Texas Comptroller of Public Accounts    STAR System


9708712L



August 20, 1997

*************
*************
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Dear ************:

Thank you for your letter dated July 18, 1997, concerning Texas sales tax as it 
applies to the situations below.

One of your client's does work for agricultural, residential, nonresidential 
and tax-exempt entities. He always itemizes his charges. He never uses a 
lump-sum price. Please rule on the items below that he charges for.

Note  - The casing of a water well is realty.  Everything else in the water 
well bore is tangible personal property.  Rules 3.291, 3.296, and 3.357 will 
cover the different situations.

Agricultural

* Drilling - Effective September 1, 1993, tangible personal property to be 
installed as a component of an underground irrigation system for use 
exclusively on a farm or ranch in the production of agricultural products sold 
in the regular course of business is exempt. This means the casing, tubing, 
submersible pump, concrete, etc., installed in a newly drilled well or in the 
repair of an existing water well are exempt. Labor to drill a new well is not 
taxable because this is new construction.

* Casing - Casing itself is exempt.  The labor to install it in a new well is 
not taxable.  It is considered new construction labor.

* Bailing (in connection with repairing or replacing the pump) - Exempt.  
Bailing sand from a well is generally considered taxable as the repair of 
tangible personal property. However, the repair of exempt tangible personal 
property is exempt.  The equipment in an irrigation well is considered exempt 
farm/ranch machinery or equipment.

* Bailing (in connection with drilling the well) - Exempt, considered new 
construction labor.

* Supplies itemized on the invoice - Too vague to answer, please be specific.  
See Rule 3.296(g)(6) and (7).

* Machine work on pumps - Exempt.

* Casing a well drilled many years ago which was never cased - The material is 
Exempt.  The labor is taxable real property repair and remodeling.

* Supplies purchased by driller and used in drilling and servicing wells but 
not charged out on the invoice - Taxable.

* Welding - Exempt in connection with a new well or on the tangible personal 
property equipment in an existing well.  Taxable, on the casing of an existing 
well.

Residential

* Drilling - All labor charges are exempt new construction and all materials, 
supplies, and equipment are taxable.

* Casing - Material is taxable and labor to install in a new well is exempt. 
See Rule 3.291(b)(3) and (4).

* Bailing (in connection with repairing or replacing the pump) - Taxable 
(repair of tangible personal property).

* Bailing (in connection with drilling the well) - Exempt (new construction 
labor).

* Pulling and replacing pumps (submersible and turbine) - Taxable (repair or 
replacing tangible personal property).

* Supplies itemized on the invoice - Taxable.

* Machine work on pumps - Taxable (repair of tangible personal property)

* Casing a well drilled many years ago which was never cased - Materials are 
taxable and labor is exempt (repair/remodeling residential realty).

* Supplies purchased by driller and used in drilling and servicing wells but 
not charged out on the invoice - Taxable.

* Welding - Taxable except for welding on the casing or in connection with a 
new well.

Nonresidential

* Drilling - Labor charges are exempt new construction and all materials, 
supplies, and equipment are taxable.

* Casing -If casing a new well, materials are taxable and labor is exempt. See 
Rule 3.291(b)(3) and (4). If repair/remodeling an existing nonresidential well, 
the total charge is taxable.

* Bailing (in connection with repairing or replacing the pump) - Taxable.

* Bailing (in connection with drilling the well) - Exempt as new construction 
labor.

* Pulling and replacing pumps (submersible and turbine) - Taxable.

* Supplies itemized on the invoice - Taxable.

* Machine work on pumps - Taxable.

* Casing a well drilled many years ago which was never cased - Taxable.

* Supplies purchased by driller and used in drilling and servicing wells but 
not charged out on the invoice - Taxable.

* Welding - Taxable except in connection with a new well.

Tax Exempt customers

Note - All  charges below for labor and material that are billed directly to an 
exempt entity are exempt if the items are purchased for use directly in 
fulfilling the purpose of the exempt entity as identified in the articles or 
incorporation or by-laws of the exempt organization.  The exempt entity must 
give you a completed exemption certificate. Only governmental agencies do not  
have to give certificates.

* Drilling
* Casing
* Bailing (in connection with repairing or replacing pump)
* Bailing (in connection with drilling the well)
* Pulling and replacing pumps (submersible and turbine)
* Supplies itemized on the invoice
* Machine work on pumps
* Casing a well drilled many years ago which was n cased
* Supplies purchased by driller and used in drilling servicing (applies only to 
consumable supplies completely consumed at the job site.)
* Wells but not charged out on the invoice
* Welding

Also, is a well used at the barn (for chemical mixing and machinery repair and 
cleaning) considered agricultural?  Response: Yes, if the water facilities are 
used in the production of food for human consumption, production of grass, 
production of feed for any form of animal life, or other agricultural products 
to be sold in the regular course of business

Would a well used for watering livestock and as water supply for the farm 
employee's residence be considered agricultural?  Response: The exemption is 
lost if the equipment is not used exclusively for farm/ranch operations. A 
water well for a farm/ranch owner or farm/ranch employee's residence is treated 
as a residential well and not as an agricultural well.

Sales tax rules are available on the Internet 
http://www.sos.state.tx.us/tac/34/I/3/O/index.html.

This opinion is based on the facts presented.  Different facts though similar, 
may result in different answers.

If you have any questions or need more information, you may call me toll free 
at 1-800-531-5441, ext. 34675.  The direct line is 512/463-3465.  You may also 
write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,


Tom Soto
Tax Policy Division




ACCESSION NUMBER: 9708712L 
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 08/20/1997
TAX TYPE: SALES