How did Texas tax contract gauging, written reports, greasing, maintenance, and repair when billed separately or together?

Plain-English summary

Reading well-site gauges and providing written reports was a nontaxable service. Separately stated charges for that work were not taxed.

General maintenance or repair of well-site equipment was taxable, including minor repair and greasing even when the customer supplied the grease. Repair of equipment treated as a real-property improvement was also taxable under the letter's then-effective rule.

If taxable and nontaxable work was billed together in one lump sum, the total charge was taxable. The provider needed to separately state and identify the nontaxable gauging portion to avoid that result.

Common questions

Were gauge reading and reports taxable? No when separately stated.

Was greasing taxable? Yes, even with customer-provided grease.

What happened to a combined lump-sum charge? The entire amount was taxable.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8811L0913G08

Original ruling text

November 16, 1988

Dear ****:

Thank you for your letter requesting information on the taxability of
contract pumper or contract gauger charges.

You stated that the contract pumper primarily reads gauges; then you asked
what if they occasionally grease the unit with the grease provided by the
customer.

Contract pumper/gaugers are usually providing a combination of taxable
and non-taxable services. They may separately state the charges for the
taxable services from the non-taxable services and add the tax accordingly.
They may bill a lump-sum charge for the combination of taxable and non-taxable
services, in this case the total charge is taxable.

Reading gauges and providing written reports is a non-taxable service;
separately stated charges for this service should not be taxed. General
maintenance or repair, even minor repairs, of equipment at the well site is a
taxable charge because the majority of equipment at the well site retains its
identity as tangible personal property. Repair of equipment that is considered
an improvement to real property became taxable January 1, 1988, these charges,
if any, should also be taxed. Greasing the units (tangible personal property) is
a taxable service even when the grease is provided by the customer. Materials
are taxable to the end consumer. The end consumer may be the customer or the
pumper and is determined by the type of service being performed.

As stated earlier charges that are not separately stated and identified
as charges for the performance of non-taxable services will be taxed. You did
not indicate in your letter how these are handled.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may write me at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Policy Division
Tax Correspondence