How did tank capacity and reclaimed-oil credits affect tax on oil-tank cleaning?

Plain-English summary

Cleaning a storage tank over 500 barrels was nontaxable real-property maintenance. Cleaning a tank of 500 barrels or less was taxable personal-property maintenance, with tax calculated before subtracting the reclaimed-oil credit. The letter also illustrated return reporting for the four redacted invoices.

Common questions

Were tanks over 500 barrels taxable to clean? No. What about 500 barrels or less? Taxable. Did the oil credit come before tax? No.

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/8507L0652B14

Original ruling text

July 15, 1985

Dear **:

Thank you for submitting invoice copies to request clarification on the
taxability of your oil tank cleaning operations.

When you are cleaning storage tanks with a capacity of more than 500 barrels
you are considered to be maintaining real property and your charge to the
customer is not taxable. When you are cleaning storage tanks with a capacity of
500 barrels or less you are considered to be maintaining personal property and
the charge to your customer, before the credit for reclaimed oil is given, is
taxable.

I have taken your invoices and restated them in an effort to show you the
proper procedures.

Example 1 & 2.

Tank Cleaning (1,000 BBLs Capacity)
8 hours truck and operator @ $** = $**
8 hours helper @ $** = $**
fresh air $**
41 bbls at 25% Bs&w Waves 31 bbls net CREDIT @ $** =
$**
Amount due this invoice $**

or

Tank Cleaning (500 BBL Capacity)
8 hours truck and operator @ $** = $**
8 hours helper @ $** = $**
fresh air $**

Subtotal $**
Tax (.04125) $**

41 bbls at 25% Bs&w Leaves 31 bbls net CREDIT @ $** =
$**
Amount due this invoice $**

Examples 3 & 4.

Tank Cleaning and Spill (1,000 BBL Capacity)
4 hours bobtail and operator @ $** = $**
4 hours helper @ $** = $**
Amount due this invoice $**

or

Tank Cleaning and Spill (500 BBL Capacity)
4 hours bobtail and operator @ $** = $**
4 hours helper @ $** = $**
Subtotal $**
Tax (. 04125) $**
Amount due this invoice $**

I will use all four (4) of these examples to show how they would be reported on
your sales tax return.

1. Total Sales $** (Total of all 4 invoices less tax)
2. Taxable Sales $** (Total of taxable invoices less tax)
3. Cost of items you bought for your own use $** (Items purchased
   tax free. But used by you instead of sold)
4. Total Amount Subject to Tax $**
5. Tax (.04125) and so forth $**

I hope this clarifies your questions for you and if I can be of any further
help don't hesitate to call or write me.

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/475-1931. You may write me at the Tax Administration Division.

Sincerely,

F. Wayne McDonald
Tax Administration Division