TAX CODE
CHAPTER 202. OIL PRODUCTION TAX
SUBCHAPTER A. GENERAL PROVISIONS
§ 202.001. DEFINITIONS. In this chapter:
(1) "Carrier" means a person who owns, operates, or
manages a means of transporting oil.
(2) "First purchaser" means a person who purchases
crude oil from a producer.
(3) "Oil" means crude oil or other oil taken from the
earth, regardless of the gravity of the oil.
(4) "Producer" means a person who takes oil from the
earth or water in any manner, a person who owns, controls, manages,
or leases an oil well, or a person who owns an interest, including a
royalty interest, in oil or its value, whether the oil is produced
by the person owning the interest or by another on his behalf by
lease, contract, or any other arrangement.
(5) "Royalty interest" means an interest in mineral
rights in a producing leasehold in the state, but does not include
the interest of a person having the management and operation of a
well.
(6) "Subsequent purchaser" means a person who
purchases oil from a person other than the producer of the oil, or a
person operating a reclamation plant, topping plant, treating
plant, refinery, or processing plant.
Acts 1981, 67th Leg., p. 1736, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.002. PRODUCTION AND MEASUREMENT OF
OIL. (a) "Production" means the total gross amount of oil
produced, including royalty and other interests.
(b) The amount of production shall be measured or determined
by:
(1) tank tables compiled to show 100 percent of the
capacity of the tanks without deduction for overage or losses in
handling; or
(2) meter or other measuring devices that accurately
determine the amount of production.
(c) If the amount of production has been measured or
determined by a tank table compiled to show less than 100 percent of
the full capacity of a tank, the amount must be raised to a basis of
100 percent.
(d) When measuring or determining the amount of production,
a reasonable deduction may be made for basic sediment and water and
a reasonable allowance may be made for correction of the
temperature to 60 degrees Fahrenheit.
(e) This section does not authorize the use of metering
devices for the measurement of oil on a well without the express
permission of the operator of the well.
Acts 1981, 67th Leg., p. 1736, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.003. AGREEMENT TO PAY TAX NOT IMPAIRED. This code
does not impair a contract in which any person has agreed to pay any
part of the tax imposed by this chapter. This code does not relieve
any person of any contractual liability.
Acts 1981, 67th Leg., p. 1737, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.004. INSPECTION OF RECORDS AND REPORTS. A person
required by this chapter to make and keep a record shall keep the
record open for inspection by the comptroller or the attorney
general at all times. Reports filed under this chapter are open to
inspection by the attorney general.
Acts 1981, 67th Leg., p. 1737, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.005. EMPLOYMENT OF AUDITORS. The comptroller may
employ auditors and supervisors to verify reports and investigate
the affairs of producers and purchasers to determine whether the
tax imposed by this chapter is being properly reported and paid.
Acts 1981, 67th Leg., p. 1737, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.006. TAXPAYER IDENTIFICATION NUMBER. (a) Except
as otherwise provided by Subsection (b), each producer must obtain
a taxpayer identification number from the comptroller.
(b) A producer whose only ownership interest in the oil is a
royalty interest must obtain a tax identification number from the
comptroller only if the producer has elected to take the producer's
share of production in kind or if the comptroller determines that
the producer's activity or interest requires that a number be
assigned to protect the state's interest in the tax attributable to
the producer.
Added by Acts 1993, 73rd Leg., ch. 587, § 33, eff. Jan. 1, 1994.
SUBCHAPTER B. TAX IMPOSED
§ 202.051. TAX IMPOSED. There is imposed a tax on the
production of oil.
Acts 1981, 67th Leg., p. 1737, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.052. RATE OF TAX. (a) The tax imposed by this
chapter is at the rate of 4.6 percent of the market value of oil
produced in this state or 4.6 cents for each barrel of 42 standard
gallons of oil produced in this state, whichever rate results in the
greater amount of tax.
(b) For oil produced in this state from a new or expanded
enhanced recovery project that qualifies under Section 202.054 of
this code, the rate of the tax imposed by this chapter is 2.3
percent of the market value of the oil.
(c) The exemptions described by Sections 202.056 and
202.059 apply to oil produced in this state from a well that
qualifies under Section 202.056 or 202.059, subject to the
certifications and approvals required by those sections.
Acts 1981, 67th Leg., p. 1737, ch. 389, § 1, eff. Jan. 1, 1982.
Amended by Acts 1989, 71st Leg., ch. 795, § 1, eff. Sept. 1,
1989; Acts 1991, 72nd Leg., ch. 604, § 1, eff. Sept. 1, 1991;
Acts 1993, 73rd Leg., ch. 1015, § 1, eff. Sept. 1, 1993; Acts
1995, 74th Leg., ch. 989, § 4, eff. Jan. 1, 1996.
§ 202.053. MARKET VALUE. The market value of oil is the
actual market value plus any bonus, premium, or other thing of value
paid for the oil or that the oil will reasonably bring if lawfully
produced.
Acts 1981, 67th Leg., p. 1737, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.054. QUALIFICATION OF OIL FROM NEW OR EXPANDED
ENHANCED RECOVERY PROJECT FOR SPECIAL TAX RATE. (a) In this
section:
(1) "Active operation" means the start and
continuation of a fluid injection program for a secondary or
tertiary recovery project to enhance the displacement process in
the reservoir.
(2) "Commission" means the Railroad Commission of
Texas.
(3) "Enhanced recovery project" means the use of any
process for the displacement of oil from the earth other than
primary recovery and includes the use of an immiscible, miscible,
chemical, thermal, or biological process and any co-production
project.
(4) "Existing enhanced recovery project" means an
enhanced recovery project that began active operations before
September 1, 1989.
(5) "Expanded enhanced recovery project" or
"expansion" means the addition of injection and producing wells,
the change of injection pattern, or other operating changes to an
existing enhanced oil recovery project that will result in the
recovery of oil that would not otherwise be recovered.
(6) "Incremental production" means the volume of oil
produced by an expanded enhanced recovery project in excess of the
production decline rate established under conditions before
expansion for an existing enhanced recovery project.
(7) "Operator" means the person responsible for the
actual physical operation of an enhanced recovery project.
(8) "Positive production response" means that the rate
of oil production from the wells affected by an enhanced recovery
project is greater than the rate that would have occurred without
the project.
(9) "Primary recovery" means the displacement of oil
from the earth into the well bore by means of the natural pressure
of the oil reservoir, including artificial lift.
(10) "Production decline rate" means the projected
future oil production from a project area as extrapolated by a
method approved by the commission.
(11) "Recovered oil tax rate" means the tax rate
provided by Section 202.052(b) of this code.
(12) "Secondary recovery project" means an enhanced
recovery project that is not a tertiary recovery project.
(13) "Tertiary recovery project" means an enhanced
recovery project using a tertiary recovery method listed in the
federal June 1979 energy regulations referred to in Section 4993,
Internal Revenue Code of 1986, or approved by the United States
secretary of the treasury for purposes of administering Section
4993, Internal Revenue Code of 1986, without regard to whether that
section remains in effect.
(14) "Co-production project" means an enhanced
recovery project in which water is permanently removed from an oil
and/or gas reservoir in an effort to lower the gas-water or
oil-water contact in the reservoir or to reduce reservoir pressure
to recover entrained hydrocarbons from the reservoir that would not
be produced by conventional primary or secondary production
methods.
(15) "Commission approved co-production project"
means a reservoir development project in which the commission has
recognized that water withdrawals from an oil or gas reservoir in
excess of specified minimum volumes will result in recovery of
additional oil and/or gas from the reservoir that would not be
produced by conventional production methods and where operators in
the field have begun to implement commission requirements to
withdraw such volumes of water and dispose of such water outside the
subject reservoir. Reservoirs potentially eligible for this
designation shall be limited to those reservoirs in which oil
and/or gas has been bypassed by water encroachment caused by
production from the reservoir and such bypassed oil and/or gas may
be produced as a result of fieldwide high-volume water withdrawals
of natural formation water.
(16) "High-volume water withdrawals" means the
withdrawal of water from a reservoir in an amount sufficient to
dewater portions of the reservoir containing oil and/or gas
previously bypassed by water encroachment.
(b) Oil produced from an enhanced recovery project other
than a co-production project qualifies for the recovered oil tax
rate if, before the project begins active operation, the commission
approves the project and designates the area to be affected by the
project. The incremental production from an expanded enhanced
recovery project other than a co-production project qualifies for
the recovered oil tax rate if, before the expansion begins, the
commission approves the expansion and designates the area to be
affected by the expansion. For a new or expanded enhanced recovery
project, other than a co-production project, for which an
application for approval under this section is filed with the
commission on or after January 1, 1994, severance tax for all oil
produced during the period from January 1, 1994, through August 31,
1995, to which the recovered tax rate is applicable, must be paid
when due at the rate provided by Section 202.052(a) of this code.
On or after January 1, 1996, the payor may apply to the comptroller
for and shall be entitled to receive a tax credit equal to the
difference between the tax paid and the tax which would have been
due at the recovered oil tax rate for all production to which the
recovered tax rate is applicable during the period from January 1,
1994, through August 31, 1995. The tax credit may be applied to
either oil or gas severance taxes regardless of the field from which
the production originates. Oil produced from a commission approved
co-production project, whether a new enhanced recovery project or
an expanded enhanced recovery project, qualifies for the recovered
oil tax rate following commission certification of a positive
production response without regard to whether the commission
approval is before or after the project began active operations;
provided, however, tax must be paid when due at the rate provided in
Section 202.052(a) of this code for all oil produced on or before
July 31, 1995. On or after September 1, 1995, the operator may
apply to the comptroller for a refund and shall be entitled to
receive a refund equal to the difference between the tax paid on all
oil produced from a commission approved co-production project after
commission certification of a positive production response and the
tax due at the recovered oil tax rate for all oil produced after
commission certification of a positive production response from
such co-production project. The operator of a proposed project or a
proposed expansion may apply to the commission for approval of the
project or expansion under this section. The commission may
require an applicant to provide the commission with any relevant
information required to administer this section. If approval by
the commission of a unitization agreement under Subchapter B,
Chapter 101, Natural Resources Code, is required for purposes of
carrying out the project or expansion, the commission may not
approve the project or expansion unless it approves the unitization
agreement. A person may apply for approval of a proposed enhanced
recovery project or a proposed expansion under this subsection
concurrently with an application for approval of a unitization
agreement for purposes of carrying out the enhanced recovery
project or expansion under Section 101.011, Natural Resources Code,
or with an application for certification of the project or
expansion as a tertiary recovery project for purposes of Section
4993, Internal Revenue Code of 1986, or may make a separate
application for approval.
(c) This section applies to an enhanced recovery project
that begins active operation on or after September 1, 1989, and to
an expansion that the commission approves on or after September 1,
1991. An application for approval under this section must be filed
on or after September 1, 1989, for a new enhanced recovery project.
An application for approval under this section must be filed on or
after September 1, 1991, for an expansion of an existing enhanced
recovery project. A project may not qualify as an expansion if the
project has qualified as a new enhanced recovery project under this
section. An application may be filed on or after September 1, 1989,
even if a separate application for approval of the project or
expansion has already been filed under Subchapter B, Chapter 101,
Natural Resources Code, or for approval as a tertiary recovery
project for purposes of Section 4993, Internal Revenue Code of
1986, if the operation of a new project or the expansion of an
existing project, other than a co-production project, does not
begin before the application for approval under this section is
approved by the commission; provided, however, nothing herein
shall require commission approval of a co-production project prior
to commencing active operations on such project in order for such
project to be eligible for the recovered oil tax rate.
(d) An applicant for commission approval of a co-production
project shall submit a written application for approval to the
commission. Such application must be filed before January 1, 1994.
The applicant shall provide the commission with any relevant
information required to administer this section, including
evidence demonstrating that the reservoir is eligible for the
designation and demonstrating the minimum volumes of high-volume
water withdrawal required to recover oil and/or gas from the
reservoir that would not be produced by conventional production
methods. A commission representative may administratively approve
the application. If the commission representative denies
administrative approval, the applicant shall have the right to a
hearing upon request.
(e) If the commission approves an enhanced recovery project
or an expansion under this section, it shall issue a certification
of approval for an approved project designating the area to be
affected by the project.
(f) The recovered oil tax rate applies only to oil produced
from a new enhanced oil recovery project, any co-production
project, or the incremental production caused by the expansion of
an existing enhanced recovery project from the area the commission
certifies to be affected by the project.
(g) Subject to the provisions of Subsections (b) and (h) of
this section, the recovered oil tax rate applies to oil on which a
tax is imposed by this chapter for the 10 years beginning the first
day of the month following the date the commission certifies that,
in the case of an enhanced recovery project including a
co-production project, a positive production response has occurred
or, in the case of an expansion, other than related to a
co-production project, incremental production has occurred, if the
application for certification is filed:
(1) not later than three years from the date the
commission approves the project if the project is designated as a
new or existing project other than a co-production project that
uses a secondary recovery process; or
(2) not later than five years from the date the
commission approves the project if the project is designated as a
new or existing project that uses a tertiary recovery process or is
a co-production project.
(h) The operator may designate the certification date,
subject to commission approval. If the commission determines that
the project has caused a positive production response or
incremental production, the commission shall certify that fact.
(i) Notwithstanding Subsection (g) of this section,
qualification for the recovered oil tax rate ends on the first day
of the first calendar month that begins on or after the 91st day
following the date of termination of the active operation of the
enhanced recovery project or of termination of an approved
expansion.
(j) If the active operation of an approved enhanced recovery
project or expansion is terminated, the person who immediately
before the termination is the operator of the project shall notify
the commission and the comptroller in writing not later than the
30th day after the last day of active operation. Any person who
violates this subsection is liable to the state for a civil penalty
if the person pays or attempts to pay the tax imposed by this
chapter on oil from the project at the recovered oil tax rate after
qualification for that rate ends under Subsection (g) or (i) of this
section. The amount of the penalty may not exceed the sum of:
(1) $10,000; and
(2) the difference between the amount of taxes paid or
attempted to be paid and the amount of taxes due.
(k) The attorney general may recover a penalty under
Subsection (j) of this section in a suit brought on behalf of the
state. Venue for the suit is in Travis County.
(l) The commission has broad discretion in administering
this section and shall adopt and enforce any appropriate rules or
orders that the commission finds necessary to administer this
section concerning the designation, operation, and termination of
enhanced recovery projects and expansions. The commission shall
notify the comptroller of any action taken under this subsection.
The comptroller shall have the power to establish procedures in
order to comply with this Act.
(m) Subject to the provisions of Subsection (b) of this
section, if , before the comptroller approves an application for
taxation at the recovered oil tax rate, the tax imposed by this
chapter is paid at the rate provided by Section 202.052(a) of this
code on oil that qualifies under this section for the recovered oil
tax rate, the producer or producers of the oil are entitled to a
credit against taxes imposed by this chapter in an amount equal to
the difference between the tax paid on the oil and the tax due on the
oil at the recovered oil tax rate. The credit is allocated to each
producer according to the producer's proportionate share in the
oil. To receive a credit, one or more of the producers of the oil
must apply to the comptroller for the credit not later than the
first anniversary after the date the commission certifies that a
positive production response has occurred.
(n) To qualify for the taxation of oil at the recovered oil
tax rate, a person responsible for paying the tax must apply to the
comptroller. The application must include the certification of the
commission that the project or expansion has been approved and that
the project has resulted in a positive production response or that
the expansion has resulted in incremental production. The
comptroller shall approve the application of a person who
demonstrates that the oil is eligible for taxation at the recovered
oil tax rate. The comptroller may require a person applying for the
recovered oil tax rate to provide any relevant information in the
person's monthly report and internal records that the comptroller
considers necessary to administer this section. The commission
shall notify the comptroller in writing immediately if it
determines that active operation of an approved enhanced recovery
project or an approved expansion has been terminated or if it takes
any action or discovers any information that affects the taxation
of oil at the recovered oil tax rate.
Added by Acts 1989, 71st Leg., ch. 795, § 2, eff. Sept. 1, 1989.
Amended by Acts 1991, 72nd Leg., ch. 604, § 2, eff. Sept. 1,
1991; Acts 1993, 73rd Leg., ch. 335, § 1, 2, eff. Jan. 1, 1994;
Acts 1993, 73rd Leg., ch. 958, § 2, eff. Sept. 1, 1993; Acts
1997, 75th Leg., ch. 931, § 1, 2, eff. Sept. 1, 1997; Acts 2003,
78th Leg., ch. 209, § 53, eff. Oct. 1, 2003.
§ 202.056. EXEMPTION FOR OIL AND GAS FROM WELLS
PREVIOUSLY INACTIVE. (a) In this section:
(1) "Commission" means the Railroad Commission of
Texas.
(2) "Hydrocarbons" means any oil or gas produced from
a well, including hydrocarbon production.
(3) "Three-year inactive well" means any well that has
not produced in more than one month in the three years prior to the
date of application for severance tax exemption under this section.
(4) "Two-year inactive well" means a well that has not
produced oil or gas in more than one month in the two years
preceding the date of application for severance tax exemption under
this section.
(b) Hydrocarbons produced from a well qualify for a 10-year
severance tax exemption if the commission designates the well as a
three-year inactive well or a two-year inactive well. The
commission may require an applicant to provide the commission with
any relevant information required to administer this section. The
commission may require additional well tests to determine well
capability as it deems necessary. The commission shall notify the
comptroller in writing immediately if it determines that the
operation of the three-year inactive well or two-year inactive well
has been terminated or if it discovers any information that affects
the taxation of the production from the designated well.
(c) If the commission designates a three-year inactive well
under this section, it shall issue a certificate designating the
well as a three-year inactive well as defined by Subsection (a)(3)
of this section. The commission may not designate a three-year
inactive well under this section after February 29, 1996. If the
commission designates a two-year inactive well under this section,
it shall issue a certificate designating the well as a two-year
inactive well as defined by Subsection (a)(4) of this section. The
commission may not designate a two-year inactive well under this
section after February 28, 2010.
(d) An application for three-year inactive well
certification shall be made during the period of September 1, 1993,
through August 31, 1995, to qualify for the tax exemption under this
section. An application for two-year inactive well certification
shall be made during the period September 1, 1997, through August
31, 2009, to qualify for the tax exemption under this section.
Hydrocarbons sold after the date of certification are eligible for
the tax exemption.
(e) The commission may revoke a certificate if information
indicates that a certified well was not a three-year inactive well
or a two-year inactive well, as appropriate, or if other lease
production is credited to the certified well. Upon notice to the
operator from the commission that the certificate for tax exemption
under this section has been revoked, the tax exemption may not be
applied to hydrocarbons sold from that well from the date of
revocation.
(f) The commission shall adopt all necessary rules to
administer this section.
(g) To qualify for the tax exemption provided by this
section, the person responsible for paying the tax must apply to the
comptroller. The comptroller shall approve the application of a
person who demonstrates that the hydrocarbon production is eligible
for a tax exemption. The comptroller may require a person applying
for the tax exemption to provide any relevant information necessary
to administer this section. The comptroller shall have the power to
establish procedures in order to comply with this section.
(h) If the tax is paid at the full rate provided by Section
201.052(a), 201.052(b), 202.052(a), or 202.052(b) before the
comptroller approves an application for an exemption provided for
in this chapter, the operator is entitled to a credit against taxes
imposed by this chapter in an amount equal to the tax paid. To
receive a credit, the operator must apply to the comptroller for the
credit before the expiration of the applicable period for filing a
tax refund claim under Section 111.104.
(i) Penalties
(1) Any person who makes or subscribes any
application, report, or other document and submits it to the
commission to form the basis for an application for a tax exemption
under this section, knowing that the application, report, or other
document is false or untrue in a material fact, may be subject to
the penalties imposed by Chapters 85 and 91, Natural Resources
Code.
(2) Upon notice from the commission that the
certification for a three-year inactive well or a two-year inactive
well has been revoked, the tax exemption shall not apply to oil or
gas production sold after the date of notification. Any person who
violates this subsection is liable to the state for a civil penalty
if the person applies or attempts to apply the tax exemption allowed
by this chapter after the certification for a three-year inactive
well or a two-year inactive well is revoked. The amount of the
penalty may not exceed the sum of:
(A) $10,000; and
(B) the difference between the amount of taxes
paid or attempted to be paid and the amount of taxes due.
(3) The attorney general may recover a penalty under
Subdivision (2) of this subsection in a suit brought on behalf of
the state. Venue for the suit is in Travis County.
Added by Acts 1993, 73rd Leg., ch. 1015, § 3, eff. Sept. 1, 1993.
Amended by Acts 1997, 75th Leg., ch. 208, § 1 to 3, eff. Sept. 1,
1997; Acts 1999, 76th Leg., ch. 365, § 2, eff. Aug. 30, 1999;
Acts 1999, 76th Leg., ch. 893, § 1, eff. June 18, 1999.
§ 202.057. TAX CREDIT FOR INCREMENTAL PRODUCTION
TECHNIQUES. (a) In this section:
(1) "Baseline production" means a lease's average
monthly production during the four highest months of production in
the time period from January 1, 1996, through December 31, 1996.
(2) "Commission" means the Railroad Commission of
Texas.
(3) "Incremental production" means production from a
qualifying lease in excess of the baseline production.
(4) "Incremental production technique" means any
secondary or tertiary production enhancement technique. For wells
in primary production, the use of incremental production techniques
means that an expenditure of at least $5,000 must have been made to
cause increased production. Operators must certify to the
commission that such expenditure has been made to qualify for the
tax exemption. The incremental production techniques listed in
this subdivision must cause incremental production from an existing
oil lease or from a newly drilled single-completion well on an
existing lease.
(5) "Incremental ratio" means the amount of a
qualifying lease's average monthly incremental production during
the four-month period used to meet the definition of a qualifying
lease divided by its average monthly total production during the
same four-month period.
(6) "Qualifying lease" means a commission-designated
oil lease whose production during the four-month period used in
computing the baseline is no more than seven barrels of oil
equivalents per day per well, excluding gas flared pursuant to the
rules of the commission, and which has shown incremental production
for four of five consecutive months on or after September 1, 1997,
and after performing an incremental production technique within the
lease. For purposes of qualifying a lease, production per well per
day is measured by dividing the sum of lease production during the
four highest months of production in the baseline period by the sum
of the number of well-days, where a well-day is one well producing
for one day.
(7) "Qualified incremental production" means the
lease's monthly total production multiplied by the incremental
ratio.
(b) An operator of a qualifying lease is entitled to a 50
percent tax exemption on that lease's qualified incremental
production for five years provided that:
(1) the incremental production required to define a
qualifying lease occurred after September 1, 1997, and before
December 31, 1998;
(2) the operator of a qualifying lease applies to the
commission for a determination of a lease's incremental ratio
before February 11, 1999; and
(3) the operator provides to the comptroller a
commission-certified incremental ratio.
(c) If the comptroller's average taxable price of crude oil
reaches $25 per barrel, adjusted to 1997 dollars, for three
consecutive months, the tax credit under this section shall be
suspended until the price drops below $25 per barrel, adjusted to
1997 dollars, for three consecutive months.
(d) If the tax is paid at the full rate provided by Section
201.052(a) or (b) or Section 202.052(a) or (b) before the
comptroller approves an application for an exemption provided in
this chapter, the operator is entitled to a credit against taxes
imposed by this chapter in an amount equal to 50 percent of the tax
paid on the incremental production. To receive the credit, the
operator must apply to the comptroller for the credit not later than
the first anniversary after the date the commission certifies the
incremental ratio for a qualifying lease.
(e) The commission may enact rules necessary to administer
the provisions of this section.
Added by Acts 1997, 75th Leg., ch. 1060, § 2, eff. Sept. 1, 1997.
§ 202.059. EXEMPTION FOR HYDROCARBONS FROM TERRA
WELLS. (a) Hydrocarbons produced from a well subject to an
agreement under Chapter 93, Natural Resources Code, and under a
license issued under that chapter qualify for an exemption from the
taxes imposed by this chapter and Chapter 201 if the comptroller
approves the tax exemption under Subsection (g).
(b) Hydrocarbons produced from a well formerly subject to an
agreement under Chapter 93, Natural Resources Code, and a license
issued under that chapter resuming production after participation
in TERRA for two years qualify for an exemption from the taxes
imposed by this chapter and Chapter 201 if the comptroller approves
the tax exemption under Subsection (g).
(c) The commission may certify a well eligible for a tax
exemption or an application may be made to the commission for
certification under this section. The commission may require an
applicant to provide the commission with any relevant information
required to administer this section. The commission shall issue a
certificate to each operator of the well. The certificate must:
(1) include identification of the well; and
(2) state the date on which the tax exemption takes
effect, subject to the comptroller's approval of the exemption
under Subsection (g).
(d) The commission shall furnish to the comptroller a copy
of a certificate of exemption for each well qualifying under this
section.
(e) The commission may revoke a certificate for a tax
exemption if information indicates that a well was not eligible for
that designation at the time of certification or if a license issued
under Chapter 93, Natural Resources Code, is revoked by the
commission. The commission shall notify the operator and the
comptroller that a certificate has been revoked. A tax exemption
granted under this section is automatically revoked on the date the
certificate is revoked, and hydrocarbons produced from the well
after the date of revocation are not eligible for the tax exemption.
(f) The commission may adopt and enforce any rules or orders
that the commission finds necessary to administer this section.
(g) To qualify for the tax exemption, the person responsible
for paying the tax must apply to the comptroller for the exemption
and include with the application the certificate issued by the
commission under Subsection (c). The comptroller shall approve the
application of a person if the hydrocarbons are eligible for the tax
exemption. The comptroller may require a person applying for the
tax exemption to provide any relevant information necessary to
administer this section. The comptroller may establish procedures
to comply with this subsection and Subsection (h).
(h) If the tax is paid at the full rate provided by this
chapter and Chapter 201 on hydrocarbons produced on or after the
effective date of the tax exemption but before the date the
comptroller approves an application for the tax exemption, the
operator is entitled to a credit on taxes due under Chapter 201 or
this chapter in the amount equal to the tax paid during that period.
To receive a credit, the operator must apply to the comptroller for
the credit not later than one year after the date the commission
certifies the well for a tax exemption.
(i) A person is subject to the penalties that may be imposed
under Chapters 85 and 91, Natural Resources Code, if the person
makes and submits to the commission or comptroller an application,
report, or other document used or intended to be used for a
certification, tax exemption, or tax credit under this section and
the person knows that the application, report, or other document
contains a false or untrue material fact.
(j) A person is liable to the state for a civil penalty if
the person, after receiving notice from the commission that the
person's tax exemption certificate for a TERRA well or a former
TERRA well has been revoked, applies or attempts to apply for a tax
exemption for hydrocarbons produced from the well under the revoked
certificate. The amount of the penalty may not exceed the sum of:
(1) $10,000; and
(2) the difference between the amount of taxes paid or
attempted to be paid and the amount of taxes due.
(k) The attorney general may recover a penalty under
Subsection (j) in a suit brought on behalf of the state. Venue for
the suit is in Travis County.
(l) In this section:
(1) "Commission" means the Railroad Commission of
Texas.
(2) "Hydrocarbons" means any oil, gas, condensate, and
other liquid hydrocarbons produced from a well.
(3) "TERRA" means the Texas Experimental Research and
Recovery Activity under Chapter 93, Natural Resources Code.
Added by Acts 1995, 74th Leg., ch. 989, § 5, eff. Jan. 1, 1996.
SUBCHAPTER C. RECORDS
§ 202.101. PRODUCER'S RECORDS. A producer shall keep
accurate records in the state. The records must show:
(1) the counties in which the producer produces oil;
(2) the names of the leases from which the producer
produces oil;
(3) the total number of barrels of oil produced from
each lease;
(4) for each sale or delivery to a first purchaser, the
name and address of the first purchaser, the number of barrels sold
or delivered, and the price received for the oil;
(5) the amount and disposition of oil refined,
processed, or used on the lease where it is produced;
(6) the location and number of barrels in storage that
the producer owns and has not sold; and
(7) the name and address of each pipeline or refinery
that is storing oil that the producer has not sold.
Acts 1981, 67th Leg., p. 1737, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.102. FIRST PURCHASER'S RECORDS. A first
purchaser shall keep accurate records in the state. The records
must show:
(1) the name and address of each producer from which
the first purchaser buys oil;
(2) for each producer, the counties where the oil is
produced;
(3) for each producer, the name of the lease from which
the oil is produced;
(4) the number of barrels of oil purchased from each
producer and the price paid each producer for the oil;
(5) the number of barrels purchased and used, refined,
or processed by the first purchaser; and
(6) for each sale to a subsequent purchaser, the name
and address of the subsequent purchaser, the number of barrels
sold, and the price received for the oil.
Acts 1981, 67th Leg., p. 1738, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.103. SUBSEQUENT PURCHASER'S RECORDS. A
subsequent purchaser shall keep accurate records in the state. The
records must show:
(1) the name and address of each person who sells oil
to the subsequent purchaser, the number of barrels sold, the price
paid to each seller, and the date of each sale;
(2) the disposition of all oil purchased by the
subsequent purchaser;
(3) the number of barrels of oil used, refined, or
processed by the subsequent purchaser; and
(4) the name and address of each person who buys oil
from the subsequent purchaser, the number of barrels sold or
delivered to each buyer, the price received for the oil from each
buyer, and the date of the sale or delivery.
Acts 1981, 67th Leg., p. 1738, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.104. ROYALTY OWNER'S RECORDS. The owner of a
royalty interest shall keep:
(1) a record of all money received as royalty from each
producing leasehold in the state; and
(2) a copy of all settlement sheets furnished by a
purchaser or operator or other statement showing the number of
barrels of oil for which a royalty was received and the amount of
tax deducted.
Acts 1981, 67th Leg., p. 1738, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.105. CARRIER'S RECORDS. A carrier shall keep
accurate monthly records of oil the carrier transports for hire,
for itself or for its owners. The records shall be kept within the
state and must show, for each shipment:
(1) the date the oil was received;
(2) the number of barrels of oil received;
(3) the person from whom the oil was received;
(4) the point of delivery;
(5) the person to whom the oil was delivered; and
(6) the manner of transportation.
Acts 1981, 67th Leg., p. 1738, ch. 389, § 1, eff. Jan. 1, 1982.
SUBCHAPTER D. PAYMENTS
§ 202.151. TAX DUE. The tax imposed by this chapter is
due at the office of the comptroller on the 25th day of each
calendar month for oil produced during the preceding calendar
month.
Acts 1981, 67th Leg., p. 1739, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.152. PAYMENT OF TAX. The tax imposed by this
chapter must be paid by legal tender or cashier's check payable to
the comptroller.
Acts 1981, 67th Leg., p. 1739, ch. 389, § 1, eff. Jan. 1, 1982.
Amended by Acts 1997, 75th Leg., ch. 1423, § 19.121, eff. Sept.
1, 1997.
§ 202.153. FIRST PURCHASER TO PAY TAX. (a) A first
purchaser shall pay the tax imposed by this chapter on oil that the
first purchaser purchases from a producer and takes delivery on the
premises where the oil is produced.
(b) A first purchaser shall withhold from payments to the
producer the amount of tax that the first purchaser is required by
Subsection (a) of this section to pay. This subsection does not
affect a lease or contract between the state or a political
subdivision of the state and a producer.
Acts 1981, 67th Leg., p. 1739, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.154. PRODUCER TO PAY TAX ON OIL NOT SOLD. If the
producer does not sell oil produced in the same month it is
produced, the producer shall pay the tax imposed by this chapter as
if the oil were sold that month. In such a case, the working
interest operator may pay the tax and deduct it from the interest of
other interest holders.
Acts 1981, 67th Leg., p. 1739, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.155. PURCHASER TO PAY TAX ON OIL FROM PROPERTY
UNDER LEGAL CONSTRAINT. (a) A purchaser shall pay the tax imposed
by this chapter on oil purchased from property in bankruptcy,
receivership, covered by an assignment, or subject to a legal
proceeding.
(b) The purchaser shall withhold the amount of tax required
to be paid by Subsection (a) of this section from payments to the
producer, trustee, assignee, or other person claiming the payments
and from payments the purchaser impounds or places in escrow.
(c) The purchaser is not liable for the amount of tax paid as
required by this section to any claimant of payments for the
purchase of oil.
Acts 1981, 67th Leg., p. 1739, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.156. TAX BORNE RATABLY. The tax shall be borne
ratably by all interested parties, including royalty interests.
Producers or purchasers of oil, or both, are authorized and
required to withhold from any payment due interested parties the
proportionate amount of tax due.
Acts 1981, 67th Leg., p. 1739, ch. 389, § 1, eff. Jan. 1, 1982.
SUBCHAPTER E. REPORTS
§ 202.201. PRODUCER'S REPORT. (a) A producer
authorized by the comptroller to remit the tax due shall file with
the comptroller, on or before the 25th day of each calendar month,
the report under this subsection and, as applicable, the report
under Subsection (d) showing the total oil produced, used, lost or
stolen, or possessed and otherwise unaccounted for by the producer
during the preceding calendar month. The report under this
subsection must show:
(1) the number of barrels of oil produced from each
lease;
(2) each county in which each lease from which oil was
produced is located;
(3) the name, address, and taxpayer identification
number assigned by the comptroller of each first purchaser of oil
and for each the amount of oil purchased from each lease;
(4) the payment received for the oil from each first
purchaser from each lease from which oil was produced;
(5) the name and lease identification number of each
lease from which the oil was produced; and
(6) other information the comptroller may reasonably
require.
(b) If the report the producer is required to file shows
additional tax due, the producer must pay the additional tax when he
files the report.
(c) A producer whose only sales are to a purchaser who
remits the tax due under Section 202.153 is not required to file a
report on the oil sold.
(d) A producer shall file a crude oil special tax report
with the comptroller and pay the applicable tax imposed under this
chapter if any oil has been used, lost or stolen, or possessed and
otherwise unaccounted for by the producer after it has been
produced and measured. The producer must file the report on or
before the 25th day of the month following the month in which the
oil is used, lost or stolen, or possessed and otherwise unaccounted
for. The report must show:
(1) the total number of barrels of oil used, lost or
stolen, or possessed and otherwise unaccounted for by the producer;
(2) where the oil was used, lost or stolen, or
possessed and otherwise unaccounted for; and
(3) other information the comptroller may reasonably
require.
(e) A producer that is no longer in business shall notify
the comptroller of this fact on or before the 25th day of the first
month following the producer's last day of business.
Acts 1981, 67th Leg., p. 1740, ch. 389, § 1, eff. Jan. 1, 1982.
Amended by Acts 1983, 68th Leg., p. 1375, ch. 284, § 2, eff.
Sept. 1, 1983; Acts 1993, 73rd Leg., ch. 587, § 34, eff. Jan. 1,
1994; Acts 1997, 75th Leg., ch. 1040, § 55, eff. Jan. 1, 1998;
Acts 1999, 76th Leg., ch. 1183, § 4, eff. Sept. 1, 2001.
§ 202.202. FIRST PURCHASER'S REPORT. (a) On or before
the 25th day of each calendar month, each first purchaser or his
authorized agent shall file a report with the comptroller. The
report must contain the following information concerning oil
purchased from a producer during the preceding calendar month:
(1) the number of barrels of oil purchased from each
lease for each producer;
(2) the amount paid to each producer for each lease
from which oil was purchased;
(3) the name and address of each producer;
(4) each county in which each lease from which the
purchased oil was produced is located;
(5) the name and lease identification number of each
lease from which the purchased oil was produced; and
(6) other information the comptroller may reasonably
require.
(b) If the report the first purchaser is required to file
shows additional tax due, the first purchaser must pay the
additional tax when he files the report.
Acts 1981, 67th Leg., p. 1740, ch. 389, § 1, eff. Jan. 1, 1982.
Amended by Acts 1983, 68th Leg., p. 1376, ch. 284, § 3, eff.
Sept. 1, 1983; Acts 1997, 75th Leg., ch. 1040, § 56, eff. Jan. 1,
1998; Acts 1999, 76th Leg., ch. 1183, § 5, eff. Sept. 1, 2001.
§ 202.204. REPORTS OF CARRIER. A carrier shall provide
information and file reports on the movements of oil if requested by
the comptroller as often as required by the comptroller.
Acts 1981, 67th Leg., p. 1740, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.205. TRANSFER OF OWNERSHIP. (a) If an
oil-producing lease is transferred, or is to be transferred, the
producer transferring the lease shall note the name and address of
the producer acquiring the lease and the date of the transfer on the
last report covering the lease that he is required by Section
202.201 of this code to file.
(b) If an oil-producing lease is transferred, the producer
acquiring the lease shall note the date of the transfer and the name
and address of the person from whom the lease was acquired on the
first report covering the lease that he is required by Section
202.201 of this code to file.
Acts 1981, 67th Leg., p. 1740, ch. 389, § 1, eff. Jan. 1, 1982.
SUBCHAPTER F. LIABILITY FOR TAX
§ 202.251. LIABILITY OF PRODUCER AND PURCHASER. The tax
imposed by this chapter is the primary liability of the producer and
is a liability of the first purchaser and each subsequent
purchaser. Failure of the first purchaser to pay the tax does not
relieve the producer or a subsequent purchaser from liability for
the tax. A purchaser of oil produced in the state shall satisfy
himself that the tax on that oil has been or will be paid by the
person liable for the tax.
Acts 1981, 67th Leg., p. 1741, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.252. PRODUCER'S REMEDY. If a purchaser withholds
the amount of the tax imposed by this chapter from payments to a
producer for the sale of oil and fails to pay the tax as provided by
this chapter, the producer may sue the purchaser to recover the
amount of the tax withheld, penalties and interest that have
accrued from failure to pay the tax, court costs, and reasonable
attorney's fees.
Acts 1981, 67th Leg., p. 1741, ch. 389, § 1, eff. Jan. 1, 1982.
SUBCHAPTER G. ENFORCEMENT
§ 202.301. DELINQUENT TAXES: PENALTY. (a) A person
who fails to pay the tax imposed by this chapter when due forfeits
five percent of the amount due as a penalty, and if the person fails
to pay the tax within 30 days after the day on which the tax is due,
the person forfeits an additional five percent.
(b) The minimum penalty under this section is $1.
Acts 1981, 67th Leg., p. 1741, ch. 389, § 1, eff. Jan. 1, 1982.
Amended by Acts 1983, 68th Leg., p. 453, ch. 93, § 8, eff. Sept.
1, 1983.
§ 202.302. TAX LIEN. The state has a prior and
preferred lien for the amount of the taxes, penalties, and interest
imposed by this chapter on:
(1) the oil to which the tax applies that is possessed
by the producer, first purchaser, or subsequent purchaser;
(2) the leasehold interest, oil rights, the value of
oil rights, and other interests, including oil produced and oil
runs, owned by a person liable for the tax;
(3) equipment, tools, tanks, and other implements used
on the lease from which the oil is produced; and
(4) any other property not exempt from forced sale
owned by the person liable for the tax.
Acts 1981, 67th Leg., p. 1741, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.303. FORCED SALE BY OFFICER. (a) A peace officer
may levy on oil for which the tax imposed by this chapter is due and
unpaid by notice to the owner or person in charge of the oil.
(b) After notice to the owner or person in charge, the peace
officer shall post a notice at the site of the oil that the oil will
be sold to the highest bidder 10 days after the notice has been
posted.
(c) After the notice has been posted for 10 days, the peace
officer shall sell the oil to the highest bidder.
(d) The peace officer, except a ranger, may deduct 10
percent of the proceeds of the sale of the oil as his commission.
The officer shall forward the balance, up to the amount of tax due,
to the comptroller. The officer shall deliver any proceeds in
excess of the tax due and the officer's commission, if any, to the
owner of the oil.
Acts 1981, 67th Leg., p. 1742, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.304. SUIT FOR TAXES; SWORN DENIAL. Rule 185,
Texas Rules of Civil Procedure, applies to a suit by the attorney
general for taxes imposed by this chapter if:
(1) the attorney general files as an exhibit a report
or audit of the taxpayer; and
(2) the exhibit is supported by the comptroller's
affidavit that the taxes shown to be due are past due and unpaid and
that all payments and credits have been allowed.
Acts 1981, 67th Leg., p. 1742, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.305. UNLAWFUL REMOVAL OF OIL. On notice from the
comptroller, no person may remove oil from a lease in this state if
the owner or operator of the lease has failed to file a report or pay
a tax as required by this chapter.
Acts 1981, 67th Leg., p. 1742, ch. 389, § 1, eff. Jan. 1, 1982.
Amended by Acts 1987, 70th Leg., 2nd C.S., ch. 1, § 12, eff. July
21, 1987.
§ 202.306. INSPECTOR HAS FREE ACCESS. A person
appointed by the Railroad Commission of Texas and holding the
commission's certificate authorizing him to inspect oil wells, oil
leases, pipelines, or railroad cars or tanks has the right of free
access at all times to the wells, leases, pipelines, railroad cars
and tanks, and motortruck tanks for the purpose of inspecting the
production or transportation of oil.
Acts 1981, 67th Leg., p. 1742, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.307. INCOMPLETE RECORDS OR REPORTS; CONCEALING
PROPERTY UNDER LIEN; PENALTY. (a) A person commits an offense if
the person:
(1) with intent to defraud the state, knowingly fails
to keep a complete record that he is required by this chapter to
keep;
(2) knowingly fails to file a complete report that he
is required by this chapter to file;
(3) with intent to defraud the state, conceals
property or equipment that is under a lien authorized by Section
202.302 of this code; or
(4) fails or refuses to permit the comptroller or
attorney general to inspect a record or report required by this
chapter.
(b) An offense under this section is a misdemeanor
punishable by:
(1) a fine of not less than $25 nor more than $5,000;
(2) confinement in county jail for not less than one
month nor more than six months; or
(3) both a fine and confinement.
Acts 1981, 67th Leg., p. 1742, ch. 389, § 1, eff. Jan. 1, 1982.
SUBCHAPTER H. CLASSIFICATION OF TAX AND ALLOCATION OF REVENUE
§ 202.351. OCCUPATION TAX. The tax imposed by this
chapter is an occupation tax.
Acts 1981, 67th Leg., p. 1743, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.352. TAX SET ASIDE. One-half of one percent of
the tax collected under this chapter shall be deposited in the state
treasury for the use of the comptroller to administer and enforce
the provisions of this chapter, to be expended in the amounts and
for the purposes prescribed in the General Appropriations Act.
Money deposited under this section that is not spent at the end of a
fiscal year reverts proportionally to the other funds to which the
tax imposed by this chapter is paid.
Acts 1981, 67th Leg., p. 1743, ch. 389, § 1, eff. Jan. 1, 1982.
§ 202.353. ALLOCATION OF REVENUE. After deducting the
amount required to be deposited by Section 202.352 of this code, the
comptroller shall deposit one-fourth of the revenue collected from
the tax imposed by this chapter to the credit of the foundation
school fund and three-fourths to the general revenue fund.
Acts 1981, 67th Leg., p. 1743, ch. 389, § 1, eff. Jan. 1, 1982.
Amended by Acts 1981, 67th Leg., p. 2778, ch. 752, § 9(h), eff.
Jan. 1, 1982; Acts 1984, 68th Leg., 2nd C.S., ch. 28, art. II, part
B, § 8, eff. Sept. 1, 1984.
§ 202.354. DEDICATION TO TEXAS TUITION ASSISTANCE GRANT
PROGRAM. The revenue collected from any incremental production
from a qualifying lease, as those terms are defined by Section
202.057, and deposited to the general revenue fund may only be spent
to fund the Texas tuition assistance grant program under Subchapter
G, Chapter 56, Education Code.
Added by Acts 1997, 75th Leg., ch. 1060, § 3, eff. Sept. 1, 1997.
