Is frac sand run through attrition mills (spinning-paddle scrubbers) to remove clay, then washed, dried, and sorted by size with no remixing, taxable 'processed' sand in Texas?

Plain-English summary

The Texas Comptroller ruled that a frac-sand mining operation's sand stays exempt unprocessed sand, even though its process is more mechanically involved than a simple wash-and-sort: after mining and initial debris screening, the sand runs TWICE through "attrition mills" — machines with spinning polymer paddles that scrub clay off the sand grains — before being separated by size into stockpiles for drying. The company's two final products, 40/70 mesh and 100 mesh frac sand, are never recombined after separation, and no additives or non-native materials are ever mixed in.

The Comptroller's reasoning tracks the standard test used across this batch of sand-mining rulings: washing, drying, screening for size, and sorting are NOT processing, no matter how many mechanical steps are involved in getting there, as long as the sand's own size and composition aren't changed and it isn't remixed afterward. Even the double pass through the attrition mills doesn't change the outcome, because the mills' function is cleaning (removing clay), not resizing or recombining.

What this means for you

Frac sand and industrial sand producers

Extra process steps — like an attrition mill or scrubber — don't automatically convert unprocessed sand into taxable processed sand. What matters is whether the equipment changes the sand's physical size/shape or whether separated grades get remixed afterward. A cleaning-only step (removing clay, organics, or surface contaminants) is consistent with staying unprocessed.

Multi-entity mining operations

Note the corporate structure here: a Delaware parent and its wholly-owned Delaware LLC subsidiary jointly requested this ruling for the subsidiary's Texas mining operation — a reminder that a PLR can be requested on behalf of an operating subsidiary while naming the parent's role, but the ruling itself binds the Comptroller only as to the specific named taxpayer entities and facts.

Accountants and tax professionals

This is one of several closely related sand-mining rulings issued around the same date (see companion rulings 201901046L, 201901047L, 201901049L, and 201902003L) — useful as a set for understanding where the Comptroller consistently draws the processed/unprocessed line for frac sand operations with slightly different equipment configurations.

Common questions

Q: Does running sand through a mechanical cleaning device like an attrition mill make it taxable?
A: Not by itself. The Comptroller looks at whether the equipment changes the sand's size/shape or whether the process ends in remixing — a cleaning-only pass through an attrition mill, even twice, doesn't convert unprocessed sand into taxable processed sand.

Q: Does adding water during processing matter?
A: No — water is used throughout this process for washing, transport, and separation, and doesn't affect the taxable/nontaxable characterization; only genuine additives or non-native materials would.

Q: Can another sand mining company rely on this ruling?
A: No. It binds the Comptroller only as to the taxpayer and facts in this specific request and cannot be relied on by any other taxpayer.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051 (sales tax imposed)
• Tex. Tax Code § 151.010 (taxable item)
• Tex. Tax Code § 151.009 (tangible personal property)
• Comptroller Decision No. 27,940 (1992)
• Comptroller Decision Nos. 29,862 (1994), 44,432 (2005)
• STAR Accession Nos. 8810L0904F07 (1988), 9212L1233B12 (1992)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/201901045L

Original ruling text

January 25, 2019

RE: Private Letter Ruling No. 20180628141153

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters,[1] in response to your request dated June 19, 2018. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on whether an entity’s sand is processed or unprocessed sand.

Facts Presented

The relevant facts are based on the information provided by taxpayer’s representative COMPANY C, on behalf of their clients COMPANY A and COMPANY B. COMPANY A is a Delaware corporation and has a headquarters in CITY, Texas. COMPANY B is also a Delaware Limited Liability Company wholly owned by COMPANY A and headquartered in CITY, Texas. COMPANY B mines and sells sand in Texas. The sand is used for fracking purposes.

COMPANY B mines with an excavator by scooping the sand out of an open pit. Haul trucks move the sand to stockpiles where the sand is screened to remove roots, clay balls, rocks and large debris.

The sand is washed and then pumped to the attrition mills. The attrition mills are equipped with plymer paddles that spin the sand. The spinning action cleans away any clay still attached to the sand. The sand will pass through the attrition mills twice before moving on for sorting. The sand is separated by size and weight, and moved to different stockpiles. Pipes send the muddy water to a water recovery thickener for clarification. The different stockpiles begin the drying and final sorting process. Heat is used during the drying process but does not physically change the sand. COMPANY B did not indicate a need to recombine the sand after separation into its decanting pile. COMPANY B’s final products are two different sizes of sand—40/70 mesh frac sand and 100 mesh frac sand.

COMPANY B does not add any additives or non-native materials to the sand before delivery to customers.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Is COMPANY B’s sand unprocessed sand and not subject to Texas sales tax?

Ruling: COMPANY B’s sand products are unprocessed sand and are not taxable.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). The term “taxable item” includes tangible personal property and taxable services. Section 151.010 (Taxable Item). The term “tangible personal property” means personal property that can be seen, weighed, measured, felt, or touched or that is perceptible to the senses in any other manner and includes a computer program and a telephone prepaid calling card. Section 151.009 (Tangible Personal Property).

The sale of unprocessed sand, gravel, and similar materials is not taxable. However, the sale and transportation of processed materials is taxable. See Comptroller Decision No. 27,940 (1992); STAR Accession No. 8810L0904F07 (Oct. 4, 1988). The Comptroller has provided examples of processing. Processed materials are materials that are crushed, mixed, or subject to any other process other than basic washing and sorting. Comptroller Decision Nos. 29,862 (1994) and 44,432 (2005).

The Comptroller has also given guidance of what is not processing. “The washing, drying, screening for size, and sorting of sand, gravel and similar materials is not processing.” STAR Accession No. 9212L1233B12 (Dec. 7, 1992).

COMPANY B’s sand is not remixed and is unprocessed sand. Therefore, the sale of COMPANY B’s sand is not taxable.

STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20180628141153.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE:

[1] Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.