Texas Margin Tax Alert: COGS Victory for Seismic Survey Company

In CGG Veritas Services (U.S.) Inc. v. Hegar et al, the Texas Third Circuit Court of Appeals upheld the trial court’s ruling that a seismic survey company is eligible for the Texas margin tax’s cost of goods sold deduction. 

CGG is a fully-integrated geo-sciences company that sells seismic sound recordings and images. Their customers include oil and gas exploration and production companies that use the recordings and images to determine where to drill or how to increase production. 

The Appellate Court ruled, using the reasoning in Newpark Resources, that CGG furnished labor and materials to projects for the construction, improvement, remodeling or repair of real property (which includes oil and gas wells) within the meaning of subsection 171.1012(i). Therefore, CGG was entitled to elect to take the COGS deduction. 

If you provide seismic services or any other services in connection with the construction, improvement, remodeling or repair of real property, please call us to see if there is an opportunity to obtain Texas margin tax refunds or to lower your Texas margin tax liability.

For questions about this regulation or other state and local tax matters, please contact us.