(1) The contract sales price of the coal is calculated immediately after the point the coal is prepared for shipment to the first arm's-length purchaser of the coal. "Prepared for shipment" and "purchaser" are defined in 15-35-102, MCA. Contract sales price will be the calculated FOB mine price. Transportation costs that reduce the contract sales price of the coal shall not reduce the contract sales price below zero. The contract sales price will be further adjusted by deducting from either the FOB mine price or a value imputed by the department:

(a) the allowance for federal, state, and Indian royalties; and

(b) the amounts charged to the purchaser to pay taxes on production.

(2) The formula in (1) should be applied to each contract individually.