Is frac sand that has been extracted, washed, dried, and screened by grain size (but not cut, crushed, or mixed) subject to Texas sales tax as "processed" tangible personal property?

Plain-English summary

A group of related sand mining companies extracts sand in Texas for use in oil and gas well fracking. Their process: front-end loaders and excavators scoop sand from the ground (no blasting or cutting), then the sand is separated by grade and size, washed in attrition scrubbers to remove clay, silt, and organic contaminants, dried, and screened again by mesh and vibration to reach the precise grain sizes customers want. The companies asked Texas whether all this washing, drying, and screening turns the sand into taxable "processed" tangible personal property.

Texas ruled the sand stays unprocessed and nontaxable, drawing a bright line that traces back to 1990s Comptroller guidance: washing, drying, screening for size, and sorting are not "processing" activities — but cutting, crushing, or mixing materials together is. Because these mines never cut or crushed the sand and never mixed it with other materials (the water used is just for the wash/separation steps, and each grade of sand stays segregated from other grades), none of their multi-step preparation crossed into taxable processing, no matter how elaborate the washing and drying equipment. The same sand run through a crusher, or mixed with other materials, would come out the other side taxable.

What this means for you

Sand, gravel, and aggregate mining companies

Extraction, washing, drying, and size-sorting/screening — even through sophisticated multi-stage equipment — keep raw materials in the nontaxable "unprocessed" category. The line you can't cross without triggering tax is cutting, crushing, or mixing the material with something else.

Frac sand suppliers to the oil and gas industry

This ruling directly addresses frac sand (proppant) production, confirming that standard frac-sand processing (wash, dry, screen to grain size) doesn't create a taxable sale — useful certainty for an industry that moves large volumes of sand.

Accountants and tax professionals

The controlling authority is a 1992 STAR letter (9212L1233B12) establishing washing/drying/screening as nonprocessing, contrasted with a 2005 Comptroller decision and a 2000 STAR letter treating cutting/crushing/mixing as processing. This ruling is a clean modern application of that 1990s-era framework to the frac sand industry specifically.

Common questions

Q: Would crushing the sand to reduce its size make it taxable?
A: Yes — the ruling distinguishes crushing (and cutting, and mixing) as processing activities that would make the resulting sand taxable, unlike the washing/drying/screening-by-size steps these taxpayers used.

Q: Does adding water during the wash and separation steps count as "mixing" that would trigger tax?
A: No. The ruling notes no chemicals or other materials besides water were added, and the water contained no acids or additives that would alter the sand — using water purely as a wash/separation medium doesn't count as processing.

Q: Does the sale price or industry (oil and gas vs. construction) matter to this analysis?
A: No — the taxability turns entirely on what physical activities were performed on the material (extraction/washing/drying/screening vs. cutting/crushing/mixing), not on price or end use.

Q: Does this ruling apply to my mining or aggregate operation?
A: Not automatically. This is a private letter ruling binding only on the Comptroller as to this taxpayer's specific facts. Any cutting, crushing, or mixing step not present in these facts could change the outcome for a different operation.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051, § 151.010 (sales tax imposition; taxable item)
• Tex. Tax Code § 151.009 (Tangible Personal Property)
• 34 Tex. Admin. Code § 3.300(a)(10) (Manufacturing)
• STAR Accession No. 9212L1233B12 (Dec. 7, 1992) (washing/drying/screening/sorting are not processing)
• STAR Accession No. 201902003L (Feb. 7, 2019) (transportation/sale of processed sand is taxable)
• STAR Accession No. 200006438L (June 28, 2000) (cutting/crushing/mixing as processing)
• Comptroller's Decision No. 44,432 (2005); No. 25,342 (1989); No. 27,940 (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/202007009L

Original ruling text

July 2, 2020

RE: Private Letter Ruling No. PLR20200124155218

Dear **,

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE 1] We are responding to your request dated Nov. 14, 2019, and supplemental correspondence dated March 20, March 30, May 5, 2020. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on whether your clients’ sand, which is extracted from the earth, separated, washed, dried and screened is subject to sales and use tax under Section 151.051 (Sales Tax Imposed) and Rule 3.300(a)(10) (Manufacturing).

Facts Presented

The facts presented relate to (Taxpayer 1), (Taxpayer 2), and (Taxpayer 3), collectively referred to as Taxpayers.

Taxpayer 2 and 3 operate separate mines in Texas and are subsidiaries of Taxpayer 1. Taxpayer 2 and 3 sell sand directly to customers. Taxpayer 1 does not operate a mine, but it sells sand from both mines directly to customers.

Taxpayer 2 and 3 mine sand in Texas, which is used for oil and gas well fracturing. The preceding entities use front-end loaders, bulldozers and excavators to extract and scoop the sand from the ground. No blasting or cutting is used to extract the sand. To prepare the sand for sale, the sand is placed on screeners to remove any unwanted foreign materials.

On occasion, the extracted sand is piped to another location by adding water, thereby creating a water slurry. In other cases, the sand is mixed with water and placed in large tanks. Water slurries are eventually sent to a water plant for washing.

After the sand is sent to a water plant, the sand is separated by grade and size through screener systems. The two mines use different screening machines. Sand granules are not resized during separation. Separation only sifts the material to locate the correct size.

Once the proper sand granules are selected, they are sent to attrition scrubbers for washing. The attrition scrubbers operate like washing machines, washing and agitating the sand slurry. The effect of the attrition cell scrubbers is the removal of organics, clay, silt and other contaminants. No chemicals or other materials besides water are added to the sand. The water used in the washing step contains no acids or other additives that would deteriorate the sand or organics.

Once the sand grains are passed through the attrition scrubbers, the sand is dried by removing the water from the slurry, then transported via a conveyer belt where it is ultimately sent to dryers. After the sand dries, the sand is segregated once again by mesh and vibration screening equipment to reach an appropriate granule size requested by Taxpayers’ clients.

Question, Ruling and Analysis

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

Question: Is Taxpayers’ sand unprocessed and not subject to Texas sales tax?

Ruling: The sale of Taxpayers’ sand is unprocessed. Sale of the unprocessed sand is not subject to Texas 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. Section 151.009 (Tangible Personal Property).

Washing, drying, screening for size, and sorting of sand, gravel and similar materials are not processing activities. STAR Accession No. 9212L1233B12 (Dec. 7, 1992). The sale of unprocessed sand, gravel, and similar materials is not taxable. See Comptroller Decisions No. 44,432 (2005), 25,342 (1989).

Conversely, the sale and transportation of processed sand is taxable. See Comptroller Decision No. 27,940 (1992) and STAR Accession No. 201902003L (Feb. 7, 2019). Prior guidance has classified cutting, crushing, or mixing of sand as processing. See Comptroller Decision No. 44,432 (2005) and STAR Accession No. 200006438L (June 28, 2000).

Taxpayers’ activities to produce sand for sale do not include processing. The sand is extracted from the ground without blasting. After excavation, the sand is separated by grade and size through equipment that uses water and the sand’s weight to differentiate each sand grain. Attrition scrubbers are used to remove organics, clay, silt, and other debris.

Further screening is used to remove water and dryers are used to complete the drying process. Dry sand particles are separated by size, using a mesh screen and vibration, into the two precise sizes. Sand separated by size is not mixed with other sizes of sand or other materials.

These activities do not change the size or shape of the sand or involve the mixing of sand. Since none of the activities used by Taxpayers are processing, the sand is unprocessed. The sale of unprocessed sand 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. 202000124155218.

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.