Ezel / Tax Rulings / TX
TX 8803L0862B14 Sales and/or Use Tax (State,Local,MTA) 1988-03-25

Did Texas classify oil-and-gas flowlines as tangible personal property whether they were above or below ground?

Short answer: Yes. The Comptroller retained its industry-wide position that flowlines above and below ground were tangible personal property and declined to change it in 1988.

Apply this to your situation

This page answers the general question as of 1988. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1988
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 is an official 1988 Texas Comptroller of Public Accounts letter to an industry association, published on STAR. It preserves a classification adopted through a 1985 industry compromise and should not be assumed to state the current treatment of flowlines or oilfield services. STAR documents may no longer represent current policy even if not marked superseded, and another taxpayer should not treat the letter as binding. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional.
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 Comptroller said Texas had agreed with oil-and-gas industry representatives in 1985 to treat flowlines above and below ground as tangible personal property.

That position arose while the agency was amending the well-servicing rule after repair, remodeling, restoration, and maintenance labor on tangible personal property became taxable. The 1988 Policy Committee had initially been unaware of the earlier agreement, but the Comptroller declined to change a position already disseminated widely to the industry.

What this means for you

The historical classification did not depend on whether the flowline was buried. Both above-ground and below-ground flowlines received the same tangible-personal-property treatment.

Common questions

Were underground flowlines real property under this letter? No. They were treated as tangible personal property.

Were above-ground flowlines treated differently? No.

Did the Comptroller change the position in 1988? No.

Citations and references

The letter referred to the well-servicing rule and 1984 and 1987 legislative changes but did not cite a rule, bill, or statute number.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

March 25, 1988

Dear Mr. **:

I understand you met with members of the Policy Committee in November 1987
regarding the sale tax responsibilities of members of your association. Please
accept this letter as clarification of one of the points made during that
meeting.

During 1985, we were in the process of amending the well servicing rule to
include taxable repair labor, remodeling labor, restoration and maintenance
labor on tangible personal property. In 1984, the legislature added this type
labor to the sale tax law as a taxable service.

While corresponding with various companies in the oil and natural gas industry
and with members of the well servicing association regarding the well servicing
rule, we made several compromises. Because we had so may questions asked about
flow lines, we all agreed to treat flow lines, both above and below ground, as
tangible personal property.

In all the discussions the Policy Committee had with various industry groups
regarding the charges in the Tax Code made by the legislature in 1987, the
members of the Policy Committee were unaware of the agreement we made with
industry in 1985 regarding flow lines.

Because our position on flow lines being tangible persona property has been
disseminated to a large segment of industry, we aren't inclined to change that
position at this time. Please accept our apology for any inconvenience this has
cause you.

Please feel free to contact me if you have additional question. You may write
me, call toll free 1-800-252-5555 from anywhere in Texas or phone 512/463-4633.

Sincerely,

(Mrs.) Wanda Hutcheson
Tax Policy Division

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