When did Texas exempt drilling rigs, components, and pipe bought for mineral exploration or production outside the state?

Plain-English summary

The Texas Comptroller said a drilling rig and its component accessories qualified for sales-tax exemption when purchased intact or as a completed unit for use in another state. The purchaser had to issue an exemption certificate claiming Section 151.324(b).

Drill pipe, casing, tubing, and other pipe faced a narrower condition. Those items qualified only when used at an offshore facility outside Texas territorial waters, which the letter described as three marine leagues.

What this means for you

The letter did not treat every out-of-state drilling purchase alike. A completed drilling rig and its accessories could qualify based on use in another state, while pipe required the specified offshore use beyond Texas territorial waters.

Common questions

Could a completed drilling rig qualify for exemption? Yes, when bought intact or as a completed unit for use in another state.

Did the purchaser need documentation? Yes. The letter required a signed exemption certificate citing Section 151.324(b).

Did drill pipe qualify merely because it would be used outside Texas? The letter said pipe qualified only at an offshore facility outside Texas territorial waters.

Citations and references

• Tex. Tax Code § 151.324(b) — the exemption reason the purchaser was told to state on the certificate.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8703L0800B04

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

BOB BULLOCK
Comptroller March 19, 1987

Dear *:

Thank you for your letter concerning the applicability of an exemption
for
drilling equipment purchased for exclusive use outside this state for the
exploration for or production of oil, gas, sulphur, or other minerals.

A drilling rig and its component accessories would qualify for exemption
from
sales tax when purchased intact or as a completed unit for use in another
state. You must complete and sign an exemption certificate (enclosed)
claiming Sec. 151.324(b) of the Tax Code as your reason.

Drill pipe, casing, tubing and other pipe, however, only qualify for
exemption when used at an offshore facility outside Texas territorial
waters
(3 marine leagues).

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

Please feel free to contact me if you have additional questions. You may
write me, call toll free 1-800-252-5555 from anywhere in Texas or phone
512/463-4600.

Sincerely,
F. Wayne McDonald
Tax Policy Section
Tax Administration Division