Court Unanimously Rules for Texas in Southwest Royalties Case

On Friday, the Texas Supreme Court issued a unanimous ruling in favor of the State of Texas in Southwest Royalties, Inc. vs. Hegar. The Court held that Southwest Royalties, an oil and gas company, did not qualify for a sales tax exemption for equipment it had purchased. The Court agreed with the Attorney General’s Office that Southwest Royalties failed to prove that the equipment was used in the actual manufacturing, processing, or fabricating of hydrocarbons—which is what the law passed by the Texas Legislature actually exempted from sales tax.

Texas Attorney General Ken Paxton issued the following statement in response to the decision: “I am pleased that the Texas Supreme Court unanimously agreed that the law is clear and that Southwest Royalties does not qualify for a tax exemption. The Comptroller is faithfully executing the law and treating taxpayers fairly, in accordance with the wishes of the Texas Legislature. Bottom line: we saved the State, and taxpayers across the State, over $4 billion.”