Which oilfield roustabout labor charges did Texas classify as taxable or nontaxable in 1984?

Plain-English summary

The Texas Comptroller classified the labor on seven example oilfield roustabout jobs separately:

• assembling and setting a pump jack, tanks, and heater treater was nontaxable because "assembled" meant installed, not the last stage of manufacturing;
• installing tank and heater connections, cutting lines, preparing a well for production, and setting the pump jack was nontaxable;
• finishing vent lines, installing a pump-jack motor, starting the unit, building a pit fence, and cleaning the location was nontaxable, assuming the service provider did not supply the motor or fence material;
• painting a tank battery and trimming lines was taxable, assuming each tank in the battery had less than 500-barrel capacity;
• hauling excess pipe and cleaning the location was nontaxable;
• repairing leaks in an injection line from the pump to the well was taxable as repair of tangible personal property; and
• covering oil and water and putting a line clamp on the line described in Job 7 was nontaxable.

The answers covered only the labor portion of each bill. When labor was nontaxable, the service provider still had to pay sales tax on the cost of materials used.

STAR adds an important historical warning: labor to repair and remodel real property became taxable effective January 1, 1988, so that later change could affect these 1984 answers depending on the facts. STAR also states that incomplete information is available for the responses.

What this means for you

Oilfield service companies

The label "roustabout service" did not decide taxability. The Comptroller examined the particular installation, repair, painting, hauling, and cleanup work performed.

Operators and invoice reviewers

Review each job description and any supplied materials. Two invoices from the same provider could receive different treatment.

Accountants and tax professionals

These are historical classifications, expressly flagged by STAR as potentially affected by a January 1, 1988 law change. Verify current law before applying them.

Common questions

Q: Was installing and setting oilfield equipment taxable?
A: The installation examples in Jobs 1 through 3 were nontaxable, subject to the stated assumptions.

Q: Was painting the tank battery taxable?
A: Yes, assuming the individual tanks were under 500 barrels.

Q: Was repairing an injection-line leak taxable?
A: Yes. The response classified it as repair of tangible personal property.

Q: Were materials exempt when the labor was nontaxable?
A: No. The provider had to pay tax on the cost of materials used.

Q: Can these 1984 answers be applied without checking later law?
A: No. STAR expressly warns that the January 1, 1988 taxation of real-property repair and remodeling labor could affect them.

Citations and references

• STAR historical note: labor to repair and remodel real property became taxable effective January 1, 1988; no statute or rule number is provided.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8411L0603E10

Original ruling text

NOTE: Labor to repair and remodel real property became taxable effective 01/01/1988;
These responses could be affected by that law change depending upon the facts of
each situation. Incomplete information available with respect to these responses.

DATE: November 27, 1984

TO: Nancy Mathews, 2H07

FROM: Eddie C. Washington, 3E40

SUBJECT: Roustabout Services

The following are typical billings made by roustabout service companies for
various work performed in oilfields and the correct application of sales tax on
them:

JOB 1

Quality: 13 1/2 hours Curtis and truck
Unit Price: $28.00
Amount: $378.00
Description: November 1, 1983 Assembled Pump Jack. Set Tanks, Stood Heater
Treater Up and Down.

Quality: 13 1/2 hours Terry
Unit Price: $12.00
Amount: $162.00
Description: November 1, 1983 Assembled Pump Jack. Set Tanks, Stood Heater
Treater Up and Down.

Quality: 13 1/2 hours Larry
Unit Price: $12.00
Amount: $162.00
Description: November 1, 1983 Assembled Pump Jack. Set Tanks, Stood Heater
Treater Up and Down.

Answer: Nontaxable as the term "assembled" means installed and not assembly
as in the last stage of manufacturing.

JOB 2

Quality: 13 1/2 hours Curtis and truck
Unit Price: $28.00
Amount: $378.00
Description: November 2, 1983 Installed Connections on Tanks and Heater
Treater. Cut Lines for Tanks and Heater. Had Well Ready to Produce. Set
Blocks for Pump Jack and Set Pump Jack.

Quality: 13 1/2 hours Terry
Unit Price: $12.00
Amount: $162.00
Description: November 2, 1983 Installed Connections on Tanks and Heater
Treater. Cut Lines for Tanks and Heater. Had Well Ready to Produce. Set
Blocks for Pump Jack and Set Pump Jack.

Quality: 13 1/2 hours Larry
Unit Price: $12.00
Amount: $162.00
Description: November 2, 1983 Installed Connections on Tanks and Heater
Treater. Cut Lines for Tanks and Heater. Had Well Ready to Produce. Set
Blocks for Pump Jack and Set Pump Jack.

Answer: Nontaxable.

JOB 3

Quality: 13 1/2 hours Curtis and truck
Unit Price: $28.00
Amount: $378.00
Description: November 3, 1983 Finished Up Vent Lines Off of Heater.
Installed Motor on Pump Jack. Got Unit Running. Built Fence Around Pits.
Cleaned up Location.

Quality: 13 1/2 hours Terry
Unit Price: $12.00
Amount: $162.00
Description: November 3, 1983 Finished Up Vent Lines Off of Heater.
Installed Motor on Pump Jack. Got Unit Running. Built Fence Around Pits.
Cleaned up Location.

Quality: 13 1/2 hours Larry
Unit Price: $12.00
Amount: $162.00
Description: November 3, 1983 Finished Up Vent Lines Off of Heater.
Installed Motor on Pump Jack. Got Unit Running. Built Fence Around Pits.
Cleaned up Location.

Answer: Nontaxable. [assuming that motor and fence material were not supplied
by this service provider]

JOB 4

Quality: 10 hours Curtis and truck
Unit Price: $28.00
Amount: $280.00
Description: November 30, 1983 Finished Painting Tank Battery and Trimming
Liens.

Quality: 10 hours Tery
Unit Price: $12.00
Amount: $120.00
Description: November 30, 1983 Finished Painting Tank Battery and Trimming
Liens.

Quality: 10 hours Larry
Unit Price: $12.00
Amount: $120.00
Description: November 30, 1983 Finished Painting Tank Battery and Trimming
Liens.

Answer: Taxable. [assuming individual tanks in battery are less than 500 barrel capacity]

JOB 5

Quality: 12 hours Curtis and truck
Unit Price: $28.00
Amount: $336.00
Description: November 23, 1983 Hauled Excess Pipe to the Lawn Yard.
Cleaned Up Location.

Quality: 12 hours Terry
Unit Price: $12.00
Amount: $144.00
Description: November 23, 1983 Hauled Excess Pipe to the Lawn Yard.
Cleaned Up Location.

Quality: 12 hours Larry
Unit Price: $12.00
Amount: $144.00
Description: November 23, 1983 Hauled Excess Pipe to the Lawn Yard.
Cleaned Up Location.

Answer: Nontaxable.

JOB 6

Quantity: Curtis and Pu. and Sonny
Amount: $100.00
Description: September 30, 1984 Repair Leaks in Injection Line from Pump
to Well. Left Unit Running.

Answer: Taxable repair of personal property.

JOB 7

Quality: 2 hours Curtis and truck
Unit Price: $28.00
Amount: $112.00
Description: September 24, 1984 Cover Oil and Water. Put Line Clamp on
Ejection Line. Left Unit Running

Quality: 2 hours Larry
Unit Price: $12.00
Amount: $48.00
Description: September 24, 1984 Cover Oil and Water. Put Line Clamp on
Ejection Line. Left Unit Running

Quality: 2 hours
Unit Price: $12.00
Amount: $48.00
Description: September 24, 1984 Cover Oil and Water. Put Line Clamp on
Ejection Line. Left Unit Running

Answer: Nontaxable.

These answers all relate to the labor portion of the bill. Where the charge
for labor is listed as nontaxable, sales tax should be paid on the cost price
of all materials used.

DATE: 10-11-84

TO: Eddie Washington - Sales Tax Policy Division

FROM: Nancy Mathews - San Angelo - 2H07

SUBJECT: Roustabout Services

Attached please find copies of invoices and price list from ***.
Please review and advise me on how taxpayer should
handle tax.

It is my understanding that most roustabout services charge their
customers as reflected on the attached price list.

Thank you.

Nancy Mathews - Tax Representative

General Oil Field Construction

24 Hour Service

Gang Truck with tools and pusher - $28.00 per hour
Helpers - $12.00 per hour
Hot Shot Service (Pickup and Driver) - $20.00 per hour
One Ton Truck with Driver - $25.00 per hour
Gooseneck Float - $11.00 per hour
Spray Painting Compressor and Spray Gunds (With Operator) - $25.00 per hour
Wash Rig (Chemicals Extra) - $30.00 per hour
Front End Loader - $20.00 per hour

Time starts from yard until return to yard.
4 hour minimum on all work and personnel.
$40.00 charge on overnight stay for job.
Double time charged for Sundays and Holidays.

TERMS: INVOICES PAYABLE UPON RECEIPT. OVER THIRTY DAYS INTEREST WILL BE
CHARGED AT MAXIMUM ALLOWED BY LAW

PRICES SUBJECT TO CHANGE WITHOUT NOTICE.