Texas Appellate Court – Mining and extraction costs do not qualify for the manufacturing sales/use tax exemption

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August 2014

Overview

On August 13, 2014, the Texas Court of Appeals for the Third District held that the manufacturing exemption from Texas sales tax did not apply to the purchase of certain above-ground and below-ground oil and gas production equipment or to the services pertaining to such equipment. The court rejected the taxpayer’s argument that mining and extraction qualifies as “manufacturing, processing, or fabrication.”
 
Taxpayers claiming the Texas manufacturing exemption for either purchased equipment or services related to such equipment should review whether the equipment or services are used in the extraction or mining of oil and natural gas and whether alternatives for exemption may exist.

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