Is 'fishing' (retrieving lost tools or equipment from a wellbore) a taxable service under Texas's oil and gas well service rules?

Plain-English summary

A well-service company asked about the sales tax treatment of "fishing" services — recovering lost or stuck rods, tubing, or tools from a wellbore — when performed during initial completion of a well or during a well workover.

The Comptroller confirmed the exception in Texas's oil and gas well service rules:

• Rule 3.324(b) lists nontaxable services performed inside the wellbore, including work performed for the purpose of starting initial production or increasing production.
• Rule 3.324(d)(1)(C) generally defines "fishing for rods or tubing" as a taxable activity.
• But Rule 3.324(d)(4) overrides that for context: fishing services are not taxable when performed during activities such as starting initial production or workover.

Practical takeaway: the invoice should clearly describe the specific reason the fishing activity was performed — for example, "fishing to recover lost tool during well workover" — and the well operator can issue an exemption certificate stating that reason to support the nontaxable treatment.

What this means for you

Oil and gas well service providers

The taxability of fishing services depends entirely on the CONTEXT in which they're performed, not the activity itself. The same fishing operation is taxable in general but nontaxable if it happens during initial well completion or a workover — so document the context on every invoice.

Well operators

If you're hiring a fishing service during initial completion or a workover, you can give the service provider an exemption certificate stating that reason to support not being charged tax.

Accountants and tax professionals

A useful illustration of how Rule 3.324's general/exception structure works: subsection (d)(1)(C) sets the default rule (taxable), and subsection (d)(4) is a context-specific carve-out (nontaxable) — the analysis hinges on matching the specific service to the right subsection based on when in the well's lifecycle it occurs.

Common questions

Q: Is fishing for lost tools or tubing in a well always taxable in Texas?
A: No — it's taxable by default under Rule 3.324(d)(1)(C), but exempt under Rule 3.324(d)(4) when performed during initial completion of a well or during a workover.

Q: What should the invoice say to support nontaxable treatment?
A: It should describe the specific reason for the fishing activity, such as recovering a lost tool during a well workover.

Q: Do we need documentation from the well operator?
A: An exemption certificate from the well operator stating the reason the fishing shouldn't be taxed helps support the exemption.

Q: Can I rely on this letter for my own well service invoices?
A: No. This opinion is based on the facts presented, and additional or different facts may change the opinion; it can be relied on only by the taxpayer it was issued to.

Citations and references

Rules:

• 34 Tex. Admin. Code Rule 3.324(b) (oil, gas, and related well service — nontaxable wellbore services for initial production/increasing production)
• 34 Tex. Admin. Code Rule 3.324(d)(1)(C) (fishing for rods or tubing — generally taxable)
• 34 Tex. Admin. Code Rule 3.324(d)(4) (fishing services not taxable during initial production or workover)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200002026L

Original ruling text

February 4, 2000

Subject: Taxability Issues

Dear **:

Thank you for your recent email concerning the taxability of well fishing
services during initial completion of a well or during a well workover.

Rule 3.324(b) concerning oil, gas and related well service describes and lists
the nontaxable services that are performed inside the wellbore. The nontaxable
services include work performed for purposes of starting initial production or
to increasing production.

Rule 3.324(d)(1)(C) defines taxable activities to include fishing for rods or
tubing. However, Rule 3.324(d)(4) states that fishing services are not taxable
when performed during activities such as starting initial production or
workover.

Your invoice should adequately describe the nature under which the fishing
activities are performed, e.g., fishing to recover lost tool during well
workover. You may have the well operator give you an exemption certificate
stating the reason the fishing activity should not be taxable.

The referenced Comptroller rule is available at
.

You may view or down load an exemption certificate at
and then click on the following:

1. Tax Forms
2. Sales & Use Tax
3. 01-339 (Resale/Exemption Certificate)

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

You may call me toll free 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3825. My
e-mail address is .

Sincerely,

Eddie C. Washington
Tax Policy Division