Wyoming: How to Tax Tools Lost Down Holes
- Apr 22, 2014 | Gail Cole
When a tool is lost down a hole in Wyoming, should it be subject to sales tax? Anyone suffering sleepless nights over this question will be happy to learn that the Wyoming Department of Revenue has just issued “Important Clarification Concerning the Taxability of Tools Lost Down Hole.” The holes in question aren’t just any holes; they’re oil and gas wells.
It turns out that “Wyoming has historically viewed tools lost down hole or tools damaged beyond repair” to be subject to sales tax, regardless of when the damage or lost-down-hole-event occurred. That is no longer the case.
Effective immediately (the notice was published on April 15, 2014), the Wyoming Department of Revenue is changing its “interpretation of the taxability of tools lost down hole or damaged beyond repair to be consistent with the phase of the well at the time the tool is lost or damaged.”
Under the new policy, taxability hinges on when the tool was lost: during the pre-production casing phase or during the production casing phase:
- If a customer is required to pay for a tool that “is lost down hole or damaged beyond repair during the pre-production casing phase of the well,” the tool will be exempt from sales tax.
- If a customer is required to pay for a tool that is “lost or damaged beyond repair during the production casing phase of the well,” the tool is subject to sales tax.
This policy change “in no way affects the taxability of any services performed within an oil or gas well site.”
Does dealing with sales tax and sales tax exemptions make you want to throw your tools down a hole? Switch to an automated sales tax solution instead.