Ezel / Tax Rulings / TX
TX 8805L0903F04 Sales and/or Use Tax (State,Local,MTA) 1988-05-26

How did Texas tax installation, standby-consultant, and mileage charges for oil-and-gas well equipment?

Short answer: Installation connected with selling, leasing, or renting wellhead and well components was taxable, as was installation forming part of taxable nonresidential repair or remodeling. The described standby-consultant fee was nontaxable. Mileage followed the underlying service: taxable with taxable work and nontaxable with nontaxable work.

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 Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
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

Texas treated installation connected with the sale, lease, or rental of wellhead and well components as taxable because those components were tangible personal property. It also taxed installation included in nonresidential real-property repair or remodeling.

The standby-consultant fee described by the taxpayer was nontaxable. Mileage followed the work performed: taxable when tied to taxable service and nontaxable when tied to nontaxable service.

What this means for you

Oilfield service providers should separately identify standby consulting and determine mileage taxability from the underlying job. Installation classification depends on the property and transaction it supports.

Common questions

Were standby-consultant fees taxable? No. Was installation taxable? Yes in the situations described. What about mileage? It followed the taxability of the service performed.

Citations and references

  • Rule 3.324, Oil, Gas, and Related Well Service

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller May 26, 1988

Dear ***:

Thank you for your recent letter concerning the taxability of
installation
charges by a serviceman, standby consultant fees and mileage charges to
and
from a location. All of these relate to oil and gas drilling operations.

Effective October 1, 1987, all installation charges connected with the
sale,
lease or rental of tangible personal property or the performance of
taxable
services are taxable. Wellhead and well components are considered
tangible
personal property,

Also, effective January 1, 1988, the charge for installation, connected
with
the sale of tangible personal property that becomes a permanent
improvement
to realty, is taxable when it is a part of the charge to repair or
remodel
nonresidential real property.

Standby consultant fees, as defined in your letter, are not taxable.

Mileage charges to and from the location will be taxable or not taxable
depending on what is actually done by the provider of the service. If the
work completed is subject to sales tax, then the mileage charges are also
taxable. If the work completed is not subject to sales tax, then the
mileage
charges would not be taxable. I an enclosing a copy of Rule 3.324, Oil,
Gas,
and Related Well 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 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,
Julie Pesl
Tax Policy Division

Get today's answer for your situation

You just read a 1988 ruling on this question. Ezel checks current Texas tax law and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the authority it relies on.