Ezel / Tax Rulings / TX
TX 8607L0744C03 Sales and/or Use Tax (State,Local,MTA) 1986-07-15

Did casing and tubing bought for use in high-pressure New Mexico wells qualify as drilling equipment under Section 151.324(b)?

Short answer: No. The Comptroller classified casing and tubing as production equipment rather than drilling equipment and said they were exempt only when used offshore outside Texas's territorial limits.

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This page answers the general question as of 1986. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1986
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

The requester asked about casing and tubing purchased for use in high-pressure wells in New Mexico.

The Comptroller said casing and tubing were production equipment, not drilling equipment, so they did not qualify under Section 151.324(b). The letter further said they were exempt only when used offshore beyond Texas's territorial limits.

Common questions

Were casing and tubing drilling equipment under Section 151.324(b)? No.

How were they classified? As production equipment.

What exempt use did the letter identify? Offshore use outside Texas's territorial limits.

Citations and references

  • Tex. Tax Code § 151.324(b) — drilling-equipment exemption discussed in the letter.

Source

Original ruling text

July 15, 1986

Dear ***:

*** has asked me to write to you concerning tax on casing
and tubing purchased for use in high pressure wells in New Mexico.

Casing and tubing are not considered drilling equipment and do not fall
within the exemption provided in Tex. Tax Code Ann Sec. 151.324 (b).
Casing and tubing are considered production equipment and only exempt if
used offshore outside the territorial limits of Texas.

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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