My county keeps taxing my limestone quarry equipment as 'processing' instead of exempt mining equipment, even after Virginia already ruled on this for my earlier tax years — what happens now?

Plain-English summary

A business operating open-pit limestone quarries in a Virginia county, and also manufacturing chemical quicklime at the same location (with similar operations elsewhere in Virginia and in another state), was assessed county Machinery and Tools (M&T) tax for the 2022 tax year. The county added assets it said the Taxpayer had omitted from its original return, and — consistent with its position on the Taxpayer's PRIOR years' returns — continued to treat certain equipment the Taxpayer claimed as exempt as instead being used in "quarrying," not "mining," and therefore taxable under the processing designation.

The taxpayer raised four issues on appeal: (1) the equipment the county called "processing" was really used in mining and should be exempt; (2) some assets were taxed twice; (3) the assessment included assets the Taxpayer had already disposed of; and (4) the assessment mistakenly left out certain assets the Taxpayer HAD reported (and presumably paid tax on) on its original 2022 return. The county's March 2024 final determination rejected the mining argument and upheld the rest of the assessment, finding no evidence of double-assessment or disposals, and faulting the Taxpayer for not submitting all requested asset filings.

Why this remands: timing against the Department's own prior ruling. The county's March 2024 determination came out just before the Department issued P.D. 24-27 (3/20/2024) — a ruling in a dispute between this SAME taxpayer and the SAME county, but for the 2018 through 2021 tax years. In that ruling, the Department held that "mining" under Virginia Code § 58.1-1101 includes the extraction of limestone from a quarry (rather than treating quarrying as something categorically different from mining), and sent the case back to the county to work out exactly what property was actually used in mining operations (and therefore exempt) versus what was taxable, along with reviewing the Taxpayer's double-assessment claims.

This ruling applies the same result to the newer year. Because the county's 2022 determination repeated the rejected "quarrying, not mining" position, the Department remanded this case with the same core instructions as P.D. 24-27 — sort out which equipment is used in mining and exempt versus taxable — plus additional instructions for the new issues this year raises: the Taxpayer must provide the county with evidence of the disposals it claims, and the county must consider the Taxpayer's information about assets it says were mistakenly excluded from the assessment.

What this means for you

Businesses in quarrying, mining, or mineral-processing operations

Virginia's Machinery and Tools tax exemption for mining equipment isn't limited to traditional underground mines — the Department has held that limestone extraction from an open-pit quarry counts as "mining" under Va. Code § 58.1-1101. If your locality is taxing your quarry equipment as non-exempt "processing" equipment, that classification may be open to challenge.

Taxpayers with an ongoing multi-year classification dispute with a locality

If you win a favorable classification ruling for one set of tax years, don't assume it automatically carries over — as this ruling shows, a locality can (and sometimes will) repeat its rejected position in a later year's assessment, requiring you to appeal that year separately, even though the Department is likely to apply the same reasoning again.

Accountants and tax professionals

When a locality's M&T assessment is under appeal, check the record for prior Department rulings involving the SAME taxpayer and locality on the same classification question — a timing mismatch between a locality's determination and an existing Department ruling (as happened here) is a strong, concrete basis for remand.

Common questions

Q: Does limestone quarrying count as "mining" for Virginia Machinery and Tools tax purposes?
A: Yes — the Department has held that "mining" under Va. Code § 58.1-1101 includes extracting limestone from an open-pit quarry, not just traditional underground mining.

Q: My locality keeps classifying my quarry equipment as taxable "processing" equipment — what can I do?
A: If the Department has already ruled on the mining/processing classification for your operation in an earlier year, cite that ruling in your appeal; a locality repeating a rejected position in a later year is a basis for remand, as happened here.

Q: What happens when a case is "remanded" to the county?
A: The county must redo its assessment consistent with the Department's instructions — here, determining which specific equipment was actually used in mining (and therefore exempt), reviewing evidence of asset disposals, and correcting any assets mistakenly omitted from the assessment — and then issue a new final determination, which the taxpayer can appeal again if still dissatisfied.

Q: Who bears the burden of proof in an M&T tax appeal?
A: A local tax assessment is deemed prima facie correct on appeal — the assessment stands unless the taxpayer proves it's incorrect.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-3983.1 D 1 — Department authority to decide taxpayer appeals of local M&T tax assessments
• Va. Code § 58.1-1101 — definition of "mining" relevant to M&T tax classification
• Va. Code § 58.1-3983.1 — further local M&T appeal procedure

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 25-4

Original ruling text

January 10, 2025

Re: Appeal of Final Local Determination

Taxpayer: *

Locality Assessing Tax: *

Machinery and Tools Tax

Dear Mr. *:

This final state determination is issued upon the administrative appeal filed by you on behalf of * (the “Taxpayer”) with the Department of Taxation. You appeal the assessment of Machinery and Tools (M&T) tax issued to the Taxpayer by *** (the “County”) for the 2022 tax year.

The M&T tax is imposed and administered by local officials. Virginia Code § 58.1-3983.1 D 1 authorizes the Department to issue determinations on taxpayer appeals of M&T tax assessments. On appeal, a local tax assessment is deemed prima facie correct, i.e. , the local assessment will stand unless the taxpayer proves that it is incorrect.

The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website.

FACTS

The Taxpayer operated a business that extracted limestone from open pit quarries in the County. The Taxpayer also manufactured chemical quicklime at its location in the County. It had similar operations in other Virginia localities and in * (State A).

The County issued an assessment for the 2022 tax year for some additional assets that the County claimed the Taxpayer had omitted on its original M&T return. The County also made adjustments to that return consistent with the determination it had made as to prior years’ returns that the equipment the Taxpayer was treating as exempt was used in quarrying, not mining, and thus was subject to M&T tax under the processing designation.

The Taxpayer filed an appeal with the County, contending that the assessment included assets that had already been reported as taxable on its original return. The Taxpayer also asserted that the activities the County considered to be processing were actually mining and, as such, any equipment that was not directly used in the mining operation was not subject to local taxation. Further, the Taxpayer indicated that the assessment not only included some assets the Taxpayer had previously disposed of, but also mistakenly excluded certain assets that the Taxpayer had reported on its original 2022 M&T return.

The County issued a final local determination in March 2024, reiterating its previous conclusion that the equipment the Taxpayer was treating as exempt was used in quarrying, not mining, and thus remained subject to tax under the processing designation. The County also determined that the assessment of tax for additional assets was correct because the Taxpayer had not submitted requested filings for all its furniture, fixtures, and equipment or produced evidence that other assets were double assessed. In addition, the County concluded that there was no evidence of any disposals.

The Taxpayer appealed to the Department, contending that 1) the activities the County designated as processing were mining; 2) the County taxed some assets twice; and 3) the assessment included assets the Taxpayer had previously disposed of; and 4) the assessment mistakenly excluded assets the Taxpayer had previously reported as taxable on its 2022 M&T return.

ANALYSIS

In its March 2024 final determination, the County concluded that the Taxpayer was not a mining business because it was operating a quarry, not a mine. That determination was issued shortly before the Department issued its determination in a case involving the same Taxpayer and locality for the 2018 through 2021 tax years, published as Public Document (P.D.) 24-27 (3/20/2024). In that case, the Department determined that the term “mining” in Virginia Code § 58.1-1101 includes the extraction of limestone from a quarry. Accordingly, the case was remanded to the County to determine what property was used in the Taxpayer’s mining operations and what property was exempt. The Department also instructed the County to evaluate the Taxpayer’s claims of duplicative assessments based on additional information provided by the Taxpayer. See also P.D. 23-43 (4/12/2023) and P.D. 23-93 (08/03/2023).

DETERMINATION

In this case, the County’s final determination as to the 2022 tax year was issued before the date of the Department’s determination in response to the Taxpayer’s appeal for the 2018 through 2021 tax years. With that determination, the Department remanded the case to the County to determine what property was utilized in the Taxpayer’s mining operations and what property was exempt. The Department also instructed the Taxpayer to provide the County with information it had requested to ensure that no duplication of assets had occurred. Once the County completed its review, it was directed to revise the assessment and issue a new final determination. If the Taxpayer disagreed with the County’s new final determination, it could appeal to the Department pursuant to Virginia Code § 58.1-3983.1.

Consistent with that determination, the Department is remanding this case to the County with the same instructions as provided in P.D. 24-27, with additional instructions as to new issues not present in the previous case. Namely, the Taxpayer must provide the County with evidence of disposals. The County must also consider the Taxpayer’s information regarding assets it claims were mistakenly excluded from the assessment.

If you have any questions regarding this determination, you may contact * in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at or **.

Sincerely,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

AR/4960.X

Related Documents

23-43

23-93

24-27