Is bulldozer work for landowners, ranchers, and oil/gas seismic companies (clearing right-of-ways, repairing damaged roads, clearing brush, building or repairing a ranch tank) a taxable real property service?

Plain-English summary

A bulldozer operator working in the oil-and-gas/ranching context asked the Comptroller to classify five specific services as taxable or not. The answer draws a clean line between NEW work/clearing (nontaxable) and REPAIRING something that already existed (taxable):

1. Clearing right-of-ways (cut, clear, stack, burn, disk) on a landowner's property with their permission, so a seismic or oil/gas company can access the land -- nontaxable.
2. Repairing ranch roads that a seismic company's travel damaged, hired by the oil company doing the repair -- taxable, under Rule 3.357 (Nonresidential Real Property Repair, Remodeling, Restoration, Maintenance, New Construction, and Residential Property).
3. Clearing brush on a ranch for an individual landowner -- nontaxable.
4. Building a new tank on a ranch for an individual landowner -- nontaxable (new construction).
5. Repairing an existing tank on a ranch for an individual landowner -- taxable, again under Rule 3.357.

What this means for you

Bulldozer operators and earthwork contractors serving ranches or the oil/gas industry

Track whether your job is creating/clearing something new (generally nontaxable) versus repairing, restoring, or maintaining something that already exists (taxable real property repair under Rule 3.357) -- the same equipment and operator can owe tax on one job and not the next, based purely on that distinction.

Ranchers and landowners hiring bulldozer work

Building a new tank or clearing brush/right-of-ways shouldn't carry sales tax, but repairing an existing tank or road damaged by prior use will.

Oil and gas companies whose seismic/exploration activity damages ranch infrastructure

If you hire a contractor to repair roads or other property your operations damaged, that repair work is taxable, even though the original right-of-way clearing that let you access the land wasn't.

Common questions

Q: Is clearing a right-of-way for an oil/gas company's seismic work taxable?
A: No, per this letter -- it's nontaxable.

Q: Is repairing a ranch road damaged by a seismic company's vehicles taxable?
A: Yes, per this letter, under Rule 3.357 as nonresidential real property repair.

Q: Is building a new ranch tank different from repairing an existing one, tax-wise?
A: Yes -- per this letter, building a new tank is nontaxable, but repairing an existing tank is taxable under Rule 3.357.

Citations and references

Rules:

• 34 Tex. Admin. Code Rule 3.357 (Nonresidential Real Property Repair, Remodeling, Restoration, Maintenance, New Construction, and Residential Property)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9911893L

Original ruling text

November 9, 1999

Dear Sir or Madam:

This is in response to your request that we identify the taxable or nontaxble
status of services that you provide. I have restated the services in question
below, followed by my response to those specific questions:

1. Using a bulldozer on a land owners property to cut, clear, stack, burn &
   disk right-of-ways with the land owners approval for you to go on their land
   because the seismic company or oil and gas company has paid them to do so.

Response: Nontaxable.

2. Hired by an oil company to repair ranch roads with a maintainer that the
   seismic company damaged while traveling up and down the rancher's roads to do
   their seismic shoot.

Response: Taxable, under Rule Section 3.357 - Labor Relating to Nonresidential
Real Property Repair, Remodeling, Restoration, Maintenance, New Construction,
and Residential Property.

3. Using a bulldozer to clear brush on a ranch for an individual landowner.

Response: Nontaxable.

4. Using a bulldozer to build a tank on a ranch for an individual landowner.

Response: Nontaxable.

5. Using a bulldozer to repair a tank on a ranch for an individual landowner.

Response: Taxable, under Rule Section 3.357 - Labor Relating to Nonresidential
Real Property Repair, Remodeling, Restoration, Maintenance, New Construction,
and Residential Property.

This opinion is based on the facts presented. Other facts though similar may
provide a different result. I hope this information answers your questions.
If you need additional information, please call me toll-free at 1-800-531-5441,
extension 3-4502. The direct line is 512/463-4502. You may also write to Tax
Policy Division, Comptroller of Public Accounts. You may also e-mail our tax
help section at:

Sincerely,

Gilbert Zamora
Tax Policy