Tex.
Tax Code Section 201.101
Market Value
(a)
The market value of gas is its value at the mouth of the well from which it is produced. The value of gas at the mouth of the well is determined by ascertaining the producer’s actual marketing costs and subtracting those costs from the producer’s gross cash receipts from the sale of the gas.(b)
Marketing costs are the costs incurred by the producer to get the gas from the mouth of the well to the market, including:(1)
costs for compressing the gas sold;(2)
costs for dehydrating the gas sold;(3)
costs for sweetening the gas sold; and(4)
costs for delivering the gas to the purchaser.(c)
Marketing costs do not include:(1)
costs incurred in producing the gas;(2)
costs incurred in normal lease separation of the oil or condensate; or(3)
insurance premiums on the marketing facility.(d)
Marketing costs are determined by adding:(1)
a reasonable charge for depreciation of the marketing facility being used, provided that, if the facility is rented, the actual rental fee is added;(2)
a return on the producer-owned investment equal to six percent per year on the average depreciable balance;(3)
costs of direct or allocated labor associated with the marketing facility;(4)
costs of materials, supplies, maintenance, repairs, and fuel associated with the marketing facility; and(5)
ad valorem taxes paid on the marketing facility.(e)
If the facility is used for a purpose other than marketing the gas being sold, the cost shall be allocated accordingly.(f)
If the facility is handling gas for outside parties, the average cost for handling all of the gas shall be applied against the facility owner’s gas.(g)
The actual cost being charged a producer by an outside party for marketing functions may be used for tax purposes if no other benefit or value accrues to the producer.(h)
A producer receiving a cost reimbursement from the gas purchaser shall include the reimbursement in the gross cash receipts and is entitled to deduct the actual marketing costs incurred.
Source:
Section 201.101 — Market Value, https://statutes.capitol.texas.gov/Docs/TX/htm/TX.201.htm#201.101 (accessed Jun. 5, 2024).
