TX 8509L0664A01 Sales and/or Use Tax (State,Local,MTA) 1985-09-12

How did Texas sales tax apply to an oilfield electrician's repairs, installations, modifications, and real-property work?

Short answer: Repairs and modifications to personal property were generally fully taxable; new installations and material sales taxed materials but not labor or equipment, while identified real-property work was nontaxable.

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

Disclaimer: This is an official 1985 Texas Comptroller taxpayer-response letter classifying multiple described oilfield electrical invoices as repairs, modifications, installations, inspections, real-property work, abandonment work, or tank maintenance. Several conclusions expressly say an invoice only 'appears' to describe particular work, and the letter warns that unclear field-work invoices would be treated as taxable. It also says different facts could change the opinion. Current oilfield, contractor, repair, installation, real-property, tank, invoicing, and sales-tax rules may differ, and STAR documents may no longer represent current policy even when not marked superseded. Letters on STAR can support detrimental reliance only for the taxpayer to whom the letter was directly issued under 34 Tex. Admin. Code Rules 3.1 and 3.10. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.

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

The Comptroller classified the contractor's invoices individually. New power hookups and the sale and installation of an anchor or other materials taxed the materials but not labor or equipment. An inspection with no repair, identified real-property work, and apparent well-abandonment work were nontaxable.

Relocations, modifications, and repairs to personal property—including a head switch, power panel, transformers, well-site equipment, a motor, and a transformer bank—were taxable on the total charge for labor, materials, and equipment. Tank maintenance was fully taxable for a tank of 500 barrels or less and nontaxable for a tank over 500 barrels.

The letter stressed invoice descriptions. Field work would be treated as taxable unless the invoice clearly showed real-property work or a new installation; in those circumstances, labor and equipment could be excluded from the tax base.

Common questions

Were new installations fully taxable? No; the examples taxed materials but not labor or equipment.

Were repairs or modifications to personal property fully taxable? Yes, in the described examples.

Was real-property work taxable? The identified real-property invoice was nontaxable.

Why did invoice wording matter? Unclear field work would be treated as taxable unless the invoice clearly identified real-property work or a new installation.

Citations and references

The reproduced letter cites no numbered statute or rule.

Source

STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
Opinion: https://star.comptroller.texas.gov/view/8509L0664A01

Original ruling text

September 12, 1985

Dear ***:

Thank you for your letter concerning the taxability of services provided
by your company.

I will list your invoices with a brief description of the services as I
understand them and the taxability of such immediately following.

Invoice #*** - This appears to be a new power hook-up installation.
Sales tax is due on materials. - No tax on labor or equipment.
Invoice #*** - Appears that you are relocating a head switch at a
tank battery and running a new conduit.
The total amount is taxable. Labor, materials, and service truck.
Invoice #*** - Appears to be the sale and installation of a pulling
unit anchor.
Tax is due on the anchor. - No tax due on labor or equipment.
Invoice #*** - Appears you were modifying an existing power panel
Total charge (labor, equipment, and materials) is taxable.
Invoice #*** - Appears to be another modification. Replace 3-25 KVA
transformers with 1-75 KVA transformer.
Total charge is taxable.
Invoice #*** - Appears to be only an inspection with no repairs necessary.
Nontaxable.
Invoice #*** - Appears to be a repair done at the well site.
Total charge is taxable.
Invoice #*** - Appears to be work on real property.
Nontaxable.
Invoice #*** - Appears to be part of the abandonment of a well. If so,
Nontaxable.
Invoice #*** - Appears to be a sale and installation of materials.
Materials - taxable. - Labor - nontaxable.
Invoice #*** - Appears to be a repair to personal property.
Total charge is taxable (labor, materials, equipment).
Invoice #*** - Same as above.
Total charge is taxable.
Invoice #*** - Same as above.
Total charge is taxable.
Invoice #*** - Appears to be part of maintenance to a storage tank.
Storage tank 500 bbls or less - total taxable.
Storage tank more than 500 bbls - nontaxable.
Invoice #*** - Appears to be a repair of a motor at the lease site.
Total charge is taxable.
Invoice #*** - Appears to be a repair to a transformer bank.
Total charge is taxable.
Invoice #*** - Same as above.
Total charge is taxable.
Invoice #*** - Same as above.
Total charge is taxable.
Invoice #*** - Same as above.
Total charge is taxable.

There were several invoices that I was unable to determine what was actually being
done at the well site. You should clearly indicate, in the description of work on
the invoice, what type of equipment and whether its an installation, repair,
modification or what that is being performed. All work in the field will be considered
as taxable unless it is clearly indicated on the invoice to be real property or a new
installation. Under these circumstances, the labor and equipment charges can be
excluded from the tax base.

This opinion is based on the facts presented. If there are additional or different
facts, the opinion may change.

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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