Were subscriptions and geological or geophysical surveys exempt when their information came from direct scientific exploration?

Plain-English summary

The Comptroller read Rule 3.342(d)(2) to exempt information sold by subscription or as a geological or geophysical survey when the information was derived from exploratory testing, experimentation, or direct scientific observation.

The letter drew a line between scientific results and records that merely report facts about the process. Statistical completion-report items such as a well's name, location, completion date, producing reservoir, casing and cementing records, and perforation data were taxable. The letter separately classified driller's logs and cable-tool drilling logs as taxable, while treating borehole logs, specified maps and studies, core analyses, electrical well logs, seismic surveys, and remote-sensing surveys as exempt.

Common questions

Could subscription information qualify for the exemption? Yes. Subscription format did not prevent exemption if the information was derived from the qualifying scientific work.

Were all oil-and-gas reports exempt? No. Reports that only recorded statistical facts about the scientific process were taxable.

What did the letter say about seismic surveys? It listed seismic surveys as exempt under the stated criteria.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8902L0945B09

Original ruling text

February 9, 1989

Dear **:

Thank you for your letter of January 27, 1988, concerning the taxability of
information services covered under Rule 3.342(d)(2).

Question:

Rule 3.342(d)(2) reads in part, "Any sale of information primarily derived from
"...exploratory testing or experimentation or any similar method of direct
scientific observation of physical phenomena is not subject to tax" (emphasis
added).

Does the work "any" encompass information that may be libraried and sold on a
subscription basis, so long as it meets the other criteria? Also, what is
meant by "exploratory testing or experimentation"...or..."direct observation"?

Response:

Yes. Exploratory testing, etc... To make or conduct a systematic search for
purposes of discovery; to examine minutely especially for diagnostic purposes.
With regard to the oil and gas industry, exploratory testing includes serial
surveying, geological studies, geophysical surveying, coring, and drilling of
wildcat wells.

Subscription services and the sale of geophysical and/or geological surveys
will qualify for exemption if they were derived from exploratory testing or
experimentation. If the subscription service is only statistical in nature and
records data or facts about the scientific process, which data do not
contribute directly to the purpose of the exploratory testing or
experimentation, then the resulting subscription services would be taxable.
Taxable subscription services numbered as you have numbered them under the term
"completion reports" are 1) name and/or number of the well; 2) location and
lease name; 3) date of completion; 4) name and depth of reservoir being
produced; 6) casing and cementing records; and 7) perforation data.

Following is a list of information located within the "public domain" rated as
to taxability based upon the criteria listed above:

1) Driller's Log - Taxable Cable Tool Drilling Log - Taxable
2) Borehole Log - Exempt
3) Paleolithologic Maps & Studies - Exempt
4) Core Analysis - Exempt
5) Electrical Well Logs - Exempt
6) Subsurface Maps - Exempt
7) Elevation Maps - Exempt
8) Seismic Surveys - Exempt
9) Remote Sensing Surveys - Exempt

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
1-800-252-5555 ext 3-4675. The regular number is 512/463-4600. You may write
me at Tax Correspondence, Comptroller of Public Accounts

Sincerely,

Tom Soto
Tax Correspondence