Were gas-chart work, gas-volume calculations, and calibration or repair of oilfield meters taxable in Texas?

Plain-English summary

The potential client integrated gas charts, calculated gas volumes for audits, calibrated and repaired gas-orifice meters, and performed certain Railroad Commission well tests.

If the chart and volume-calculation work merely recorded meter information like a gauger, it was not taxable. Other chart or calculation services required more facts.

Meter calibration and repair depended on location:

• Meters at the lease or well site, between the lease and a transmission line, or attached to flow or gathering lines were tangible personal property. Calibration and repair were taxable, effective October 2, 1984, and the total customer charge was taxable.
• Meters on a pipeline or at a booster station were part of real property. Repair labor became taxable January 1, 1988, and the total charge was taxable.
• Maintenance labor on real property was nontaxable, but records had to show that calibration was maintenance rather than repair.

What this means for you

The historical classification turned on both the work and the meter's physical location. The letter did not classify well tests, and it required additional information for chart services that went beyond gauger-like recording.

Common questions

Were gas-chart and volume calculations taxable? Not when they only recorded meter information as a gauger would.

Were flow-line or gathering-line meter calibration and repair taxable? Yes.

Were pipeline meter repairs taxable? Yes, as real-property repairs under the letter.

Was real-property maintenance taxable? No, if records substantiated maintenance rather than repair.

Citations and references

• 34 Tex. Admin. Code Rule 3.357 — historical real-property repair rule.
• 34 Tex. Admin. Code Rule 3.257(a)(3), (c)(2) — maintenance citation as printed in the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8802L0862E06

Original ruling text

COMPTROLLER PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

February 19, 1988

Dear **:

Thank you for your letter concerning taxability of services provided by
a potential client.

You stated that the individual integrates gas charts, calculates gas
volumes on individual wells for audit purposes, calibrates and repairs
gas orifice meters and performs certain well tests required by the Texas
Railroad Commission.

If the gas charts and gas volume calculations services are to record
information of meters such as a gauger would do, the charge to the
customer
is not taxable. If these services are something else, additional
information
is needed to determine taxability.

Calibration services are considered maintenance and taxable effective
October 2, 1984 when performed on personal property. Repairs to these
same meters are taxable October 2, 1984. Meters located at the lease
or well site or between the lease site and the transmission or pipeline
are considered personal property. To put it another way, if the meter
is located or attached to flow lines or gathering lines, it is personal
property and the total charge to the customer is taxable.

Meters located on pipeline or at a booster stations are considered to be
part
of real property. The labor to repair real property became taxable Janu-
ary 1, 1988. The total charge to the customer is taxable. Please refer
to Rule 3.357, enclosed.

Maintenance labor on real property is not taxable. Please refer to Rule
3.257(a)(3) and (c)(2). Records must be kept to substantiate that
calibration is maintenance of real property rather than repair.

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 our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may
write me
at the Tax Policy Division.

Sincerely,
(Mrs.) Jo Ann Dieck
Tax Policy Division