How did Texas tax frac-tank cleaning, oilfield waste hauling, drilling-mud transportation and pumping, and trucking-only charges?

Plain-English summary

Cleaning a frac tank was not taxed as janitorial service because the tank was not real property. It was taxable as maintenance of tangible personal property and had been taxable since October 2, 1984.

If the provider only transported its own drilling mud to the location and did not pump it down the well bore, the total charge was taxable. If it also performed the pumping service, it paid tax when buying the mud and did not collect tax on the pumping or transportation charges.

The letter treated waste collection and disposal resulting from oil-or-gas exploration, development, or production as exempt and said trucking-only service with no sale was not taxable.

There is a source-text conflict: after giving the specific transportation-versus-pumping answer for item 4, the letter also includes item 4 in a later group described as exempt waste collection and disposal. The published text does not reconcile the two statements.

What this means for you

The historical treatment varied with what was being cleaned or hauled and whether the provider merely transported mud or also pumped it. Because the ruling contradicts itself on item 4, that service should not be classified from this letter alone.

Common questions

Was frac-tank cleaning taxable? Yes, as maintenance of tangible personal property rather than janitorial service.

Were oil-and-gas waste collection and disposal taxable? The letter says they were exempt when resulting from exploration, development, or production activities.

Was trucking-only service taxable? No, under item 7.

Can item 4 be classified confidently? No. The letter gives a specific taxable-or-pumping answer and later also lists item 4 among exempt waste services.

Citations and references

• No statute or administrative rule is cited in the letter text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8711L0846D05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

November 6, 1987

Dear **:

Thank you for your letter concerning the taxability of various services
performed in your business operations. You ask whether the following
items
are taxed:

1. Washing or cleaning frac tank. Is this taxable under Janitorial
   service?

2. Trucking charges for hauling salt water to disposal.

3. Charges for hauling salt water per bbl to disposal.

4. Trucking charges for hauling spud mud to location. (trucking only
   no charge for our mud.)

5. Trucking charges for hauling waste (such as dirty water & mud) to
   disposal.

6. Contract price for hauling drilling fluids to disposal.

7. Trucking charges only with no sale.

Answers:

Item 1. A frac tank is not real property so cleaning of it is not taxed
under the new Janitorial service. But, it is taxable as maintenance of
tangible personal property since October 2, 1984.

Item 4. If you only transport your mud to the location and don't actually
pump it down the well bore, the total charge is taxable. If you perform
the pumping service with your mud then you only need to pay tax on the
mud when you buy it and don't collect tax on the pumping or transporting
charges.

Items 2,3,4,5 & 6 are waste collection and disposal services which are
exempted when resulting from activities associated with exploration,
development or production of oil or gas, so you don't need to collect
the tax.

Item 7 is not a taxable service.

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 Policy Division.

Sincerely,
Tom Soto
Tax Policy Division