Ezel / Tax Rulings / TX
TX 8703L0801D13 Sales and/or Use Tax (State,Local,MTA) 1987-03-12

How did Texas tax a flint-coat process on oil-field casing and the sand, epoxy, and flint rock used in that process?

Short answer: The processor's total customer charge was taxable. Sand consumed in the process and epoxy and flint rock transferred to the customer could be bought tax-free with exemption certificates.

Apply this to your situation

This page answers the general question as of 1987. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1987
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 1987 Texas Comptroller letter applies then-current processing and exemption-certificate rules to a specific flint-coat method. The tax treatment of processing services, consumed materials, transferred materials, exemption certificates, and local taxes may have changed or differ for another method. STAR documents may no longer represent current policy even when not marked superseded. Identities 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 Texas Comptroller classified flint-coating oil-field casing as processing and said the processor's total charge to its customer was subject to sales tax.

The inputs received different treatment. Sandblasting sand could be purchased tax-free with an exemption certificate because it was directly consumed in the process. Epoxy and flint rock could also be purchased tax-free with exemption certificates because they were transferred to the customer as part of the process.

What this means for you

Taxing the customer charge did not make every input taxable to the processor. The letter distinguished sand consumed during processing from epoxy and flint rock transferred to the customer, while allowing exemption-certificate purchases for both categories.

Common questions

Was the flint-coat service taxable? Yes. The total customer charge was taxable.

Could the sandblasting sand be bought tax-free? Yes, with an exemption certificate, because it was consumed in the process.

Could the epoxy and flint rock be bought tax-free? Yes, with exemption certificates, because they were transferred to the customer.

Citations and references

  • Comptroller Rule 3.287 — enclosed by the Comptroller for reference.
  • Comptroller Rule 3.300 — enclosed by the Comptroller for reference.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller March 12, 1987

Dear *****:

Thank you for your recent letter regarding the flint coat process on oil
field casing.

We consider this to be processing. As we discussed, your total charge
to your customer is subject to sales tax. The sandblasting sand may be
purchased tax free on an exemption certificate because it directly
consumed in the process. Because, the epoxy and flint rock are
transferred to the customer with the process, these items may also be
purchased tax free on an exemption certificate. I am enclosing Rule
3.287 and 3.300 for your reference.

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
Al Van Allen
Tax Policy Section
Tax Administration Division

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