Texas Attorney General Opinion: WW-554 Page: 1 of 2
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THE ATTORNEY GENERAL
Ausrxs 41, TEXAS
February 18, 1959
Hon. Robert S. Calvert Opinion No. WW- 54
Comptroller of Public Accounts
Capitol Station Re: Whether or not shut-in
Austin, Texas gas royalty payments
are taxable under the
provisions of Article
Dear Mr. Calvert: 7047b, V.C.S.
Your letter of December 11, 1958, requesting an opinion
upon the above-captioned matter, reads, in part, as follows:
"In making audits of several of the gas production
accounts it has been noted that in a number of
instances the producers make shut-in royalty pay-
ments to various of the interest holders. A
question has arisen as to whether or not such
payments are subject to the gas production tax,
in view of the fact that the payments might be
considered as a bonus or premium for gas that has
been or which will, in the future, be produced
from the lease."
Article 7047b does not specifically purport to cover
this situation. Therefore, we must attempt to discern the
"legislative intent" without thereby adding to the statute.
This is a severance tax. It contemplates production of
gas. 5ec. 1 (1)7. The tax base is either (1) market value
of gas at the mouth of the well or (2) gross cash receipts,
Sec. 1 (2)7.
It is certainly true that royalty interest owners are
herein included in the taxed group. /Sec. 1 (8)7. It is
also true that royalty owners are here receiving cash payments
--shut-in royalties. However, these payments do not result
from the production and sale of gas. They do not originate
from purchasers, but rather from the lessee-producers, They
are to compensate the royalty interest holders for lost
production payments during periods when no production occurs.
Union Oil Company of California v. L. B. Ogden, et al, Tex,
v. App. 2d2b).
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Texas. Attorney-General's Office. Texas Attorney General Opinion: WW-554, text, February 18, 1959; (texashistory.unt.edu/ark:/67531/metapth267166/m1/1/: accessed December 15, 2018), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; crediting UNT Libraries Government Documents Department.