Ezel / Tax Rulings / TX
TX 8803L0875C10 Sales and/or Use Tax (State,Local,MTA) 1988-03-11

Were daily gauge readings and written reports taxable when a pumper also performed minor well-site maintenance?

Short answer: Gauge reading and written reports alone were not taxable, but the provider's general equipment maintenance made the described service taxable. The Comptroller approved the tax being charged.

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 published on STAR. Its conclusion depended on the provider combining daily gauge reporting with minor equipment repair and maintenance at the well site; verify current oilfield-service classifications before applying it today. Letters on STAR can support detrimental reliance only for the taxpayer directly issued the letter and may no longer represent current policy. 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

A subcontracted pumper visited the well site daily, read gauges, provided handwritten reports, and also performed minor repairs and maintenance such as greasing drill shafts and treating wells for paraffin and corrosion. Major repairs were called in and billed separately.

The Comptroller said gauge reading and written reports by themselves were nontaxable. General maintenance of well-site equipment was taxable. Because the described service included that maintenance, the Comptroller said the provider had correctly charged tax.

What this means for you

Combining a nontaxable reporting function with taxable equipment maintenance changed the result for the service described in the letter. The fact that the provider reportedly earned no profit on the arrangement did not alter the stated conclusion.

Common questions

Were gauge readings taxable by themselves? No.

Were handwritten gauge reports taxable? No.

Was general well-site equipment maintenance taxable? Yes.

Was the provider correct to charge tax on the combined service? Yes.

Citations and references

The letter did not cite a rule or statute by number.

Source

Original ruling text

March 11, 1988

Dear ***:

Thank you for your letter concerning the taxability of pumper/gauges. I
will
restate your situation with my response immediately following.

SITUATION:

We contract the services from the COMPANY A who in turn subcontract
an individual to go to the site on a daily basis, read gauges,
provide
handwritten gauge reports, do general maintenance in the form of
minor
repairs and maintenance--greasing drill shafts, treating wells with
chemicals for paraffin treatment and corrosion inhibitor, etc. When
major repairs are necessary, he calls for these to be done and they
are
invoiced separately to us. COMPANY A provides the pumper with
insurance and worker's compensation, but--according to their
accounting
department--they do not earn a profit on this service.

Answer: Reading gauges and providing written reports is a nontaxable
service. However, if they also provide general maintenance of
equipment at
the well site, as you indicated, this is a taxable service. Based in
the
information you provided COMPANY A has been correctly charging tax.

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,

F. Wayne McDonald
Tax Policy Division

cc: Bernard Vasek

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