When were downhole fishing services taxable during drilling, completion, and later work on an oil or gas well?

Plain-English summary

The letter divided downhole fishing jobs by the well's stage and purpose. Services performed during drilling or before the well was brought to completion were not taxable. After completion, fishing jobs were taxable unless they were performed during a workover or to repair the casing string.

The service company owed tax on equipment used to provide the service whether the job itself was taxable or nontaxable. When the job was taxable, tax applied to the total labor-and-equipment charge even if the equipment “rental” was separately stated.

Common questions

Were fishing services during drilling taxable? No.

Were services before initial completion taxable? No.

Were post-completion fishing jobs taxable? Yes, except when performed during a workover or to repair the casing string.

Did separate statement of equipment rental remove it from a taxable job's tax base? No. The entire labor-and-equipment charge was taxable.

Did the service company owe tax on its own equipment? Yes, whether the service job was taxable or nontaxable.

Citations and references

• The letter cited no numbered statute or Comptroller 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/8610L0766D01

Original ruling text

October 21, 1986

Dear ***:

Services performed downhole during the drilling operation or prior to
bringing the well to completion are not taxable.

Fishing jobs done once the well has been brought to completion will the
taxable unless done during a workover or to repair the casing string.

The service company owes tax on the equipment used to provide the service
regardless of whether the job is taxable or non-taxable.

If the job is a taxable job, tax is due on the total charge for
labor and equipment regardless of whether the charge for the "rental" of
the equipment is separately stated.

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. The regular number is
512/463-4600. You may write us at the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division