Earlier this year, the Texas Comptroller’s office announced plans to apply sales tax to processed materials such as frac sand, following the Hegar v. Texas Westmoreland Coal Co. decision. The ruling broadened the definition of “processing” under Texas law to include certain activities at the point of extraction, including excavation, washing and sorting. Under the Comptroller’s June 13 audit memo, these activities would have made processed frac sand taxable and extended the manufacturing exemption to qualifying equipment used in those operations.
For decades, the Comptroller’s office maintained that equipment used in pretreatment activities like washing or sorting was not eligible for the manufacturing exemption because those steps occurred before manufacturing began. The Westmoreland decision marked a significant departure from that view, opening the door for certain extracting equipment to qualify.
The policy was set to take effect Oct. 1. EWTC opposes this change and has been working along with other allied trade associations to oppose the proposal. Last week, under the new acting comptroller, the agency issued an alert pausing implementation of the June 13 memo indefinitely while it reviews the underlying policies. In the meantime, existing rules will remain in place, and EWTC will continue to monitor this issue and share relevant updates. Read the June 13 memo here.
Jeff Emerick, Director of Government Affairs, writes about the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
