A Texas Supreme Court ruling has spared the state from having to issue billions of dollars in tax refunds to oil and gas drillers — a prospect that had had threatened to shake up the next legislative session.
The justices on Friday sided with Texas Comptroller Glenn Hegar in an arcane tax dispute that the Republican feared could have far-reaching consequences for the state’s budget outlook.
Denying Midland-based driller Southwest Royalties’ request for a refund, the court ruled that state law did not exempt metal pipes, tubing and other equipment used in oil and gas extraction exempt from sales taxes.
“Southwest did not prove that the equipment for which it sought a tax exemption was used in “actual manufacturing, processing, or fabricating” of hydrocarbons within the meaning” of the tax code, Justice Phil Johnson wrote for the majority in an opinion that affirmed decisions in lower courts. “Thus, Southwest is not entitled to an exemption from paying sales taxes on purchases of the equipment.”
See here, here, and here for the background. As noted in the story, some $4 billion or more would have had to be refunded to various businesses if the Supremes had ruled for the plaintiffs. Needless to say, that would have been bad news for the state, as well as for cities and counties who get their share of sales tax revenue, too. Thankfully, there is a bottom to the stupidity in our tax code. Good to know.