Is seismic surveying for oil and gas exploration (placing explosive charges and geophone receivers) a taxable surveying service in Texas?

Subject

Seismic Surveying Services — Placement Of Explosive Charge And Receiver Point At Oil Well Prospective Area

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9310L1266G13

Plain-English Summary

A seismic survey company asked the Comptroller whether Texas sales tax applies to the seismic surveys it performs for oil and gas exploration. The company described sending out survey crews to lay out the position of "source points" and "receiver points" in a prospect area: the source point is where an explosive charge is placed, and the receiver point is where a geophone is placed to pick up the sound energy from the explosion and the subsequent reflections from sub-surface layers. The company thought this might be the same as oil well placement surveying.

The Comptroller's letter draws a clear distinction. The described service is not oil well placement surveying, because oil well placement surveying determines the actual site where a well will be drilled, while the service described in the letter occurs during the exploration phase — before any drilling site has been determined.

The letter then goes further: even though the surveying is not oil well placement surveying, it is also not surveying performed to determine or confirm the boundaries of real property, or to determine or confirm the location of structures or other improvements in relation to those boundaries. Because the service fits neither category — it isn't oil well placement surveying, and it isn't boundary/improvement-location surveying — the Comptroller concluded that "the surveying performed by your company as described above is not taxable surveying."

The letter closes with the Comptroller's standard caveat that the opinion is based on the facts presented and may change if different or additional facts apply.

What This Means For You

If you provide seismic survey crews for oil and gas exploration: This letter indicates that laying out source points (explosive charge locations) and receiver points (geophone locations) during the exploration phase is not treated as taxable surveying, because it is neither oil well placement surveying (determining the drill site) nor boundary/improvement-location surveying.

If you perform oil well placement surveying (determining the actual drill site): This letter does not extend its non-taxable conclusion to that type of surveying — it specifically distinguishes the exploration-phase seismic survey work described here from oil well placement surveying.

Facts matter: The Comptroller expressly notes the opinion is based on the facts presented and could change if the facts differ. If your survey work also involves determining or confirming real property boundaries or the location of structures relative to those boundaries, this specific ruling would not apply.

Q&A

Q: Is seismic surveying that places explosive charges and geophone receivers during oil and gas exploration taxable in Texas?
A: No. The letter states that "the surveying performed by your company as described above is not taxable surveying."

Q: Is this seismic survey work the same as oil well placement surveying?
A: No. The letter explains that oil well placement surveying determines the actual site to drill the well, while the described seismic survey services occur during the exploration phase, before that determination is made.

Q: Why isn't this seismic surveying taxed as real property boundary surveying?
A: The letter states the described surveying "is not surveying performed to determine or confirm the boundaries of real property, or to determine or confirm the location of structures or other improvements in relation to the boundaries of the property."

Q: Could this outcome change if the facts were different?
A: Yes. The letter states, "This opinion is based upon the facts presented. If there are different or additional facts, this opinion may change."

Original ruling text

October 27, 1993

Dear ***:

Thank you for your letter questioning the application of Texas sales
tax to the seismic surveys that your company performs.

You stated that your company is contracted to send out survey crews to
lay out the position of source and receiver points in the prospect
area. The source point is the location of an explosive charge and the
receiver point is the location of a geophone that picks up the sound
energy of the explosion and the subsequent reflections from the
sub-surface layers. You thought this would be the same as oil well
placement surveying.

The service you perform is not included as oil well placement
surveying. Oil well placement surveying is surveying that determines
the actual site to drill the well. The services that you perform occur
during the exploration phase.

Although the surveying that you described is not oil well placement
surveying, it is not surveying performed to determine or confirm the
boundaries of real property, or to determine or confirm the location
of structures or other improvements in relation to the boundaries of
the property. The surveying performed by your company as described
above is not taxable surveying.

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

You may also write to Tax Administration Division, Comptroller of
Public Accounts.

Sincerely,

Tax Administration Division

NOTE: Previous Accession Number 9308191L.2 and/or 9308191L