Which pulling-unit, pressure-testing, hot-oil, and equipment-cleaning services were taxable?

Plain-English summary

Using a pulling unit and crew to remove a faulty pump, rod, or tubing joint, or to install a new or repaired one, was taxable. Associated mileage and per-diem charges were taxable too.

Pressure testing tubing or casing to find a leak or hole was not taxable when performed as described. Heating crude oil to remove impurities so the oil could be accepted for sale was also not taxable.

Hot-oil service used to clean casing or tubing was taxable. Using hot oil to perform a pressure test was likewise taxable. Cleaning casing, tubing, flowlines, or vessels with hot oil or hot water was taxable.

Common questions

Were pulling-unit mileage and per diem excluded? No; they were included in the taxable charge. Was all pressure testing nontaxable? No. The letter taxed pressure testing performed with hot oil. Was heating oil before sale taxable? Not when done to remove impurities under the described facts.

Citations and references

The reproduced letter cites no numbered statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8502L0646C08

Original ruling text

February 1, 1985

Dear ***:

Thank you for your recent letter regarding oilfield service. Your
situations are restated below.

I understand that the charge we make for the use of our pulling unit and
crew to remove a faulty pump, rod or joint of tubing or to run into the hole
a new or repaired rod, joint of tubing or pump is not taxable.

Response: The charge would be taxable including any associated charges
such as mileage or per diem.

I also am under the impression that in regard to hot oil and hot water
service the following services are not taxable: testing the pressure on tubing
or casing to determine whether or not a leak or hole exists or heating crude
oil to remove impurities in order to render that oil acceptable for sale to a
crude oil gatherer.

Response: Pressure testing and heating crude oil to remove impurities are
not taxable. However, hot oil service to clean casing or tubing is taxable.
Using hot oil to pressure test is taxable.

I understand that the cleaning by hot oil or hot water of casing, tubing,
flowlines or vessels of any kind is taxable.

Response: You are correct.

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

If I can be of further help, please call us at 1-800-252-5555 toll free
from anywhere in Texas. You may write us at the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division