Were separately stated oil-and-gas well gauging and pumping-service charges taxable under Texas Letter Ruling 9204L1166D11?

Plain-English summary

The Comptroller treated the two oilfield services differently.

A separately stated charge for gauging was not taxable when the service consisted of reading production information at an oil or gas well and providing the operator with a written report.

Pumping services were taxable. The taxpayer described that work as adjusting oil-and-gas well instruments that affected production, and the Comptroller classified those adjustments as maintaining or repairing well-site equipment. The letter said even minor repairs fell within the taxable service.

What this means for you

The dividing line was whether the provider merely observed and reported information or physically adjusted the well equipment. Separately stated diagnostic reporting was nontaxable on these facts; equipment adjustments were taxable maintenance or repair.

Common questions

What did gauging include? Reading production information at the well and reporting it to the operator.

Was a separately stated gauging charge taxable? No.

What did pumping services include? Adjusting well instruments in ways that affected production.

Why were pumping charges taxable? The Comptroller classified the adjustments as equipment maintenance or repair, including minor repairs.

Citations and references

The letter cited no specific statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9204L1166D11

Original ruling text

April 22, 1992

Dear ***:

Thank you for your recent letter asking about the Texas sales tax
as it applies to gauging services and pumping services.

You defined gauging services as the task of reading
production information on an oil or gas well location and
reporting the results to the operator of such well.

Response: A separately stated charge for providing gauging services
is not taxable. Reading gauges and providing written reports is a
nontaxable service.

You defined pumping services as making adjustments to oil
and gas well instruments that affect well production.

Response: Charges for pumping services are taxable. Maintaining
equipment or providing repairs, even minor repairs, of equipment at
a well site is classified as a taxable service.

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

If you have any additional questions or need more information, you
may call me toll free at 1-800-252-5555, extension 3-4633. The
regular number is 512/463-4633. You may also write to the Tax
Administration Division.

Sincerely,

Wanda Hutcheson
Tax Administration Division