Is sand mined from Texas sand dunes, washed in paddle-agitated attrition cells and dried to under 0.1% moisture, taxable as processed sand?

Plain-English summary

A fourth same-batch ruling confirms the same "unprocessed and exempt" result for yet another Texas frac-sand producer, this one mining from sand dunes rather than an open pit or excavation site. The process: scoop sand from dunes, sift out rocks and plants at a "mine skid," add water for transport to a "wet plant" where attrition cells (paddle-agitated washers "similar to a domestic washing machine") remove clay and organics, then dry the sand at a separate "dry plant" down to under 0.1% moisture, and screen-sort it into final product sizes with no remixing afterward.

The Comptroller applied the same test as the other sand rulings in this batch: attrition scrubbers/cells CAN constitute taxable processing if they change the sand's size or shape, but here the facts showed no such change, so the sand stays unprocessed and its sale is exempt. The homey "washing machine" comparison in the taxpayer's own facts is a useful mental model — the equipment agitates and cleans without altering the grain itself.

What this means for you

Frac sand and industrial sand producers using dune mining

This ruling confirms the same size/shape-preservation test applies regardless of the sand source (dune vs. open-pit) or exact equipment terminology ("attrition cells" here vs. "attrition mills" or "attrition cell scrubbers" in this ruling's companions) — what matters is documented evidence the equipment doesn't crush, cut, chip, or resize the sand, and that separated grades aren't recombined.

Accountants and tax professionals

This is the fourth of five closely related sand-mining rulings from this discovery batch (with 201901045L, 201901046L, 201901047L, and the earlier 201902003L) — together they form a useful reference set showing the Comptroller applying a consistent test across producers with different mining sites, equipment brand names, and drying configurations, but the same underlying wash/dry/sort-without-remixing fact pattern.

Common questions

Q: Does drying sand to a very low moisture content (under 0.1%) make it taxable?
A: No — drying to any specific moisture level is part of the standard non-processing drying step, as long as it doesn't change the sand's size or shape.

Q: Does mining from sand dunes rather than an open pit change the analysis?
A: No — the source of the sand (dune vs. pit vs. quarry) doesn't affect the processed/unprocessed test; what matters is what happens to the sand during washing, drying, and sorting.

Q: Can another sand mining company rely on this ruling?
A: No. It binds the Comptroller only as to the taxpayer and facts in this specific request and cannot be relied on by any other taxpayer.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051 (sales tax imposed)
• Tex. Tax Code § 151.010 (taxable item)
• Tex. Tax Code § 151.009 (tangible personal property)
• Tex. Tax Code § 151.318 (property used in manufacturing — scrubber size/shape test)
• Comptroller Decision No. 27,940 (1992); Nos. 29,862 (1994), 44,432 (2005)
• STAR Accession Nos. 8810L0904F07 (1988), 9212L1233B12 (1992)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/201901049L

Original ruling text

January 25, 2019

RE: Private Letter Ruling No. 20181018102653

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters.[1] We are responding to your request Oct. 18, 2018 and email response dated Oct. 22, 2018. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of sand, which includes a determination whether the sand is processed.

Facts Presented

** (Taxpayer) is a sand mining company that sells sand with headquarters in CITY A, Texas and sand dunes outside of CITY B, Texas. Taxpayer provided documents and a presentation for review to understand their scope of work.

Taxpayer’s mining process begins with Taxpayer scooping sand off the ground from one of their sand dunes. Taxpayer transports the sand to reach the mine skid. The mine skid sifts out any rocks, plants or other debris. Water is added to the sand for transportation from the mine site to the wet plant.

At the wet plant, the wet sand enters into attrition cells that use paddles that move the sand around, similar to a domestic washing machine. Washing the sand removes clays, organics and other impurities. After washing is complete, the sand is stored temporarily to remove most of the moisture. The sand eventually moves to the dry plant.

At the dry plant, the sand dries to contain less than 0.1 percent of moisture. Screens sort the dry sand into the desired product sizes. No remixing of sand occurs after sorting. At no point in time does the washing, drying, or screening process change the size or shape of the grains of sand.

The sorted sand is stored according to size where it can be easily loaded into customers’ trucks. Customers take the purchased sand for use at the customer’s wellsite.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Is the sand Taxpayer mines and sells subject to sales and use tax?

Ruling: No. The sand Taxpayer mines and sells is not subject to sales and use tax.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). The term “taxable item” includes tangible personal property and taxable services. Section 151.010 (Taxable Item). The term “tangible personal property” means personal property that can be seen, weighed, measured, felt, or touched or that is perceptible to the senses in any other manner and includes a computer program and a telephone prepaid calling card. Section 151.009 (Tangible Personal Property).

The sale of unprocessed sand, gravel, and similar materials is not taxable. However, the sale and transportation of processed materials is taxable. See Comptroller Decision No. 27,940 (1992); STAR Accession No. 8810L0904F07 (Oct. 4, 1988). The Comptroller has provided examples of processing. Processed materials are materials that are crushed, mixed, or subject to any other process other than basic washing and sorting. Comptroller Decision Nos. 29,862 (1994) and 44,432 (2005).

Attrition scrubbers have the capacity to change the size and shape of sand, which constitutes processing under Section 151.318 (Property Used in Manufacturing). Based on the facts presented, the attrition scrubbers used in Taxpayer’s process do not change the size or shape of the sand.

The Comptroller has also given guidance of what is not processing. “The washing, drying, screening for size, and sorting of sand, gravel and similar materials is not processing.” STAR Accession No. 9212L1233B12 (Dec. 7, 1992).

Here, Taxpayer does not remix the sand after the sand has been washed, dried, screened and sorted. Taxpayer’s sand is unprocessed sand, and is not subject to sales and use tax.

Comptroller’s Decisions and STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20181018102653.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE:

[1] Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.