NAC362.010. Determination of gross value of mineral products.

     1. For the purposes of assessment and taxation of the net proceeds of minerals pursuant to chapter 362 of NRS, the gross value of mineral products must be determined in accordance with the provisions of this section.

     2. In those cases where a mineral product is sold by the producer in an arms-length transaction in free market competition, the gross value of the product is an amount equal to the proceeds of the sale of the product. This subsection applies to sales realized on all minerals produced from mining, including, without limitation, reduction, beneficiation or any treatment used by the producer within or outside this State to obtain a mineral product which is commercially marketable.

     3. In those cases where a product is exchanged for any thing or service or removed from the State in a form ready for use or sale, but not used or sold during the period covered by the statement required by NRS 362.110 to be filed, the gross value of the product is:

     (a) For sales of minerals that do not involve derivative financial transactions, the price stated in the contract or other document of sale if one is in existence; or

     (b) If minerals are transferred in kind or used to support derivative financial transactions, the closing spot price on the date of the taxable event. The spot price for precious metals will be determined by the Department by using a recognized national or international publication of prices such as the London PM fix. If no organized commodity exchange exists for a particular mineral product, the price will be the realized sales price of the mineral product.

     4. In those cases where the mineral product is used by the producer or disposed of by the producer in any kind of transaction which is not at arms-length, including, without limitation, such transactions with associated or affiliated companies, the gross value of the mineral product so used or disposed of will be determined by the Department by utilizing information supplied by the producer under this subsection and from such other appropriate sources as the Department deems necessary. The mineral producer shall supply the Department with the following information for each reporting period:

     (a) The producer’s profit and loss statements;

     (b) The proportionate profit reports and the calculations used to prepare them;

     (c) The allocation of income by states;

     (d) The amount used to calculate the percentage of depletion allowances; or

     (e) The monthly average price of the product for the months in which it was used in a manufacturing process or to provide a service.

     5. Any information submitted pursuant to paragraphs (a) to (d), inclusive, of subsection 4 must be the same as submitted to the Internal Revenue Service.

     6. The producer has the burden of proof in any determination under this section of the gross value of mineral products used or disposed of by the producer.

     7. As used in this section:

     (a) “Derivative financial transaction” means a financial transaction which uses:

          (1) A financial instrument that has no intrinsic value, but which derives its value from a contract to deliver minerals in the future at a specific price; or

          (2) An option that gives a party to the transaction the opportunity to buy minerals from or sell minerals to the other party to the transaction at a prearranged price.

     (b) “Spot price” means the price established for physical delivery of a mineral by an organized commodity exchange on the date of the taxable event.

     (c) “Transferred in kind” means a transaction in which a mineral product is delivered instead of cash to complete the transaction.

     [Tax Comm’n, Mine Proceeds Reg. No. 26, eff. 1-24-78; renumbered as Reg. No. 1, 1-22-79]—(NAC A 5-3-84; R048-01, 11-1-2001)