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Texas Supreme Court holds oil and gas exploration and production equipment subject to sales tax

The Texas Supreme Court affirmed the Texas Third District Court of Appeals’ ruling that an oil and gas exploration and production company’s purchases of casing, tubing and downhole equipment did not qualify for the manufacturing exemptions from Texas sales and use tax. In doing so, the Supreme Court determined that while hydrocarbons such as oil and gas undergo physical changes as they rise to the surface, these changes result from natural pressure and temperature changes, not from application of the equipment.

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