Was satellite-based positioning equipment exempt when bolted or welded onto commercial oil-and-gas vessels?

Plain-English summary

The requester supplied satellite-based equipment that continuously calculated a vessel's location to within five meters. The system supported platform and drilling-vessel positioning, anchor handling, pipeline-lay barges, seismic surveys, and other oil-and-gas exploration work.

The Comptroller concluded that the equipment was exempt under Tax Code § 151.329(1)(A) because it was bolted or welded to and became a component part of a vessel used in a commercial enterprise.

What this means for you

The exemption depended on physical incorporation into the commercial vessel, not merely on the equipment's maritime or oilfield use.

Common questions

Was the positioning equipment exempt? Yes.

Why? It was bolted or welded to and became a vessel component.

What kind of vessel use was described? Commercial oil-and-gas exploration and related operations.

Citations and references

• Tex. Tax Code § 151.329(1)(A) — commercial-vessel component exemption applied by 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/9104L1105G04

Original ruling text

April 30, 1991

Dear **:

Thank you for sending me the previous correspondence you had
received from us on the taxability of the satellite-based
surveying/positioning equipment used on board vessels.

The equipment is part of a system used to ascertain on a
continual, real-time basis, a surveyed-in position of the
vessel and with an accuracy of within five meters. A
network of reference stations, surveyed in to centimeter
accuracy, relay data to a land based central station, which
in turn sends the data via satellites to the user. By
combining this information with measurements relative to the
satellites, the mobile survey equipment (MSE) is able to
compute its precise geographical position at all times.

It is used for precise positioning of production platforms,
drilling vessels, or pipeline lay barges, spotting for
anchor handling vessels, performing geophysical seismic
surveys, and other applications related to oil and gas
exploration.

I have discussed the taxability issue with Eddie Washington,
Larry Koenig, Debbie Angus, and Tom Poole. We concluded
that the equipment is exempted by Sec. 151.329(1)(A) because it
is actually bolted or welded to and becomes a component part
of the vessel used in a commercial enterprise.

This opinion is based on the facts presented. Other facts
though similar may provide a different result. If you have
other questions or need more information please call or
write. The toll-free number is 1-800-531-5441; my extension
is 3-4675. The regular number is (512) 463-4675.

Sincerely,

Tom Soto
Tax Administration