For gas producers, are meter-maintenance and meter-installation fees taxable, and are chart-integration services (personalized well analyses) taxable?

Plain-English summary

The Independent Oil & Gas Association of New York, on behalf of its member gas producers, asked whether three kinds of charges are subject to sales and use tax.

The setup. Members produce natural gas and deliver it into a distribution company's ("Buyer's") pipeline. The gas must pass through a meter so the delivered volume can be measured; title to the gas passes at the meter, so the point of sale is "downstream" of the meter. Buyer owns the meters but installs and maintains them on the members' property, at the members' expense, for a fixed $130 monthly measurement/meter-maintenance/administrative fee, plus a separate installation charge. Members also buy chart-integration services from third-party contractors, who interpret the pressure/volume "charts" produced by wellhead orifice meters to estimate each well's production.

1. Meter maintenance — exempt from state tax, but check local tax. Because the meters sit upstream of the point of sale to the first commercial purchaser, they are "associated equipment" used in gas production/operation and qualify for the § 1115(a)(12) production exemption — even though Buyer installs and owns them. So the entire $130 monthly fee is exempt from the statewide sales and use tax (and fully exempt under § 1105-B(b) as of March 1, 1981). But it remains subject to any applicable local sales tax, and only the separately stated, reasonable meter-maintenance portion is locally taxable — separately stated charges for gas measurement, administrative services, and rental are exempt from state and local tax.

2. Meter installation — exempt from state tax, subject to local tax. Under §§ 1105(c)(3) and 1105-B(b), a Buyer's charge for installing the meters is exempt from the statewide tax but subject to any applicable local sales or use tax.

3. Chart integration — a nontaxable personal information service. Chart integration is an information service under § 1105(c)(1) (collecting and analyzing data and issuing reports). But § 1105(c)(1) excludes information that is personal or individual in nature and not substantially incorporated in reports furnished to others (see § 527.3(b)(2)). Each report concerns a single well and is furnished only to that well's owner, so both conditions are met. The charges are therefore not taxable at the state or local level.

What this means for you

The production exemption can reach equipment you don't own

The meters belonged to the Buyer, were installed by the Buyer, and were paid for by the producers — yet they still qualified for the § 1115(a)(12) production exemption because they were used in production up to the first commercial sale and sat upstream of the point of sale. What mattered was the equipment's role in production, not who held title.

"Exempt from state tax" is not the same as "exempt from local tax"

This opinion carefully splits state and local treatment. The meter-maintenance and installation charges escape the statewide tax but can still carry a local sales tax. And the way you bill matters: separately stating gas-measurement, administrative, and rental charges keeps them out of the local tax base, leaving only the reasonable meter-maintenance charge locally taxable. Bundle everything and you risk taxing the whole thing locally.

Personalized analytical reports can escape the information-service tax

Chart integration looked like a taxable information service, but it fell inside the personal/individual exclusion: it analyzed one specific well and went only to that well's owner, and the information was not resold or folded into reports for others. If your analytical service is truly one-client, one-subject, and not recycled, it may qualify for the same exclusion.

Common questions

Q: Is the $130 monthly meter fee taxable?
A: It is exempt from the statewide sales and use tax under § 1115(a)(12)/§ 1105-B(b), but the separately stated, reasonable meter-maintenance portion remains subject to any applicable local sales tax. Separately stated measurement, administrative, and rental charges are exempt at both levels.

Q: What about the charge to install the meters?
A: Exempt from the statewide tax under §§ 1105(c)(3) and 1105-B(b), but subject to any applicable local sales or use tax.

Q: Why aren't the chart-integration reports taxed as an information service?
A: They qualify for § 1105(c)(1)'s personal/individual exclusion — each report covers a single well and goes only to that well's owner, and the information isn't substantially incorporated into reports for anyone else.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(1) — tax on information services, with the personal/individual exclusion
• Tax Law § 1105(c)(3) — tax on installing, maintaining, servicing tangible personal property
• Tax Law § 1115(a)(12) — production-machinery exemption (oil and gas equipment to the point of first commercial sale)
• Tax Law § 1105-B(b) — reduced/phased-out rate on services to production property
• 20 NYCRR § 527.3(b)(2) — personal/individual information excluded from the information-service tax

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a91_10s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-91 (10)S
Sales Tax
January 17, 1991

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S900912D

On September 12, 1990, a Petition for Advisory Opinion was received from Independent Oil
& Gas Association of New York, 37 Franklin Street, Suite 210, Buffalo, New York 14202.
The issue raised is whether certain fees paid by Petitioner's members for meter maintenance,
meter installation, and chart integration services are subject to state and local sales and use taxes.
Petitioner is an association comprised of companies and individuals engaged in the
production through mining of oil and natural gas. Petitioner's members rent machinery, purchase
mineral leases and also purchase the following services:
1.

Meter Maintenance

Petitioner's members do not distribute natural gas to retail users. Rather, they enter into
contractual agreements (gas purchase agreements) with a distribution company (hereinafter referred
to as "Buyer") to whom they deliver the gas. Petitioner's members also enter into contracts with
Buyer's customers (hereinafter "Customers"), whereby Customers purchase gas directly from
Petitioner's members at or before the point ("delivery point") at which such gas enters Buyers
transmission pipeline. Buyer is the corporation that actually transmits the natural gas to the retail
users (industrial, commercial and residential users). Petitioner's members anticipate that from time
to time they will deliver more gas to Buyer's pipeline than is purchased by Customers. Buyer agrees
to purchase such excess gas.
Under the gas purchase agreements Petitioner's members are required to deliver the gas to
the Buyer's gas pipeline system. In order to accurately measure the amount of gas delivered to Buyer,
the gas must be "metered". Pursuant to the gas purchase agreement, Buyer owns the meters which
keep track of the amount of gas Petitioner's members deliver to Buyer's pipeline. The gas purchase
agreement requires that Petitioner's members provide and maintain parcels of real property upon
which the meters will rest. Further, Petitioner's members must agree to pay Buyer a fixed monthly
fee "as a measurement, meter maintenance and administrative service charge".
Under the terms of the gas purchase agreement, Buyer maintains title to the meters.
However, the meters are placed upon property either owned, leased or controlled by Petitioner's
members and it is the responsibility of Petitioner's members to regularly read each meter and forward
the information to Buyer.

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The title to the gas delivered by Petitioner's members passes at the meter. The amount of gas
delivered by Petitioner's members to Buyer may only be measured if it passes through the meter (i.e.
it is not possible to measure the amount of gas delivered to the meter unless it passes through the
meter).
Although Petitioner's members must pay a fixed monthly fee of $130.00 fee, the agreement
specifies that Buyer is responsible for the calibration, maintenance, adjustment and repair of the
meter.
2.

Meter Installation Fees

Under the gas purchase agreement, Buyer is required to install the meter and related receipt
facilities at Petitioner's members' expense. The fee paid for meter installation services is separate
from the fixed monthly fee of $130.00 for measurement, meter maintenance and administrative
services.
3.

Chart Integration Services
Chart integration services are provided to Petitioner's members by third-party contractors.

In addition to the meter located at the point of purchase (specified by the gas purchase
agreement), there is a meter located at or near the well's head. These meters measure the pressure
of the gas flowing through them in addition to the volume of gas flowing through them. The orifice
meters produce "charts" which are continuous recordations of such information. A historical review
of the information contained on these charts can be used to produce estimates of the volume of the
well production in addition to well performance evaluations.
In order to obtain this information, keep it in historical perspective and analyze it, Petitioner's
members purchase chart integration services. Chart integration involves the analysis of each chart
produced by an orifice meter. The chart integrator must review existing information and choose
various factors to be used in the mathematical formulae which produce volume estimations. For
example, the chart integrator must use his or her own judgment to determine the appropriate flow
temperature, specific gravity and compressibility factors applicable to a particular well when
preparing volume estimates for such well. The critical element to chart integration services is the
interpretive ability of the chart integrator. The application of the experience and knowledge of the
integrator to the data accumulated by aggregating the information contained on the charts results in
an estimation of the amount of gas production from a well. Since the chart integrator's own
estimates, interpretation and analyses are critical, two different chart integrators, reviewing the same
information will almost always render different conclusions and analyses.
Petitioner submitted a copy of a short brochure from one of the third-party contractors that
offer chart integration services to Petitioner's members. As indicated by the brochure, "in order to
accurately interpret and integrate orifice charts it [is] not only necessary to have the knowledge of

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the natural gas measurement properties and formulas but it [is] also vital to have field experience and
awareness." And, "[it] is our chart interpretation ability that we feel is so vital to the measurement
process."
The chart integration service providers prepare reports detailing their conclusions. These
reports are delivered to the particular member(s) for whom the service is performed and are not
provided to anyone other than the member(s) for whom the chart integration services are performed.
Section 1101(b)(5) of the Tax Law states, in part:
Sale, selling or purchase. Any transfer of title or possession or both,. . .rental, lease
or license to use or consume,. . .for a consideration or any agreement therefor,
including the rendering of any service, taxable under this article, for a consideration
or any agreement therefor.
Section 526.7 of the Sales and Use Tax Regulations states, in part:
Sale, selling or purchase. [Tax Law, §1101(b)(5)]
(a)

Definition.
(1)
The words sale, selling or purchase mean any transaction in
which there is a transfer of title or possession or both of tangible
personal property for a consideration.

(c)

(2)
Among the transactions included in the words sale, selling or
purchase are. . .rentals. . . .
Rentals, leases, licenses to use.
(1)
The terms rental. . .refer to all transactions in which there is
a transfer of possession of tangible personal property without a
transfer of title to the property. . . .

Section 1105 of the Tax Law states, in part:
Imposition of sales tax.--On and after June first, nineteen hundred seventy-one, there
is hereby imposed and there shall be paid a tax. . .upon:
(a)
The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
(c)

The receipts from every sale, except for resale, of the following services:

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(1)
The furnishing of information by printed, mimeographed or multigraphed
matter or by duplicating written or printed matter in any other manner, including the
services of collecting, compiling or analyzing information of any kind or nature and
furnishing reports thereof to other persons, but excluding the furnishing of
information which is personal or individual in nature and which is not or may not be
substantially incorporated in reports furnished to other persons. . .
(3)
Installing tangible personal property, . . .or maintaining, servicing or repairing
tangible personal property. . .
Regulation Section 527.3(b)(2) further explains 1105(c)(1) of the Tax Law as follows:
The sales tax does not apply to the receipts from the sale of information which is
personal or individual in nature and which is not or may not be substantially
incorporated into reports furnished to other persons by the person who has collected,
compiled or analyzed such information. . .
Section 1115 of the Tax Law states, in part:
Exemptions from sales and use taxes.
(a)
Receipts from the following shall be exempt from the tax on retail sales
imposed under subdivision (a) of section eleven hundred five and the compensating
use tax imposed under section eleven hundred ten: (12)
Machinery or equipment
for use or consumption directly and predominantly in the production of tangible
personal property, gas. . .for sale by manufacturing, processing. . .refining, mining
or extracting. . . . This exemption shall include all pipe, pipeline, drilling rigs,
service rigs, vehicles and associated equipment used in the drilling, production and
operation of oil, gas and solution mining activities to the point of sale to the first
commercial purchaser. . . .
Section 1105-B of the Tax Law states, in part:
Reduced tax rates on certain. . .services relating to tangible personal property used
or consumed in production.-­
(b)
Notwithstanding any other provisions of this article, but not for the purposes
of the taxes. . .authorized pursuant to the authority of article twenty-nine of this
chapter, the taxes imposed by subdivision (c) of section eleven hundred five on
receipts from every sale of the services of installing, repairing, maintaining or
servicing the tangible personal property described in paragraph twelve of subdivision
(a) of section eleven hundred fifteen, including the parts with a useful life of one year

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or less tools and supplies described in subdivision (a) of this section, to the extent
subject to such tax, shall be paid at the rate of two percent. . .commencing September
first, nineteen hundred eighty. . .and such receipts shall be exempt from the tax. . .on
and after March first, nineteen hundred eighty-one. . . .
The gas which Petitioner's members sell to Customers and to Buyer, must be identified before
title to the gas can pass to the purchaser. In order for identification to occur, it is necessary that the
gas passes through the meters at issue for purposes of measuring the amount of gas sold. Since title
to the gas does not transfer until after the gas passes through the meter, point of sale is determined
to occur "downstream" from the meter.
The provisions of Section 1115(a)(12) of the Tax Law provide an exemption from tax on
purchases of equipment which is used in gas production and operation activities to the point of sale
to the first commercial purchaser. As the meters at issue are installed and situated on real property
provided by Petitioner's members at a location which is within Petitioner's member's pipeline
"upstream" or prior to where the gas enters Buyer's transmission facilities, the meters are considered
to be associated equipment used in production or operation activities prior to the point of sale to the
first commercial purchaser and thus qualify for the exemption provided under Section 1115(a)(12)
of the Tax Law, despite being installed by Buyer at Petitioner's members's expense. Accordingly,
the entire monthly "meter maintenance" fee of $130.00 which contractually consists of charges for
gas measurement, meter maintenance and administrative services and which Petitioner asserts also
consists of a rental charge, is exempt from the statewide sales and use tax under the provisions of
Sections 1115(a)(12) and 1105-B(b) of the Tax Law but subject to any applicable local sales or use
tax unless such charges are separately stated on the billing presented to Petitioner's members and are
reasonable in accordance with current industry rates in which instance only the separately stated
charges for meter maintenance will be subject to the applicable local sales tax. Separately stated
amounts for gas measurement, administrative services and rental charges will be exempt from state
and local sales taxes.
Under the provisions of Section 1105(c)(3) and 1105-B(b) of the Tax Law, any charge to
Petitioner by Buyer which represents a fee for installation of the meters will be exempt from the
statewide tax but subject to any applicable local sales or use tax.
The chart integration service provided to Petitioner's members by third party contractors is
a service which is comprised of collecting and analyzing information concerning Petitioner's
members' gas wells and the issuing of reports concerning individual wells to respective
member/owners. The sale of such reports in written form constitutes the rendering of an information
service within the meaning and intent of Section 1105(c)(1) of the Tax Law.
Since a report supplies information pertaining only to a specific well and as the report is only
issued to the member/owner of such well, the report is considered to be uniquely personal and
individual in nature, thus satisfying the first condition required for exclusion from taxation pursuant

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to Section 1105(c)(1) of the Tax Law.
The second condition for exclusion requires that the information is not or may not be
substantially incorporated in reports furnished to other persons. The reports furnished to Petitioner's
members meet this criterion in that the information in each individual report is furnished only to the
member/owner and is not furnished to other persons.
Therefore, as the reports furnished to Petitioner's members meet the criteria for exclusion
required under Section 1105(c)(1) of the Tax Law, such reports constitute a non-taxable information
service.
Accordingly, the charges to Petitioner's members for chart integration are considered to be
receipts from the sale of a nontaxable information service and are not subject to state or local sales
taxes.

DATED: January 17, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.