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RULE §3.33Tax Due on Crude Oil Recovered by Reclamation Plants and Other Salvage Operations

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

  (1) Oil--Crude oil or other oil taken from the earth or waters, regardless of the specific gravity of the oil.

  (2) Reclamation plant--A facility which processes tank bottoms or other material for the purpose of separating and recovering the crude oil, regardless of the process or processes employed.

  (3) Shake-out test--A test as defined and required by the Railroad Commission of Texas. In the absence of a requirement by the commission, the test shall be conducted in accordance with generally accepted industry practices. The purpose of the shake-out test is to accurately determine the content of oil and basic sediment and water (B.S.&W.) in a given sample.

  (4) Posting or posted price--A public offer to purchase crude oil, generally of a certain quality and in a specific geographic area or at a plant.

  (5) Tank bottoms--The contents of crude oil storage, measuring, or handling tanks which are below the pipeline connecting to the tanks.

  (6) Theoretical taxable volume--The volume of oil, determined by a shake-out test as defined in this section, contained in material on which no tax has been paid or withheld.

  (7) Total theoretical volume--The volume of oil, determined by a shake-out test as defined in this section, contained in all material processed through a reclamation plant during a month.

(b) Tax due. The crude oil occupation tax imposed by the Texas Tax Code, §202.051, must be remitted on all oil salvaged or reclaimed in any manner unless the tax has previously been paid. The burden of proving the tax has been paid is on the person salvaging or reclaiming the oil.

  (1) Tax due on oil contained in tank bottoms or other material purchased from producers. Any person purchasing material from a producer which contains crude oil as evidenced by a shake-out test must withhold and remit the tax based upon the volume of oil indicated by the test. The taxable value is to be determined by postings for the type of material purchased, but may not be less than $1.00 per barrel of oil.

  (2) Tax due on oil salvaged from other sources. Any person salvaging and taking possession of oil from any source, other than by purchasing from producers, including removal from leases without compensation, is the producer of the oil salvaged and is liable for the tax, unless it has been previously paid. The taxable value of the oil salvaged is the value which is received by the person salvaging the oil. The volume of oil salvaged or reclaimed under this paragraph will be determined by application of the formula: theoretical taxable volume/total theoretical volume/total volume recovered.

(c) Records required to be kept. All persons salvaging or reclaiming crude oil must maintain record for four years showing the following:

  (1) the volume of reclaimed or salvaged crude oil on hand at the beginning of each month;

  (2) the volume of untreated material on hand at the beginning of each month;

  (3) the volume and value paid for any material not purchased during each month;

  (4) the source of the material;

  (5) the volume and source of any other material not purchased during each month;

  (6) the volume of any additives and blending material used during each month;

  (7) the volume, value, and purchaser of any salvaged or reclaimed crude oil sold during each month; and

  (8) any other disposition of crude oil or untreated material during each month; and

  (9) whether tax has been paid on any crude oil purchased.

Source Note: The provisions of this §3.33 adopted to be effective August 8, 1983, 8 TexReg 2761; amended to be effective January 7, 1985, 9 TexReg 6435.

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