Mining License Tax

Frequently Asked Questions





Sections:
  • Mining License Tax FAQs



  • Mining License Tax FAQs

    Who must have a mining license and file a tax return?
    What is the Mining License Application?
    Is it necessary to have both a mining license with the DOR and an Alaska business license?
    What is a mining operation?
    Is there a penalty for not having a mining license?
    Who can file a mining license tax return short form?
    What is a royalty?
    When are mining license tax returns due?
    Is it possible to get an extension?
    Are new mining operations exempt?
    What is the certificate of exemption?
    What recording district is a mining operation located?
    Are any other mining operations exempt from the mining license tax?
    What is taxable income and what are the mining license tax rates?
    Is there a penalty for failure to timely file a return or pay tax due?
    What is the Annual Placer Mining Application (APMA) filed with the DNR?


  • Who must have a mining license and file a tax return?

  • A person engaged in one or more of the following activities in the state is in the business of mining and shall obtain a mining license and file a mining license tax return: 1) A person owning and operating a mining property, 2) A person owning a mining property and receiving lease payments or royalty payments based on production, 3) A person leasing a mining property, 4) A person processing a mineral interest, whether an economic or production interest, in a producing property, including royalty, working or operating interests, net profits, overriding royalties, carried interests and production payments. For additional reading about when a license is required, please see 15 AAC 65.010.

  • What is the Mining License Application?

  • A person who is required to obtain a license under AS 43.65.010 and 15 AAC 65.010 shall file an application for a license on Form 661 provided by the department. The application for an initial mining license must be made on or before the time the mining operation enters the developmental phase. A license expires on April 30 of each year and must be renewed by filing a renewal application before May 1. Upon receipt of an application, the department will issue a mining license to the applicant. There is no fee for obtaining a mining license.


    The department has provided a check-the-box option on its annual mining license tax return for license renewal.



  • Is it necessary to have both a mining license with the DOR and an Alaska business license?

  • Under current law, businesses that have a mining license with the DOR are not required to obtain an Alaska business license with the Department of Commerce, Community, and Economic Development (DCCED). If you are no longer required to obtain a mining license as a result of the new legislation exemptions, you will be required to obtain an Alaska business license. Please call the DCCED for more information about obtaining an Alaska business license at (907) 465-2550.

  • What is a mining operation?

  • A mining operation is an operation by which valuable metals, ores, minerals, asbestos, gypsum, coal, or stone, or any of them are extracted, mined, or taken from the earth. A mining operation consists of a single mining property or several mining properties that are connected geographically. A mining license must be obtained for each mining operation in the state.

  • Is there a penalty for not having a mining license?

  • Under AS 43.05.290(h), a person engaging in or attempting to engage in a business, trade, profession, or occupation for which a license is required under this title, who willfully fails to obtain the license, is guilty of a misdemeanor and, upon conviction, is punishable.

  • Who can file a mining license tax return short form?

  • Form 662SF can only be used by a cash basis taxpayer with one mining operation and no other business activities. A taxpayer who has expenses that are incurred to support multiple business and/or mining activities must use the Mining License Tax Return Long Form (662).

  • What is a royalty?

  • A royalty is compensation, consideration, or fee paid for a license or privilege to use an intellectual property or a natural resource, computed usually as a percentage of revenue or profit realized from the use. Royalty income received from mining operations is taxable and under AS 43.65.010(h), taxes upon royalties shall be paid by the taxpayer receiving the royalties and no deduction, excepting depletion, is allowed.

  • When are mining license tax returns due?

  • A taxpayer shall file the return either on a calendar year or fiscal year basis, in conformance with the basis used in making the return for federal income tax purposes. A taxpayer with a calendar year-end shall file a return and pay any tax due on or before April 30 of the following calendar year. A taxpayer with a fiscal year-end shall file a return and pay any tax due on or before the last day of the fourth month following the end of the fiscal year.

  • Is it possible to get an extension?

  • Upon application (Form 668), the department will, in its discretion, grant an extension of time to file a mining license return. Form 668 must be filed no later than the date the return is due, and must include a complete statement of the reasons for the request for an extension. A copy of the approved extension request must be filed with the mining license tax return. It is important to note that an extension of time to file does NOT extend the time for payment of the total amount of tax due.

  • Are new mining operations exempt?

  • New mining operations are exempt from the mining license tax for a period of 3 ½ years after production begins. In order to be granted a certificate of exemption by the DOR, the owner or operator of a new mining operation must record, in the recording district in which the operation is located, a sworn affidavit of initial production, on a form provided by DNR, and must be recorded within 90 days after the date of initial production. Failure to record the affidavit timely may result in forfeiture of any right to the exemption.

  • What is the certificate of exemption?

  • A certificate of exemption issued for a mining operation temporarily exempts from the mining tax all persons receiving income from the property. For example, both the operator of a mining property and a royalty recipient are exempt from mining tax for the 3 ½ year period. Upon receipt of notification of initial production from the DNR, the DOR will issue a certificate of exemption to a new mining operation, if it qualifies. A certificate of exemption will be issued for a single mining operation, therefore, it will not exempt a person from tax on income received from other mining operations.

  • What recording district is a mining operation located?

  • Recording district search results can be found at the DNR Recorder’s Office public website at
    http://dnr.alaska.gov/ssd/recoff/findYourDistrict.cfm

  • Are any other mining operations exempt from the mining license tax?

  • With an effective date of January 1, 2012, new legislation exempts quarry rock, sand and gravel, and marketable earth mining operation from the mining license tax. Anyone who mines quarry rock, sand and gravel, and/or marketable earth exclusively is no longer required to obtain a mining license from the Department of Revenue (DOR) or file a mining license tax return for activities on or after January 1, 2012.

  • What is taxable income and what are the mining license tax rates?

  • For the purpose of computing the mining license tax due, taxable income is gross income as defined by 15 AAC 65.110 less deductible mining expenses as defined by 15 AAC 65.120 and 15 AAC 65.125.


    The tax rates are based on mining net income and no tax is due for mining net income of $0 - $40,000. For amounts $40,001 - $50,000 the tax is $1,200 plus 3% over $40,000. For amounts $50,001 - $100,000 the tax is $1,500 plus 5% over $50,000. The last bracket of any amount over $100,000 has a tax due of $4,000 plus 7% over $100,000.



  • Is there a penalty for failure to timely file a return or pay tax due?

  • Under AS 43.05.220(a), 5% shall be added to a tax for each 30-day period or fraction of the period during which the taxpayer fails to file at the time or times required by law or regulation a return or report, or pay the full amount of the tax. The penalty may not exceed 25% in the aggregate.

  • What is the Annual Placer Mining Application (APMA) filed with the DNR?

  • In order to conduct exploration or mining activities in the State of Alaska permits and licenses are required by as many as 12 State and Federal agencies. To assist the industry with applications in the complex permitting process, the State designed the Annual Placer Mining Application (APMA). The APMA is a permit application process for mining and reclamation of locatable as well as saleable minerals. Each year a claim owner intends to conduct mining activity, including exploration, mining, or transportation of equipment, an APMA should be completed and submitted to a State Division of Mining Office nearest to where the activity will take place. A complete DOR mining license application still needs to be filed with the tax division, as additional information is requested on the application that is not provided on the APMA.