With all of the natural gas mining activity in Pennsylvania, the Department of Revenue has issued various guidance on what machinery, equipment and supplies falls within the "mining" exemption under Pennsylvania's sales and use tax.  Over the last few years, the Department has issued Sales and Use Tax Bulletin 2012-01 concerning mining site preparation activities and published other information concerning natural gas mining in a question and answer format on its website.  We previously summarized this guidance in our July 2012 newsletter, available at www.mwn.com/pubs/xprPubSearch.aspx?xpST=PubSearch.  Most recently, the Department issued Sales and Use Tax Information Notice 2014-02 (9/22/2014), which is available on the Department's website at www.revenue.state.pa.us.  In addition to compiling some of the guidance previously issued, Notice 2014-02 addresses various additional natural gas mining topics.  Following are a few of the new examples the Department has given as either taxable activities or exempt mining activities.

Exploration activities qualifying as mining
Mining, as defined in the Department's regulation, includes certain exploration activities.  The Department sets forth the following examples of exempt exploration property and services:  seismic exploration services; exploratory well drilling services; seismic imaging services; and seismic data.

Exempt Mining Equipment
The Department also has identified numerous examples of exempt mining machinery, equipment and supplies.  In addition to standard mining machinery and equipment, the Department identifies certain remote control and accompanying monitoring equipment, and certain lighting equipment and supplies used to light production activities, as exempt.

Materials used in the construction of storage ponds are exempt from sales and use when used in the construction of "holding ponds, tanks and other containment vessels for fluids that are pumped from the well hole and reused in fracturing multiple wells."

The Notice points out that, under the Department's mining regulation, "property used to remove trees and clear ground preparatory to extraction activities" is taxable; however, machinery and equipment "such as bulldozers, graders, fill, seedlings, grass seed, shrubs, stone, concrete and soil nutrients used in backfilling and reclamation of directly used mining facilities" is exempt when such backfilling and reclamation is required by law.

Mine Management and Administration
The new information notice also identifies certain taxable mine management and administration activities, including "[c]ommunication devices used for managerial direction and supervision."  On the other hand, "[c]ommunication devices such as handheld radios used predominantly in mining activities such as work coordination among production employees of equal authority," are exempt from tax.