Southwest Royalties, Inc. v. Hegar

Southwest Royalties, Inc., an oil and gas exploration company, filed a tax refund claim with the Comptroller, arguing that it was entitled to a tax exemption for some of its equipment related to oil and gas production operations such as casing, tubing, and pumps, together with associated services. The Comptroller denied relief. Southwest subsequently sued the Comptroller and the Attorney General, asserting that the equipment for which it sought refunds was used in separating oil, gas, and associated substances (collectively, hydrocarbons) into their different components. The trial court rendered judgment for the State, concluding that Southwest failed to meet its burden of proving that the exemption applied. The Supreme Court affirmed, holding that Southwest was not entitled to an exemption from paying sales taxes on purchases of the equipment because it 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 Tex. Tax Code Ann. 151.318(2), (5), or (10). View "Southwest Royalties, Inc. v. Hegar" on Justia Law