Well Services Taxes, an Additional Tax

Here is another tax I just discovered.  Straight from Comptroller's website.  This indirectly affects mineral owners because it affects the economics of the service companies and therefore the operators of our leases.  More cost equals fewer wells.  For your education:

The Well Servicing Tax

An occupation tax is levied on persons who perform certain services associated with oil and gas wells. The tax is 2.42 percent of the gross amount of the charge for service, less the reasonable wellhead value of any material used or consumed in the well. If the tax is collected from a customer, it must be included in the service company's gross receipts reported for tax purposes.

Note: The term person means an individual, partnership, firm, joint stock company, association, or corporation.

The well servicing tax, legally identified as a Miscellaneous Occupation Tax, is often referred to as the "2.42-percent" tax.

The three primary taxable services are:

• Cementing the casing seat of any oil or gas well;
• Shooting, fracturing, or acidizing sands or other formations in any oil or gas well;
• Surveying or testing oil or gas well formations or the contents of formations with instruments or equipment partially or wholly located within the well bore.

The tax does not apply to a service incidental to drilling, completing, reworking, or reconditioning a well when the service is performed by the person drilling or reworking the well.

A service is taxable when performed by a person who offers well servicing for a fee, and who:

• Owns, controls, or furnishes the tools, instruments, and equipment used to provide the oil or gas well service; or
• Uses any chemical, electrical, or mechanical process to provide the service at any oil or gas well.