Clock Ticking on $2B Sales Tax Refund for Oil Companies

April 24, 2012

A recent court ruling against the State Comptroller's office has opened the door to a multibillion dollar sales tax refund for oil and gas companies. But companies will need to act fast to have any chance of collecting.

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The Travis County District Court ruling held that machinery used to extract oil and gas is exempt from Texas sales tax. The Texas Comptroller’s office, defendant in the suit, estimated that approximately $2 billion in potential refund claims could be affected by the decision.

Such claims, though, are subject to a four-year statute of limitations. Patricia Klemz is practice leader for sales and use tax at the Houston office of UHY Advisors.

“If they [oil and gas companies] don’t file for a claim, and with the expiration of each month, they’re going to be losing a substantial amount of money, somewhere in the neighborhood of $40 million.”

Klemz says filing for a refund stops the clock on the statute of limitations for sales tax payments. The Comptroller’s office is expected to appeal the lower court decision.

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