Ezel / Tax Rulings / TX
TX 8707L0822G03 Sales and/or Use Tax (State,Local,MTA) 1987-07-07

Was electricity used to operate disposal wells exempt when it transported artificially mixed salt water injected into oil wells?

Short answer: No. The artificially mixed salt water was not naturally occurring brine or a material extracted from the earth, so electricity used to transport it was not exempt.

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 addresses electricity used to transport artificially mixed salt water through disposal wells under the law then in effect. Its conclusion turns on the water not being naturally occurring brine or material extracted from the earth. Verify current utility and natural-resource exemptions. STAR documents may no longer represent current policy even when not marked superseded.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 taxpayer used electricity to operate wells that disposed of salt water. The water had been artificially mixed and injected into oil wells.

The Comptroller concluded that this water was not naturally occurring brine and did not qualify as a “material extracted from the earth” under Section 151.317. Electricity used to transport it therefore was not exempt.

What this means for you

The letter drew the exemption line based on the material's origin. Electricity transporting artificially produced salt water did not qualify merely because the water was used in oil-field operations and later pumped back underground.

Common questions

Was the disposal-well electricity exempt? No.

Why not? The salt water was artificially mixed rather than naturally occurring brine or another material extracted from the earth.

What authority did the Comptroller cite? Tax Code Section 151.317 and Rule 3.295(g)(2).

Citations and references

  • Tex. Tax Code § 151.317 — cited for the “material extracted from the earth” exemption.
  • Comptroller Rule 3.295(g)(2) — cited for the exemption's application.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller July 7, 1987

Dear ***:

Thank you for your recent letter regarding state sales tax on
electricity used to operate salt water disposal wells.

Salt water which has been artificially mixed and injected into oil wells
is not naturally occurring brine. The salt water does not qualify as a
"material extracted from the earth" under Section 151.317 and electricity
used to transport it is not exempt. Please refer to Rule 3.295 (g)(2)
endorsed.

I apologize for any, inconvenience caused by confusion over the
applicability of the exemption.

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 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,
Sandi Skaggs
Tax Policy Section
Tax Administration Division

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