When did Texas treat an underground pipeline on easements as real property, and when was an oilfield flow line tangible personal property?

Plain-English summary

Texas considered three factors in deciding whether a pipeline was real property: permanent physical affixation, the parties' intent that it remain affixed, and attachment that allowed the pipeline to serve its purpose.

When all three answers were yes, the pipeline was real property. Transmission lines generally fit that treatment.

A flow line carrying production within an oil-and-gas lease was instead tangible personal property for sales-and-use tax purposes. The letter directed the owner to local jurisdictions for separate ad valorem-tax questions involving real property.

Common questions

Did owning only easements prevent real-property treatment? Not by itself; the letter focused on affixation, intent, and function.

Transmission pipeline generally real property? Yes.

Lease-level production flow line tangible personal property? Yes.

Did the letter decide local property tax? No.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9006L1029B14

Original ruling text

June 23, 1990

Dear **:

We received your letter questioning whether a pipeline is
considered real property. According to your letter, the
pipeline is located beneath the earth's surface and the
pipeline owner owns property easements not the land sur-
rounding the pipeline.

Below are some of the factors we consider to determine if
a pipeline is real property:

1. Is the pipeline affixed to the realty in a permanent
   manner?

2. Is the intent of the parties for the pipeline to be
   permanently affixed to realty?

3. Is the pipeline affixed to realty so that it can be
   used for its purpose?

If the answer to the above questions is yes, then we con-
sider the pipeline real property.

Generally, transmission lines are considered real proper-
ty. However, if the pipeline is a flow line which carries
production within the lease, then the pipeline is tangible
personal property for sales and use tax purposes.

You should contact the applicable local taxing jurisdict-
ions to find out about Ad Valorem taxes on sales of real
property.

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

If you have any questions you may call or write Tax Cor-
respondence. You may call toll free 1-800-252-5555, or
our regular number is 512/ 463- 4600. My extension is
3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence