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Travis County District Judge John Dietz Reverses His Prior Ruling That Equipment Used in Processing of Oil and Gas Qualifies for Texas Manufacturing Exemption

Press Release May 01, 2012

Dallas, Texas – Ryan, a leading global tax services firm with the largest indirect tax practice in North America, today announced that a dispute between Southwest Royalties, Inc. (“Southwest Royalties”) and the State of Texas regarding the taxability of oil and gas production equipment used “below-ground” has been decided by Travis County District Court Judge John Dietz in Southwest Royalties, Inc. v. Combs. Although Judge Dietz ruled after the trial that “below-ground” equipment was used in or during the actual processing of oil and gas and qualified for the manufacturing exemption under Texas Tax Code Sec. 151.318, the judge reversed his ruling in a judgment signed on April 30, 2012.

According to the judgment, the well equipment only “indirectly” caused the physical changes that processed the oil and gas. It is likely that the case will be appealed based on evidence introduced by Southwest Royalties at the trial, which established that the oil and gas wells directly caused the physical changes to the hydrocarbon products without any intervening forces required.

Ryan serves as tax advisor to Southwest Royalties and its law firm, Scott, Douglass & McConnico, LLP, in connection with this matter and played a key role in developing the case. “It has long been the Firm’s contention that below-ground equipment used in the processing of oil and gas qualifies for the Texas manufacturing exemption,” said G. Brint Ryan, Chairman and CEO of Ryan. “We are disappointed that Judge Dietz reversed his ruling after reviewing media reports publicizing inflated estimates of potential revenue loss to the state. We hope that the appellate courts will apply the statute as written based upon the evidence presented at trial.”

About Ryan

Ryan, an award-winning global tax services and software provider, is the largest Firm in the world dedicated exclusively to business taxes. With global headquarters in Dallas, Texas, the Firm provides an integrated suite of federal, state, local, and international tax services on a multijurisdictional basis, including tax recovery, consulting, advocacy, compliance, and technology services. Ryan is an 11-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan’s multidisciplinary team of more than 4,700 professionals and associates serves over 29,000 clients in more than 75 countries, including many of the world’s most prominent Global 5000 companies. More information about Ryan can be found at


Melodie Elliott
Director, Content & Communications Marketing