Is frac sand that's washed, dried, and sized taxable as 'processed' material, or exempt as unprocessed sand, under Texas sales tax law?

Plain-English summary

The Texas Comptroller ruled on whether a frac-sand mining company's sand is taxable "processed" material or exempt "unprocessed" material, and split the answer by product: one grade of sand stayed exempt, the other became taxable, based on a single processing step. The company mines sand for oil and gas well fracturing, then screens out debris, washes it, separates it by particle size into a "wet plant," lets it drain in decanting stockpiles, and dries it in rotary dryers to produce two end products: 40/70 sand and 40/140 sand.

Texas's long-standing rule (dating to a 1988 STAR letter) is that washing, drying, screening for size, and sorting are NOT "processing" — sand that only goes through those steps stays exempt raw material. But crushing, mixing, or any other manufacturing-type step DOES make it taxable "processed" material. The dividing line in this ruling: the 40/70 sand needs no further work after its size-sorted stockpile drains and dries, so it stays unprocessed and exempt. The 40/140 sand, by contrast, requires the company to scoop sand from two DIFFERENT size-sorted stockpiles and recombine them with a front-end loader to hit the target size blend — and that extra mixing step tips it into taxable processed material.

This ruling also carries an unusual procedural quirk: it was requested anonymously through a representative who never disclosed the actual taxpayer's identity to the Comptroller. Under Rule 3.1(c)(1)(A), that means the ruling carries no detrimental reliance relief at all — even the entity that requested it can't rely on it for audit protection, only for general guidance.

What this means for you

Sand, gravel, and aggregate producers

The core test remains simple and consistent since at least 1988: washing, drying, and sorting by size don't make your product taxable, but ANY blending, mixing, crushing, or combining step does. If you're producing a graded product by physically recombining material from different sorted piles — even without changing individual particle size — that recombination itself is enough to convert exempt raw material into taxable processed material.

Oil and gas frac-sand suppliers

This is directly on point for frac sand suppliers producing multiple mesh sizes (like the common 40/70 and 100 mesh grades). If your process for one grade requires blending from separate stockpiles and another doesn't, expect different tax treatment for each grade even though both come from the same mine and same basic wash/dry/sort line.

Anyone considering an anonymous ruling request

This ruling is a cautionary example: requesting guidance without disclosing your identity gets you the Comptroller's legal reasoning, but not the audit-protection "detrimental reliance" shield that makes most private letter rulings valuable — worth confirming with counsel whether an anonymous request meets your actual goals before choosing that route.

Common questions

Q: Does washing and drying sand make it taxable?
A: No. Washing, drying, and screening for size are explicitly NOT processing under longstanding Comptroller guidance (STAR 9212L1233B12, 1992), so sand that only goes through those steps stays exempt.

Q: What single step turned this company's 40/140 sand taxable?
A: Recombining sand scooped from two different size-sorted stockpiles with a front-end loader to hit the target size blend — that mixing step is what the Comptroller treats as "processing."

Q: Why doesn't this ruling protect the requesting company from an audit?
A: Because the request was submitted anonymously — the taxpayer's identity was never disclosed. Rule 3.1(c)(1)(A) withholds detrimental reliance relief in that situation, even for the requester.

Q: Can another sand or aggregate company rely on this ruling?
A: No. Beyond the general rule that PLRs bind the Comptroller only as to the named taxpayer, this one is even more limited since no taxpayer was ever named at all.

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)
• 34 Tex. Admin. Code Rule 3.1(c)(1)(A) (anonymous requests — no reliance relief)
• Comptroller Decision No. 27,940 (1992)
• Comptroller Decision Nos. 29,862 (1994), 44,432 (2005)
• STAR Accession Nos. 8810L0904F07 (1988), 9212L1233B12 (1992), 8809T0895B04 (1988)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/201902003L

Original ruling text

February 7, 2019

RE: Private Letter Ruling No. 20180425140055

Anonymous Taxpayer

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 requests dated April 24 and May 10, 2018. The identity of the entity to which this request relates was not disclosed. As noted in Rule 3.1(c)(1)(A), detrimental reliance relief is not provided if the identity of the entity to which the request relates is not revealed.

You requested guidance on whether your client, a sand mining business, sells processed or unprocessed sand.

Facts Presented

The relevant facts are based on the information provided by COMPANY, on behalf of its undisclosed client (Taxpayer).

Taxpayer mines and sells sand in Texas for use in oil and gas well fracturing purposes. Taxpayer extracts the sand with an excavator by scooping the sand out of its natural environment. Trucks then haul the sand to stockpiles where it sits until Taxpayer begins preparing the sand for sale.

To prepare the sand for sale, Taxpayer first screens it to remove tree roots and large debris. Taxpayer then washes the sand and pumps it to the wet plant. There, Taxpayer separates the sand by size and then moves it to two wet stockpiles to decant. Taxpayer runs the muddy water used to wash the sand through a water recovery thickener for clarification and the size of the sand particles are not reduced or otherwise changed. Once the decanted stockpiles have drained enough water, Taxpayer uses front-end loaders to move the two stockpiles to its rotary dryers.

The Taxpayer’s end products are two different sizes of sand—40/70 sand and 40/140 sand. Size 40/70 sand does not require any recombining after it is separated into its decanting pile. Sand sized at 40/140 does require recombining which is done with a front- end loader by scooping sand from one pile and then from the other pile.

Question, Ruling, and Analysis

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

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

Ruling: Taxpayer’s 40/70 sand is unprocessed sand and Taxpayer’s sale of its 40/70 sand is not taxable. Taxpayer’s 40/140 sand is processed sand and Taxpayer’s sale of 40/140 sand is 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).

Based on the examples described above, the additional step of remixing sand causes the sand to be processed sand, the sale of which is subject to sales tax. See STAR Accession No. 9212L1233B12 (Dec. 7, 1992) and 8809T0895B04 (Sept. 9, 1988). Therefore, Taxpayer’s 40/70 sand is unprocessed sand because Taxpayer does not recombine the sand after drying. Taxpayer’s 40/140 sand is processed sand because it is a combination of sands from different stockpiles mixed together to create the desired size combination. Therefore, Taxpayer’s sales of the 40/70 sand are not taxable, and its sales of the 40/140 sand are taxable.

Comptroller’s Decisions and 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. 20180425140055.

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.