(1) Contract -- A signed written agreement between two parties
for the sale and purchase of natural gas.
(2) Tax Reimbursement -- A payment that a purchaser of gas
makes to a producer for the purpose of reimbursing the producer for Texas
severance taxes that are due under Tax Code, Chapter 201.
(b) If gas is sold for cash only, then tax shall be computed
on the producer's gross cash receipts. If a purchaser reimburses a producer
for severance tax, then the reimbursement is not part of the producer's gross
cash receipts and is not subject to severance tax.
(c) Requirements to Establish Tax Reimbursement.
(1) The amount of the tax reimbursement must be separately
stated in the contract, check stub, and/or purchaser statement. For example,
the contract might specifically state a price per MCF or MMBTU to be paid
to the producer by the purchaser for the gas and state an additional amount
to be paid per MCF or MMBTU for severance tax reimbursement; or
(2) A written contract between the parties must contain an
express statement that the payment that the purchaser made includes severance
tax reimbursement to the producer for tax that is due on the gas. Contracts
or other documents that merely state that "all taxes" are included are not
specific enough to establish that the purchaser has made a severance tax reimbursement.
The total amount that is shown on such documents will be presumed to be the
producer's gross receipts without tax reimbursement. Either party may overcome
the presumption by using the purchaser's records to show that severance tax
reimbursement was included in the total payment that was made to the producer.
When the total price that the purchaser paid to the producer includes severance
tax reimbursement, the taxable value for that gas is computed by dividing
the sum of one plus the tax rate into the sum of the total receipts minus
|Source Note: The provisions of this §3.18 adopted to be effective January 1, 1976; amended to be effective February 21, 1978, 3 TexReg 476; amended to be effective May 2, 1979, 4 TexReg 1417; amended to be effective April 7, 2002, 27 TexReg 2534