Were private telecommunications circuits used to control petroleum pipeline pumping stations exempt from Texas sales tax?

Plain-English summary

A common-carrier pipeline operator used private telecommunications circuits between a central control facility and pumping stations to send control signals and receive status information. Texas said telecommunications used to control pipeline operations were not exempt from tax.

The letter identified a separate exemption for long-distance communications originating outside Texas. If the control point from which the calls originated was outside Texas, the charges were exempt under the cited provision.

What this means for you

An exemption for electricity powering pipeline motors did not extend to the control telecommunications in this ruling. The origin of the long-distance communication could still change the result.

Common questions

Were the pipeline-control circuits exempt because the pipeline was a common carrier? No under the stated facts.

Did the operator's use of the circuits to control exempt-powered motors create an exemption? No. The Comptroller treated the telecommunications separately.

When did the letter recognize an exemption? For long-distance communications originating outside Texas.

Citations and references

• Tex. Tax Code § 151.323 — cited for long-distance communications originating outside Texas.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9103L1083A13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller

March 6, 1991

Dear ***:

Thank you for your recent letter regarding the taxability of
telecommunications circuits used for controlling petroleum products pipeline
operations. Your facts are restated with response below:

Situation: A client of *** operates pipelines as a common carrier
for transporting petroleum products, both intrastate within Texas and
interstate. The various pumping stations along the pipelines are controlled
from a facility located at a central point. Private telecommunications
circuits extend from the control center to the pumping stations, providing the
means for sending control signals to the pumps and receiving status information
from them. State and local taxes and a 911 fee are assessed on the monthly
charges for these circuits.

Question: I'm aware that the electricity powering the pumping motors may
be exempted from such taxes. May telecommunications circuits controlling those
motors be similarly exempted?

Response: Telecommunications services used for controlling pipeline
operations are not exempt from tax. However, Tax Code Sec. 151.323 exempts
long distance communications that originate outside Texas. So, if the control
point from which the calls originate is outside Texas, the charges would be
exempt.

This opinion is based on the facts you presented. other facts, though
similar, may yield different results.

If you have questions or need more information, please call our toll-free
number 1-800-531-5441. My direct line number is 512- 463-4680 (FAX (512)
475-0900). You may write to me in care of Tax Administration Division.

Sincerely,
Al Van Allen
Tax Administration Division