Experienced Tax Counsel for All Matters Involving Texas Oil Well Servicing Taxes
Several types of oil well services qualify as “taxable services” under Texas law. While this has an effect similar to a sales tax, it is classified as an “occupation tax” under the Texas Tax Code. When companies are required to pay Texas oil well servicing taxes, their failure to do so can trigger substantial liability for back taxes, interest, and penalties. As a result, a cautious and comprehensive approach to compliance is required, and servicers and other parties must be prepared to affirmatively demonstrate compliance when necessary.
Our lawyers assist companies with all aspects of Texas oil well servicing tax compliance. We also defend servicers and other parties in oil well servicing tax audits and, when necessary, provide representation in litigation involving disputed oil well servicing tax liability. All of our lawyers have extensive experience in these matters, and we rely on this experience to help protect our clients against unwarranted oil well servicing tax obligations.
Key Aspects of Texas Oil Well Servicing Tax Compliance
There are several aspects to Texas oil well servicing tax compliance. To mitigate their risk of scrutiny from the Texas Comptroller (and to ensure they are prepared to withstand it when necessary), servicers and other companies must consistently address all pertinent aspects on an ongoing basis. Some of the key aspects of Texas oil well servicing tax compliance include:
- Taxable Services – As noted above, several types of oil well services qualify as “taxable services” and are subject to Texas’s oil well servicing tax. These services include cementing casing seats, shooting formations, fracturing formations, acidizing formations, and surveying and testing formations.
- Exclusions – Texas’s oil well servicing tax does not apply to “incidental” services performed by a company that is either drilling or reworking a well. Examples of services subject to this exclusion include drilling, completion, reworking, and reconditioning.
- Tax Permits – Any company that is subject to Texas’s oil well servicing tax is required to obtain a tax permit from the Texas Comptroller. As the Comptroller explains, “[a] permit will be issued when the Comptroller determines that any well servicing tax due has been paid by an applicant and the applicant has complied with the applicable tax laws.”
- Responsibility to Pay – Companies that may be required to pay Texas’s oil well servicing taxes fall into two categories: (i) companies that “own, control, or furnish the tools, instruments and equipment used in providing well service;” and, (ii) companies that “use any chemical, electrical or mechanical process in providing service at any oil or gas well during the drilling and completion, or reworking or reconditioning, of [an] oil or gas well.”
- Tax Rate and Due Date – Taxable oil well services are taxed at a rate of 2.42 percent. Companies must file reports and submit payments to the Texas Comptroller by the 20th day of the month following the month for which tax is due.
Our Services
With extensive experience advising clients in Texas’s oil and gas industry, our lawyers provide assistance with all Texas oil well servicing tax matters. This includes (but is not limited to):
Texas Oil Well Servicing Tax Compliance
Companies that are subject to Texas’s oil well servicing tax must take a proactive approach to compliance. We help servicers and other companies understand their compliance obligations, implement custom-tailored policies and procedures, and manage and document compliance on an ongoing basis.
Texas Oil Well Servicing Tax Audits
We represent servicers and other companies in Texas oil well servicing tax audits. The Texas Comptroller forcefully enforces compliance across all segments of the oil and gas industry, and when facing an audit, executing an informed, strategic defense is critical to avoiding unnecessary liability (including liability for interest and penalties).
Texas Oil Well Servicing Tax Litigation
We represent servicers and other companies in litigation involving Texas oil well servicing taxes as well. If litigating is your company’s best option under the circumstances at hand, our lawyers can use their experience to build and execute a targeted litigation strategy while also keeping the possibility of settlement on the table as warranted.
FAQs: Texas Oil Well Servicing Tax Audits and Litigation
Are there exceptions to the taxability of oil well surveying and testing services?
Yes, while oil well surveying and testing generally qualify as taxable services under the Texas Tax Code, there are several exceptions. For example, the Texas Comptroller identifies the following services as “not taxable”: temperature surveys to check the results of cementing or to check mechanical equipment in a well bore; cement bond surveys; corrosion surveys; deflection and deviation surveys; and dip meter surveys to locate subsequent wells. This list is not exclusive.
What are the penalties for nonpayment of Texas oil well servicing taxes?
Unpaid oil well servicing taxes are subject to a 5% penalty for the first 30 days. After 30 days, the penalty rate increases to 10 percent. Interest accrues on past-due amounts beginning 61 days after the due date. The Texas Comptroller uses an interest rate equal to the annual prime rate plus one.
What should companies do when facing Texas oil well servicing tax audits?
Companies that are facing Texas oil well servicing tax audits should engage experienced tax counsel promptly. Facing an audit is a high-risk scenario regardless of the circumstances at hand, and targeted companies must be prepared to defend themselves effectively to avoid unnecessary liability. At Brown PC, we have extensive experience representing clients during Texas Comptroller audits, including audits involving a wide range of taxable services.
Speak with a Texas Oil Well Servicing Tax Lawyer at Brown PC
If you have questions or concerns about Texas oil well servicing tax compliance, we invite you to get in touch. With offices in Fort Worth, we represent servicers and other clients statewide. To request a call with an experienced Texas oil well servicing tax lawyer at Brown PC, please call 888-870-0025 or contact us online today.