss rock for sale from the Powder Wash area south of Wamsutter in Sweetwater County, Wyoming. The operation required United States Department of Interior, Bureau of Land Management (BLM) permits because the work was done on federal land. Wyoming Department of Environmental Quality (DEQ) permits were not required at that time. [Exhibit 117; Hearing Recording].
7. Mr. Lewis incorporated Steamboat Stone Supply, Inc., in Colorado in l996. [Exhibit 101; Hearing Recording].
8. In 2002, a moss rock supplier provided Mr. Lewis with samples from an area north of Rawlins, in Carbon County, Wyoming. Because Mr. Lewis was impressed with the samples, Petitioner and the supplier entered into a contract for the supplier to provide moss rock to Petitioner in 2002. [Hearing Recording].
9. When the supply contract did not work out to Petitioner’s satisfaction, Mr. Lewis contacted the BLM office in Rawlins, Wyoming, for guidance on how Steamboat Stone could begin its own moss rock collection activities from the area north of Rawlins. [Hearing Recording].
10. Mark Newman from the Rawlins BLM field office worked closely with Mr. Lewis to complete the paper work necessary to begin collecting moss rock, including right of way acquisitions, archaeological studies, BLM permits, DEQ permits, land owner permissions, and authorization to do business in Wyoming. Mr. Lewis was not informed during the process that any tax may be owing to the State of Wyoming based on the value of the moss rock collected. [Hearing Recording].
11. During the permitting process, Mr. Lewis acquired a April, 1987, booklet prepared by the Wyoming Department of Environmental Quality (DEQ) from the Rawlins BLM field office. [Hearing Recording]. The booklet was “. . . prepared to aid individuals, businesses and industry in preparing to apply for permits and licenses required under the Wyoming Environmental Quality Act.” At the back of the booklet is a list of other agencies an applicant may need to contact. The list did not include the Department of Revenue. [Exhibit 103, Introduction p. i].
12. As part of the permitting process, Petitioner and the BLM entered into a Negotiated Cash Sale Contract. The contract did not list any tax requirements. [Exhibit 107; Hearing Recording].
13. The DEQ authorized Steamboat Stone to conduct surface stone removal by a Letter of Authorization dated April 7, 2003. The authorization was for limited removal of stone on the surface of the ground for one year. Steamboat Stone has renewed the DEQ Letter of Authorization annually since its issuance, with the last renewal dated February 1, 2005. [Exhibits 104, 108, 504].
14. The DEQ Letter of Authorization described Petitioner’s activities as involving only minor surface disturbance, infrequent in nature and stated the mining activities were exempt from the full requirements of the Environmental Quality Act pursuant to Wyo. Stat. Ann. § 35-11-401(e)(v) . The DEQ Letter of Authorization did not contain any notice that the activity may be subject to severance or gross products taxation in Wyoming. [Exhibits 104, 504].
15. As part of the BLM permitting process, Mr. Lewis was advised by the BLM that a certificate of authority to do business in Wyoming was required. Petitioner registered Steamboat Stone with the Wyoming Secretary of State on April 18, 2003. [Hearing Recording; Exhibit 102].
16. Petitioner completed the paperwork necessary to collect moss rock in Wyoming by early 2003, and began its collection activities in Carbon County in April, 2003, using a pickup and three employees. Petitioner paid the BLM for the minerals and the surface land owner for the right to collect moss rock from the private property. Petitioner did not pay severance or gross products tax on its 2003 production. [Hearing Recording].
17. During 2004, Steamboat Stone collected moss rock from land in Carbon County, Wyoming, owned by Union Pacific Railroad and managed by Anadarko. In dealing with Anadarko, no one informed Mr. Lewis that the collection of moss rock by Petitioner might be subject to severance or gross products taxation by the state of Wyoming. Petitioner did not pay severance or gross products tax on its 2004 production. [Hearing Recording].
18. By 2005, Steamboat Stone’s moss rock was gaining popularity in the market place, so in the Spring of 2005 Petitioner renewed all of its permits for collection of moss rock with the various agencies. [Hearing Recording].
19. On October 18, 2005, the Department sent a memorandum to all LOA mining permit applicants in Wyoming, including Steamboat Stone. The memorandum advised the applicants, including Steamboat Stone, of the requirement of filing returns and paying annual gross products tax and severance tax for the mineral production they sold. The DOR attached the forms to be completed and returned to the Department by February 25th of the year following production (2006). [Exhibits 109, 503].
20. Mr. Lewis received the October 18, 2005, memorandum but did not believe the forms sent with the memorandum applied to Steamboat Stone. He nonetheless contacted the Department for information and help in filling out the forms. [Hearing Recording; Exhibits 109, 503]. This was the first notice Mr. Lewis received indicating Steamboat Stone’s moss rock collection activities were subject to Wyoming severance or gross products tax. [Hearing Recording].
21. At the hearing, Mr. Lewis argued he was not notified of the severance tax liability when Petitioner first applied for a DEQ permit or when it started operating in Carbon County, Wyoming. If he had been notified of the tax liability, Mr. Lewis would have made adjustments in Steamboat Stone’s prices to include the tax. [Hearing Recording].
22. Mr. Lewis testified the October 18, 2005, Department memorandum was the first indication he received concerning a tax on moss rock. In all of his dealings with state and federal agencies beginning in l991, no one had previously mentioned any requirement for filing returns or paying gross products or severance tax. It was Mr. Lewis’s opinion the notification process was very weak and done incorrectly. None of the people he had talked to, including BLM employees, Anadarko employees, or other people in the moss rock industry, told him about the potential tax liability. [Hearing Recording].
23. Mr. Lewis expressed his opinion that he did not think collecting moss rock from the surface of the ground was a mining activity. In support of his position, he provided definitions from Webster’s 2004 unabridged dictionary and other dictionaries. [Exhibit 116]. He relied on the unabridged dictionary definition of “mine” as an excavation in the earth from which minerals are taken to support his contention that since the moss rock was collected from the surface, no severance or gross products tax was due. He also stated the Department’s regulations provide for mineral valuation at the mouth of the mine. [Hearing Recording; Exhibit 116].
24. Petitioner contacted the Department within two weeks after receiving the Department’s October 18, 2005, memorandum to find out why Steamboat Stone was being taxed. Petitioner worked with Cindy Rice, Solid Mineral Work Leader of the Department’s Mineral Tax Division, to complete the forms, to develop a schedule for payment of the severance tax, and to avoid interest and penalty charges. The forms were filed timely with the Department and a payment schedule for the severance tax was entered into prior to the due date for the tax. [Hearing Recording].
25. Ms. Rice testified on behalf of the Department. Her duties include the collection of information from the DEQ about active mining operations and the comparison of the DEQ’s information with the Department’s records. She does this work in addition to other duties assigned by the Department. She was the author of the October 18, 2005, memorandum sent to all LOA Mining Permit Applicants. [Exhibits 109, 503; Hearing Recording].
26. Department procedures provide that an active mining permit list will be obtained annually from the DEQ for comparison with Department records. [Exhibit 110].
27. Prior to 2005, the Department annually compared the DEQ’s DT Permits for smaller sand and gravel pits and PT Permits for larger rock quarries and coal mines with Department records. The Department was unaware that DEQ issued LOA’s for moss rock removal until 2005 when another operator filed a return related to its moss rock operations. [Hearing Recording; Exhibit 110].
28. The October 18, 2005, Department memorandum was the first notice sent directly to LOA holders informing them they were required to file and pay an annual gross products tax and severance tax. The memorandum was sent to all companies engaged in removal of rock, including decorative stone, that had an LOA application on file with the DEQ. [Hearing Recording].
29. The Department considers decorative stone, including moss rock, to be a mineral and as such is a valuable product. As a matter of practice the Department considers decorative stone as being severed from the earth and, therefore, taxable. [Hearing Recording].
30. Ms. Rice testified it was the responsibility of the operator to inquire as to whether or not its operations were taxable. The Department hears about non-reporting operators from county assessors, DEQ records, other operators, or the public. One operator was discovered after the company appeared on a television home improvement program. The industry is rather a “tattle tale” industry with competitors telling the Department of competing mining operations. [Hearing Recording].
31. Richard Chancellor, Administrator of the Land Quality Division of the DEQ, testified on behalf of the Department. He explained that the Land Quality Division regulates mining of solid minerals and reclamation of land after it has been disturbed. [Hearing Recording].
32. Mr. Chancellor discussed the April 1987 booklet Mr. Lewis obtained from the Rawlins BLM field office. Facts ¶ 11. [Exhibit 103]. The booklet had been revised at least twice since 1987 and was currently undergoing revision. Mr. Chancellor explained the last page of the booklet lists other state and federal agencies with environmental concerns related to the DEQ permitting process. It did not include the Department because it is not an not an agency with environmental concerns. [Exhibit 103; Hearing Recording].
33. Mr. Chancellor testified the DEQ defines mining very broadly to include the removal of any solid material from the earth for resale. Because the mining permit process is complicated and moss rock removal is done with a minium amount of disturbance, the DEQ began issuing LOAs for moss rock removal about five years ago. The DEQ does not require mining permits for removal of moss rock. [Hearing Recording].
34. Craig Grenvik, Administrator of the Department’s Mineral Tax Division, testified on behalf of the Department. He has a bachelor of science degree in Petroleum Engineering and a MBA from the University of Wyoming and has worked at the Department since July, l997. The Division he administers is charged with valuing all mineral production for severance and gross products tax purposes. He testified concerning the rationale which the Department applied in determining that the collection of moss rock in Wyoming was subject to severance and gross products taxation. [Hearing Recording].
35. The valuation established by the Department for Steamboat Stone’s 2005 moss rock production was based on Steamboat Stone’s reported removal and sale of 1,964 tons of moss rock from lands in Carbon County, Wyoming. [Exhibit 500, p. 2; Hearing Recording].
36. Since Steamboat Stone had the privilege of removing moss rock as evidenced by its agreements with the BLM and Anadarko, the Department took the position Petitioner’s operations fell within the definition of the severance tax found in Wyo. Stat. Ann. § 39-14-701(a)(ix): “an excise tax imposed on the present and continuing privilege of removing, extracting, severing or producing any mineral in this state.” [Hearing Recording].
37. In addition, the Department’s rules define “valuable deposit” as “any product not otherwise specified which can be removed, extracted, severed or produced from a mine or mining claim and has value as may be determined by sale or use.” Rules, Department of Revenue, Chapter 6 § 4(g). Moss rock falls within this definition because it can be removed, extracted, severed or produced and because it has value as evidenced by Steamboat Stone’s moss rock sales. [Hearing Recording].
38. From the Department’s perspective, the term “all other valuable deposits” used in Wyo. Stat. Ann. § 39-14-703(a)(i) is broad enough to include the moss rock removed by Steamboat Stone. The moss rock removed by Steamboat Stone has value and is sold after its removal. [Hearing Recording].
39. The Rules of the Department of Revenue also define "Mine or mining claim" as “properties producing oil and natural gas and means any property which produces a solid, liquid, or gaseous mineral, regardless of right or form of ownership or right of production of the mineral.” Rules, Wyoming Department of Revenue, Chapter 6, § 4(h). The Department believes Steamboat Stone falls within this definition because Steamboat Stone has the right to produce a mineral. [Hearing Recording].
40. Mines and mining claims are valued for purposes of the gross products tax based on the value of the production. The moss rock collected by Steamboat Stone has value when produced as defined by the Department’s rule defining mine and mining claim. Rules, Wyoming Department of Revenue, Chapter 6, § 4(h). [Hearing Recording].
41. The Department considers moss rock as a type of “decorative stone” along with flagstone, limestone, and granite, all of which are used for aesthetic purposes. The Department’s position is supported by the treatment of moss rock by the BLM as a valuable deposit on which the federal government is entitled to and does collect a reasonable royalty. [Hearing Recording; Exhibit 505].
42. It is the Department’s position that Steamboat Stone, as the operator, was required to report and pay the severance taxes on the moss rock it produced. [Hearing Recording].
43. Wyoming has a self reporting system. The Department does not know who is producing minerals. The Department relies on the taxpayers to contact it. The Department provides information through a web site which has forms and contact information. The Department also attempts to identify potential taxpayers by contacting other agencies and speaking with county officials. When a potential taxpayer is identified, the Department sends out letters. The Department offers instructional classes for taxpayers (primarily oil & gas). The Department also works with anyone who wants to learn how to file their severance and ad valorem tax reports. [Hearing Recording].
44. In this case, the Department identified Steamboat Stone as a potential taxpayer in October of 2005, prior to the February 25, 2006, due date for severance tax reports and payments; prior to February 25, 2006, due date gross products reports; and prior to the payment dates for ad valorem taxes, November 10, 2006, for the first one-half and May 10, 2007, for the second one-half. [Hearing Recording]. See Wyo. Stat. Ann. §§ 39-14-707(a)(ii) & (b)(ii).
45. It is the Department’s position that collection of taxes should not be waived where the taxpayer was notified prior to the time reports to the Department were due. [Hearing Recording].
46. The Department’s position concerning rock with lichen or moss rock was based on its interpretation of rules and definitions which are broad enough to include moss rock as a mineral subject to taxation. [Hearing Recording].
47. The Department saw no reason to treat moss rock any differently than other decorative stone. Rock with the lichen on it is a “valuable deposit” as defined by its sale and use. [Hearing Recording].
48. Mr. Grenvik summarized the Department’s position as follows: a) Moss rock is an “other valuable deposit;” b) Wyo. Stat. Ann. §§ 39-14-701 et seq. and the rules of the Department are broad enough to cover moss rock as subject to tax; c) Petitioner was notified in a timely manner of the obligation of Petitioner to pay tax; and d) Only the taxes for production year 2005, not the prior years during which Petitioner admitted removing moss rock, have been sought to date from Steamboat Stone. [Hearing Recording].
49. Any portion of the Conclusions of Law: Principles of Law or the Conclusions of Law: Application of Principles of Law set forth below which includes a finding of fact may also be considered a Finding of Fact and, therefore, is incorporated herein by reference.
CONCLUSIONS OF LAW: PRINCIPLES OF LAW
50. The Constitution of the State of Wyoming provides for the taxation of minerals and mine products:
(a) All property, except as in this constitution otherwise provided, shall be uniformly valued at its full value as defined by the legislature, in three (3) classes as follows:
(i) Gross production of minerals and mine products in lieu of taxes on the land where produced;
* * *
(iii) All other property, real and personal.
Wyo. Const., art. 15, § 11.
51. “The department shall annually value and assess the following property at its fair market value for taxation: (i) The gross product of all mines and mining claims;” Wyo. Stat. Ann. § 39-13-102(m).
52. "Following determination of the fair market value of property the department shall notify the taxpayer by mail of the assessed value. The person assessed may file written objections to the assessment with the board within thirty (30) days of the date of postmark and appear before the board at a time specified by the board…." Wyo. Stat. Ann. § 39-13-102(n).
53. Wyoming Statutes further provide:
There is levied a severance tax on the value of the gross product for the privilege of severing or extracting other valuable deposits, oil shale or any other fossil fuel 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.
Wyo. Stat. Ann. § 39-14-703(a)(i).
54. That severance tax is defined as follows:
(ix) "Severance tax" means an excise tax imposed on the present and continuing privilege of removing, extracting, severing or producing any mineral in this state;
Wyo. Stat. Ann. § 39-14-701(a)(ix).
55. The Department has the following responsibilities related to the valuation of miscellaneous minerals:
(a) The department shall annually value and assess the gross product of all mines and mining claims at its fair market value for taxation.
(b) 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.
Wyo. Stat. Ann. § 39-14-702(a), (b).
56. The Legislature authorized the Department to adopt rules and regulations related to the valuation of property:
Basis of tax. The following shall apply:
* * *
(ii) All taxable property shall be annually valued at its fair market value. Except as otherwise provided by law for specific property, the department shall prescribe by rule and regulation the appraisal methods and systems for determining fair market value using generally accepted appraisal standards;
Wyo. Stat. Ann. § 39-13-103(b)(ii).
57. The method for determining the value of other valuable deposits is set by statute:
(b) Basis of tax (valuation). The following shall apply:
(i) Other valuable deposits shall be valued for taxation as provided in this section based upon the information received or procured pursuant to W.S. 39-14-707(a) and except as otherwise provided, 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. 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;
(ii) Except as otherwise provided, the mining or production process is deemed completed when the 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;
(iii) Except as otherwise provided, if the product as provided in paragraph (ii) 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;
(iv) Except as otherwise provided, in the event the product as provided in paragraph (ii) of this subsection is not sold at the mouth of the mine by bona fide arms-length sale, or if the product of the mine is used without sale, the department shall determine the fair market value by application of recognized appraisal techniques.
Wyo. Stat. Ann. § 39-14-703(b).
58. The Department’s Rules define “valuable deposit” as “any product not otherwise specified which can be removed, extracted, severed or produced from a mine or mining claim and has value as may be determined by sale or use.” Rules, Wyoming Department of Revenue, Chapter 6, § 4(g).
59. The Rules of the Department also define "Mine or mining claim" as “properties producing oil and natural gas and means any property which produces a solid, liquid, or gaseous mineral, regardless of right or form of ownership or right of production of the mineral.” Rules, Wyoming Department of Revenue, Chapter 6, § 4(h).
60. The term “minerals” is defined by the Department’s Rules as follows:
"Minerals" means gold, silver, and all other precious metals, soda, saline, coal, uranium, petroleum, trona, oil shale, gas or natural gas, all hydrocarbons produced with oil and gas, and all other valuable deposits, including those produced in association with other minerals.
Rules, Wyoming Department of Revenue, Chapter 6, § 4(f).
61. The Department’s Rules set out who is responsible for the reporting and payment of ad valorem and severance taxes:
(a.) This section identifies the persons responsible for remitting payment of ad valorem and severance taxes on mineral production in this state. For solid mineral production the mine operator shall report and remit tax payments for 100% of the production from the producing property.
Rules, Wyoming Department of Revenue, Chapter 6, §6(a.).
62. Operator is defined as follows:
"Operator" means any person responsible for the day-to-day operation of a mine or oil and gas property by reason of contract, lease or operating agreement or ownership of an unleased producing mine or well operated by the owner thereof.
Rules, Wyoming Department of Revenue, Chapter 6 § 4(j).
63. The Wyoming Supreme Court has recently summarized the fundamental principles of statutory interpretation in Wyoming:
In interpreting statutes, our primary consideration is to determine the legislature's intent. All statutes must be construed in pari materia and, in ascertaining the meaning of a given law, all statutes relating to the same subject or having the same general purpose must be considered and construed in harmony. Statutory construction is a question of law, so our standard of review is de novo. We endeavor to interpret statutes in accordance with the legislature's intent. We begin by making an inquiry respecting the ordinary and obvious meaning of the words employed according to their arrangement and connection. We construe the statute as a whole, giving effect to every word, clause, and sentence, and we construe all parts of the statute in pari materia. When a statute is sufficiently clear and unambiguous, we give effect to the plain and ordinary meaning of the words and do not resort to the rules of statutory construction. Wyoming Board of Outfitters and Professional Guides v. Clark, 2001 WY 78, ¶ 12, 30 P.3d 36, ¶ 12 (Wyo. 2001); Murphy v. State Canvassing Board, 12 P.3d 677, 679 (Wyo. 2000). Moreover, we must not give a statute a meaning that will nullify its operation if it is susceptible of another interpretation. Billis v. State, 800 P.2d 401, 413 (Wyo. 1990) (citing McGuire v. McGuire, 608 P.2d 1278, 1283 (Wyo. 1980)).
Moreover, we will not enlarge, stretch, expand, or extend a statute to matters that do not fall within its express provisions. Gray v. Stratton Real Estate, 2001 WY 125, ¶ 5, 36 P.3d 1127, ¶ 5 (Wyo. 2001); Bowen v. State, Wyoming Real Estate Commission, 900 P.2d 1140, 1143 (Wyo. 1995).
Loberg v. Wyo. Workers' Safety & Comp. Div., 2004 WY 48, ¶ 5, 88 P.3d 1045, ¶ 5 (Wyo. 2004) (quoting Board of County Comm'rs of Teton County v. Crow, 2003 WY 40, ¶¶ 40-41, 65 P.3d 720, ¶¶ 40-41 (Wyo. 2003)).
BP America Production Co., et al, v. Department of Revenue, 2005 WY 60, ¶ 15, 112 P.3d 596, 604 (Wyo. 2005).
64. The Wyoming Supreme Court has also provided general guidance for interpreting the statutes at issue in this case:
To properly interpret the various statutes applicable to coal valuation, we must first review their fundamental objective. The Wyoming Constitution requires the gross products of mines to be taxed in proportion to the value thereof and uniformly valued for tax purposes at full value as defined by the legislature. Wyo. Const. art. 15, §§ 3, 11. The legislature defined “value of the gross product” as the fair market value less deductions and exemptions, Wyo. Stat. Ann. § 39-14-101(a)(xv) (LexisNexis 2001), and “fair market value” as “the amount . . . a well informed buyer is justified in paying for a property and a well informed seller is justified in accepting, assuming neither party to the transaction is acting under undue compulsion.” Wyo. Stat. Ann. § 39-11-101(a)(vi) (LexisNexis 2001). With regard to the valuation of coal, the value of the gross product is the fair market value of the product at the mouth of the mine where produced, after the production process is completed, and mining or production is deemed completed when the mineral product reaches the mouth of the mine. Wyo. Stat. Ann. § 39-14-103(b) (LexisNexis 2001). The “mouth of the mine” for a surface mine, such as Wyodak’s, is further defined as “the top of the ramp where the road or conveying system leaves the pit.” Wyo. Stat. Ann. § 39-14-101(a)(vi) (LexisNexis 2001). All these provisions read together provide the context within which the specific valuation methods contained in § 39-14-103(b) must be interpreted. While the valuation statutes may not result in seamless coverage of all possible mining situations, we conclude the legislature intended for those statutes to be interpreted so that mineral production would be valued at its full fair market value. . .
Wyodak Resources Development Corp. v. Wyoming Department of Revenue, 2002 WY 181, ¶ 33, 60 P.3d 129, 141-142 (Wyo. 2002).
65. “The construction placed on a statute by the agency charged with its execution is entitled to deference as long as it does not conflict with the legislature’s intent.” Laramie County Board of Equalization v. Wyoming State Board of Equalization, 915 P.2d 1184, 1190 (Wyo. 1996).
66. The gross product of all mines and mining claims are valued and assessed for purposes of the gross products tax by the Department. Wyo. Stat. Ann. § 39-11-102(m)(i).
67. For purposes of the gross products tax taxable value has been defined by the legislature as “a percent of the fair market value of property in a particular class as follows: (A) Gross product of minerals and mine products, one hundred percent (100%).” Wyo. Stat. Ann. § 39-11-101(a)(xvii).
68. “The proper application of appraisal methods to the facts is an issue of ultimate fact requiring de novo review [on appeal from the Board]…. An ultimate fact is a mixture of fact and legal precept.” PacifiCorp, Inc., v. Department of Revenue, 2001 WY 84, ¶ 6, 31 P.3d 64, 65 (Wyo. 2001).
69. “It is only by either approving the determination of the Department, or by disapproving the determination and remanding the matter to the Department, that the issues brought before the Board for review can be resolved successfully without invading the statutory prerogatives of the Department. The statutory mandate to the Board is not to maximize revenue or to punish nettlesome taxpayers, but to assure the equality of taxation and fairly adjudicate disputes brought before it…. [The Board] must refrain from usurping the valuation function assigned to the Department, even if the Department should acquiesce.” Amoco Production Company v. State Board of Equalization, 12 P.3d 668, 674 (Wyo. 2000).
70. “[T]he Petitioner shall have the burden of going forward and the ultimate burden of persuasion, which burden shall be met by a preponderance of the evidence. If Petitioner provides sufficient evidence to suggest the Department determination is incorrect, the burden shifts to the Department to defend its action….” Rules, Wyoming State Board of Equalization, Chapter 2, § 20. “The petitioner, however, by challenging the valuation, bears the ultimate burden of persuasion to prove by a preponderance of the evidence that the valuation was not derived in accordance with the required constitutional and statutory requirements for valuing state-assessed property…” Colorado Interstate Gas Company v. Wyoming Department of Revenue, 2001 WY 34, ¶ 10, 20 P.3d 528, 531 (Wyo. 2001).
71. Wyoming mineral taxpayers have the obligation to calculate and report taxable value (subject to audit) for state-assessed mineral property; such taxable value is commonly said to be self-reported. Wyo. Stat. Ann. § 39-14-107(a); see Wyo. Stat. Ann. § 39-14-707(a) (other valuable deposits); Wyoming Department of Revenue v. Michael T. Guthrie, 2005 WY 79, ¶ 14, 115 P.3d 1086, 1092 (2005).
72. Wyoming’s tax system is by necessity a self-reporting system.
As the SBOE found in its order, Wyoming's ad valorem tax system is a self-reporting system, something of a magnanimous social contract designed to make the tax collector as unobtrusive as possible. By its very nature, it requires mineral producers to fully and accurately report mineral production in order that the system can function. If reporting is not accurate, and especially where reporting of production is not fully accurate by design, then that contract is broken. Without accurate reports, an accurate assessment cannot be ascertained and without an accurate assessment, an accurate tax cannot be imposed and collected. The various statutes of limitations are designed to further flesh out the self-reporting system, and they bring the tax assessment and tax collection process to a state of repose when the conditions for their application are met. However, where the self-reporting system has broken down and the process is tainted from its point of origin, statutes of limitations simply cannot, as a general rule, be called into play.
BP America Production Co. v. Department of Revenue, 2006 WY 27 ¶ 38, 130 P.3d 438, 469 (Wyo. 2006).
CONCLUSIONS OF LAW: APPLICATION OF PRINCIPLES
73. Steamboat Stone brought this appeal pursuant to Wyo. Stat. Ann. §§ 39-13-102(n). Since the statute does not include any specific standards to guide our decision, we judge the Department’s valuation by the general standard that the valuation must be in accordance with constitutional and statutory requirements for valuing state-assessed property, as well as the requirements of the Department’s own rules. See generally Amoco Production Company v. Department of Revenue et al, 2004 WY 89, ¶¶ 7-8, 94 P.3d 430, 435-436; State ex rel. Department of Revenue v. Buggy Bath Unlimited, Inc., 2001 WY 27, ¶ 19, 18 P.3d 1182, 1188 (Wyo. 2001).
74. The valuation of minerals in Wyoming has recently been described by the Wyoming Supreme Court as follows:
Wyoming taxes mineral production pursuant to Article 15, Section 11 of the Wyoming Constitution. The legislature is directed to define full value for the classes of property and to enact laws securing “a just valuation for taxation of all property. . . .” Id. [Powder River Coal v. State Bd. of Equalization, 2002 WY 5, ¶ 6, 38 P.3d 423, 426 (Wyo. 2002)]. All taxation must be “equal and uniform within each class of property.” Id. In fulfillment of these constitutional mandates, the legislature has charged the Department of Revenue with determining the fair market value of . . . production for severance tax purposes. Wyo. Stat. Ann. § 39-14-202(a)(i) (LexisNexis 2005). The Department's determination of fair market value also establishes fair market value for ad valorem tax purposes. Wyo. Stat. Ann. § 39-13-103(b)(iv) (LexisNexis 2005). The Department must value oil and gas in accordance with Wyo. Stat. Ann. § 39-14-203(b). Wyo. Stat. Ann. § 39-11-101(a)(vi) (LexisNexis 2005). [Footnotes omitted, citation added].
RME Petroleum Co. v. Wyoming Dept. of Revenue, 2007 WY 16 ¶ 14, 150 P.3d 673, 678-680 (Wyo. 2007). The Department must value other valuable deposits in accordance with Wyo. Stat. Ann. §§ 39-14-701 through 39-14-711.
75. Petitioner’s sole argument in support of its position that its production of moss rock is not subject to severance or gross products tax rests on its position that the collection of moss rock is not “mining” as that term is defined in various dictionaries. [Hearing Recording, Exhibit 116]. This argument, however, fails to take into consideration the nature of either Wyoming’s severance tax or gross products tax.
76. Wyoming’s severance tax is a tax imposed on the “privilege of severing or extracting other valuable deposits.” Wyo. Stat. Ann. § 39-14-703(a)(i), Conclusions ¶ 53. It is defined as an “excise tax imposed on the present and continuing privilege of removing, extracting, severing or producing any mineral in this state.” Wyo. Stat. Ann. § 39-14-701(a)(ix), Conclusions ¶ 54. By its terms Wyoming’s severance tax is based on the value of the mineral produced.
77. The value of the product removed sets the basis for calculating severance tax, but it is the privilege of removing the mineral which is taxed. Two questions, therefore, arise with respect to the whether Petitioner’s moss rock collection is subject to Wyoming’s severance tax: first, is moss rock a valuable deposit?; and second, did Steamboat Stone have the privilege of “removing, extracting, severing, or producing” the moss rock?
78. There is no question that the moss rock collected by Steamboat Stone was valuable. Facts ¶ 4. Nor was there an issue raised as to whether the rock was a mineral. While an argument could be made that value of the rock without lichen growing on it is different that its value with lichen, we need not address the issue because Petitioner failed to present any evidence of a different value than one assigned by the Department.
79. There are four descriptive terms contained within the definition of “severance tax”: “removing,” “extracting,” “severing,” and “producing” which describe the privilege subject to severance tax. Wyo. Stat. Ann. § 39-14-701(a)(ix), Conclusions ¶ 54. These terms are echoed in the Department’s rules. Rules, Wyoming Department of Revenue, Chapter 6, § 4(g.), Conclusions ¶ 58.
80. “Remove” is defined in pertinent part as: “. . . to move (something) from where it is; lift, push, transfer, or carry away, or from one place to another . . ..” “Sever” is defined in pertinent part as: “1 to separate; make or become distinct; divide . . . 2 to part or break off . . ..” “Extract” is defined in pertinent part as: “1 to draw out by effort; pull out . . . 2 to remove or separate (metal) from ore . . ..” “Produce ” is defined in pertinent part as: “1 to bring to view; offer for inspection . . . 2 to bring forth; bear; yield [a well that produces oil] . . ..” Webster’s New World College Dictionary, Fourth Edition, pp. 1213, 1313, 504, 1145 (Wiley Publishing 2002).
81. In collecting moss rock, Petitioner used three employees and a truck to separate, move, carry away, or remove the moss rock from the ground so that it could be marketed throughout the United States. Facts ¶ 16-18. This collection activity is of the same nature and falls clearly within the ordinary and generally recognized definitions of remove, sever, extract, and produce. We conclude, therefore, Petitioner’s collection of moss rock in Wyoming is subject to severance tax. BP America Production Co., et al, v. Department of Revenue, 2005 WY 60, ¶ 15, 112 P.3d 596, 604 (Wyo. 2005), Conclusions ¶ 63.
82. The second tax, the gross products or ad valorem tax, is imposed on the “[g]ross production of minerals and mine products in lieu of taxes on the land where produced.” Wyo. Const. art. 15 § 11(a)(ii), Conclusions ¶ 50; see Wyo. Stat. Ann. § 39-13-103(b)(i).
83. For gross products, including moss rock, “‘taxable value’ means a percent of the fair market value of property in a particular class as follows: (A) Gross product of minerals and mine products, one hundred percent (100%).” Wyo. Stat. Ann. § 39-13-103(b)(iii). The property is valued using the same methods as are used for the severance tax. RME Petroleum Co. v. Wyoming Dept. of Revenue, 2007 WY 16 ¶ 14, 150 P.3d 673, 678-680 (Wyo. 2007); Conclusions ¶ 74.
84. The fair market value of Petitioner’s moss rock production is based on the value of the mineral. The applicable constitutional and statutory provisions refer to the “gross product of minerals” separate from “mine products.” Because Wyoming’s Constitution and statutes draw a distinction between minerals and mine products, we conclude the legislature did not intend to limit the imposition of the gross products tax to mined products. Rather the Constitution and the statutes are drafted in such a way as to include any valuable mineral removed from Wyoming lands. Petitioner’s attempt to limit the imposition of the tax to mined minerals is not supported by the applicable law.
85. We conclude the Department's imposition of severance and gross products tax on Steamboat Stone's 2005 moss rock production in Carbon County, Wyoming, is consistent with the applicable Wyoming statutes and the Department's regulations.
86. We further conclude Petitioner failed to meet its burden of establishing by a preponderance of the evidence that its moss rock removal activities in Carbon County, Wyoming, were not subject to either severance or gross products tax. The moss rock was a valuable mineral which Steamboat Stone had the privilege of removing and which Steamboat Stone sold throughout the United States.
87. Petitioner seeks to avoid payment of the severance and gross products taxes owed based on Mr. Lewis’s assertion, unsupported by other testimony, that no one told him about the potential severance and ad valorem tax liability as he was going through the permitting process for Steamboat Stone to collect moss rock or when Caveman Stone was collecting moss rock in Wyoming.
88. Wyoming mineral tax valuation and collection is a self-reporting system. The system relies on mineral producers to fully and accurately report mineral production to the State. It does not rely on Department employees to monitor the daily activities of mineral producers. Nor does the system require purchasers of mineral production to withhold a portion of the purchase price and remit it to the State. This unobtrusive design requires a mineral producer to take the initiative, to become familiar with the requirements of Wyoming’s mineral tax system, and to report its production in a timely and accurate manner. BP America Production Co. v. Department of Revenue, 2006 WY 27 ¶ 38, 130 P.3d 438, (Wyo. 2006), Conclusions ¶ 72.
89. Petitioner characterizes the issue in terms of what he was told during the process of obtaining the necessary permits to collect moss rock for sale. We would characterize the issue differently: Did Petitioner take the initiative and ask if Wyoming imposed any tax on moss rock collection or sale? A prudent businessman would ask whether his business operations were subject to taxation as a matter of course and would not rely on others assisting with a different aspect of his business to volunteer such information. See Facts ¶¶ 10, 17. “It has long been a basic precept that ignorance of the law is no excuse.” United Pacific Insurance Co. v. Wyo. Excise Tax Division, Dept. of Revenue and Taxation, 713 P.2d 217, 226 (Wyo. 1986); Gaudina v. Haberman, 644 P.2d 159, 166 (Wyo. 1982).
90. Petitioner’s ignorance of Wyoming’s tax statutes does not excuse Petitioner from the obligation to pay its taxes when due. This is particularly true under the facts of this case where the State, through the independent efforts of the one employee assigned to identify possible taxpayers, identified Petitioner as a potential taxpayer and provided Petitioner with the necessary information and forms prior to the due date for Petitioner to report and pay its taxes. Facts ¶¶ 20, 24, 44. By coming into Wyoming to remove a valuable mineral deposit, Petitioner obligated itself to inquire as to whether taxes would be due on its operations. Petitioner’s failure to make that inquiry will not excuse Petitioner from its obligation to pay the taxes due on the minerals removed. See BP America Production Co. v. Department of Revenue, 2006 WY 27 ¶ 38, 130 P.3d 438, (Wyo.2006), Conclusions ¶ 72.
ORDER
IT IS THEREFORE HEREBY ORDERED the Department of Revenue’s determination of value for the mineral production of Steamboat Stone Supply, Inc. is affirmed.
Pursuant to Wyo. Stat. Ann. § 16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.
DATED this _____ day of June, 2007.
STATE BOARD OF EQUALIZATION
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Alan B. Minier, Chairman
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Thomas R. Satterfield, Vice-Chairman
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Thomas D. Roberts, Member
ATTEST:
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Wendy J. Soto, Executive Secretary