Texas Comptroller Glenn Hegar has issued a warning to justices on the Texas Supreme Court who are looking at whether the oil and gas industry should be exempt from paying a state sales tax on the equipment they use. It’s a move that could cost the state budget over time billions of dollars in revenue.
Oil and gas companies have sued the state, pointing to a provision in the Texas tax code that they believe exempts the industry from having to pay state sales tax on their equipment. The Texas Supreme Court has agreed to take up the case.
“There is one provision in the Tax Code that a group of folks in the oil industry has tried to take advantage of and I completely understand that, however, the Legislature never intended that that exemption would apply to the oil and gas industry," Hegar explained.
Hegar said if the State were to lose its argument, it would result in having to return just over 4-billion dollars in refunds and an additional 500-million dollars in tax revenues every year after. And that, Hegar said, could have a significant impact on the amount of money lawmakers will have to spend in 2017.
Lawmakers at the state capitol also remain leery about the impact of decreasing oil and gas prices.
“So, do we face what I term, some head winds with some uncertainty? Absolutely. But if you look at the overall in Texas on the long term, Texas continues to be a really good place to call home and a really good place to do business," Hegar said.
The Texas Supreme Court will hear oral arguments for the case challenging Texas’ tax codes on the oil and gas industry this March. The Comptroller’s next budget revenue estimate is due this fall.