Ezel / Tax Rulings / TX
TX 8503L0639A01 Sales and/or Use Tax (State,Local,MTA) 1985-03-01

When could condensate used as well-treating fluid be sold tax free, and when was tax due?

Short answer: Condensate was generally taxable. A well operator could give an exemption certificate when treating its own well and the condensate remained in and was sold with the crude; a reseller could give a resale certificate. Sales to well-service companies were taxable.

Apply this to your situation

This page answers the general question as of 1985. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1985
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

Condensate was a taxable item, but the letter identified two tax-free purchase paths.

A well operator treating its own well could give the seller an exemption certificate when the condensate would remain in the well and be sold along with the crude oil. The certificate had to state those facts.

A firm buying condensate for resale could give a resale certificate instead of paying tax. However, sales of condensate to a well-servicing company were taxable.

Common questions

Was all well-treatment condensate exempt? No. What use supported the operator exemption? The operator treated its own well and the condensate remained in and was sold with the crude. Could a well-service company buy it tax free under this letter? No; that sale was taxable.

Citations and references

The reproduced letter cites no numbered statute or rule.

Source

Original ruling text

March 1, 1985

Dear ***:

Thank you for your recent letter regarding the sale of condensate as
well treating fluid.

As we discussed, condensate is a taxable item. There are, however,
times when it may be purchased tax free.

When condensate is sold to a well operator for treating his own well and
the condensate will remain in and be sold along with the crude oil, you
may accept an exemption certificate from the operator in-lieu-of tax.
The certificate should contain the above information.

When condensate is sold to a firm for resale, you may accept a resale
certificate in lieu of tax. However, sales tax is due on the sale of
condensate to a well servicing company.

I am enclosing copies of appropriate certificates for your use.

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division

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