The Arkansas Supreme Court building in Little Rock.
LITTLE ROCK – Arkansas finance officials were wrong to collect more than $1.3 million in taxes from a Texas company on sand used in natural gas drilling, a divided state Supreme Court ruled Thursday.
In the 4-3 decision, justices agreed with a Pulaski County judge who ruled that the sand used by Weatherford Artificial Lift Systems was considered equipment and exempt from taxes. The case focused on the taxes collected before the Legislature changed the law last year to make the sand exempt.
The court noted that a witness for Weatherford testified that without the sand used in drilling, production would cease in the Fayetteville Shale natural gas formation that has been the focus of heavy drilling in recent years.
“Given this evidence, we cannot say that the trial court clearly erred in concluding that the proppants in the present case were equipment,” Justice Josephine Linker Hart wrote in the majority opinion.
An attorney for Weatherford said he was pleased with the ruling.
“They took the importance of the material in the process into account,” Mike Parker said.
The Department of Finance and Administration did not have an immediate comment on the ruling.
Three justices disagreed with the ruling, noting that the state law before 2014 didn’t specifically list sand among the equipment that was exempt from sales taxes.
“While hydraulic fracturing is clearly a complex process, and preparing sand to be used in that process may also be considered somewhat complex, the sand itself is not an implement, tool or device ‘of some degree of complexity,'” Justice Robin Wynne wrote in a dissenting opinion.
The case is among two regarding the sand tax. A separate lawsuit pending in Pulaski County challenges the way lawmakers enacted the exemption last year by including it in an unrelated budget bill. Lawmakers earlier this year approved the exemption as a stand-alone bill.
(Copyright 2015 The Associated Press. All rights reserved. This material may not be published, rewritten, broadcast or distributed.)
Sign up for Daily E-news
