This decision underlines the importance of how mining equipment is used for purposes of exemptions from taxation under the British Columbia Social Service Tax Act (Act).
Orca Sand & Gravel Limited Partnership (Orca) appealed a decision of the British Columbia minister of finance (Minister) affirming an assessment of tax under the Act on a load-out conveyor and shiploader purchased by Orca, and disallowing Orca's claim for a refund of the tax it paid to purchase some (but not all) of the equipment. The equipment was purchased for use in connection with Orca's sand and gravel mine on Vancouver Island, the products from which were used by Orca's customers to make concrete. The conveyor system and shiploader were purchased to transport extracted sand and gravel products from stockpiles over 1.7 kilometers of land and 450 meters of ocean for loading onto a ship located offshore for delivery to market.
The key issue on the appeal was the interpretation of section 13.2 of the Social Service Tax Act Regulations (Regulations) that exempts from tax machinery or equipment that is purchased for use primarily (more than 50%) and directly in the manufacture of qualifying tangible personal property, including the extraction or processing of minerals. For machinery or equipment that is to be used in relation to the operation of a mineral mine, the Regulations provided that the exemption was limited to use at the "mine site" from the point at which the raw material was extracted from the ground to the point at which the finished product was placed on a vehicle, or other conveyance for removal from the mine site.
The Minister denied the exemption on the basis that a "mine site" was limited to the area in which the actual extraction and processing of minerals takes place and that the load-out convey or and shiploader did not qualify. Orca disagreed, arguing that the load-out conveyor and shiploader were within the "mine site."
In support of its position, Orca relied on its mine permit and Environmental Assessment Certificate, both of which were issued by the provincial government and both of which covered the entirety of Orca's operations. Orca submitted that from a provincial government perspective, the entire contiguous site is a "mine site." Although the British Columbia Supreme Court (BCSC) was persuaded by Orca's submissions in this regard, it ultimately dismissed the appeal on the basis that the equipment was not used "primarily" in the manufacture of aggregate. Rather, on the evidence before it, the BCSC found that the equipment was used more than 50% of the time to transport aggregate for loading onto vessels and barges.
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