Could the sale of 33 drilling rigs and their associated equipment qualify as an exempt occasional sale in Texas?

Plain-English summary

One corporation planned to sell 33 drilling rigs and their associated equipment to another corporation. The Comptroller said a rig could be an identifiable segment of a business when its income and expenses could be determined separately from the seller's books and records.

The accounting examples submitted with the request established that separate treatment for each rig. The Comptroller therefore said each rig-and-equipment sale could qualify for the sales-tax occasional-sale exemption.

What this means for you

The ruling turned on records, not merely on labeling the assets as separate rigs. The seller's accounting system had to support separately determining the income and expenses attributable to each segment.

Common questions

Did the Comptroller treat all 33 rigs as one segment? No. The letter said each rig could qualify as an identifiable segment based on the submitted accounting records.

Was the exemption unconditional? No. The conclusion was based on the specific facts and records presented.

Citations and references

• No numbered statute or rule was cited in the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9009L1046D01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller September 19, 1990

VIA TELECOPY

Dear **:

Thank you for your letter dated September 17, 1990, concerning the
sale of thirty-three drilling rigs and associated equipment by COR-
PORATION A to CORPORATION B.

The sale of a drilling rig and associated equipment can be the sale
of an identifiable segment of a business if income and expenses at-
tributable to the rig can be determined separately in the books of
account or record.

Based on the examples of CORPORATION A's accounting system for each
rig that you submitted with your letter, CORPORATION A does main-
tain the records necessary to prove that each rig is an identifiable
segment of the business. The sale of each of the thirty-three rigs
and associated equipment can qualify fo r exemption from sales tax
as an occasional sale.

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

Please feel free to contact me if you have any additional questions.
You may write me, call toll free 1-800-252-5555 (ext. 3-4685) from
anywhere in the United States or phone 512/463-4685.

Sincerely,
Julie Pesl
Tax Correspondence