Sales Tax Articles
Sales Tax State Activity Update - October 2007
Mississippi Sours the Exemption Hopes of Sour Gas Processor
Pursue Energy Corporation operates a number of sour gas wells located in Rankin and Simpson Counties, Mississippi.
The gas requires processing to remove hydrogen sulfide ("sour gas") before it can be sold. Pursue owns the gas wells, the pipelines, and the plant at which the hydrogen sulfide is removed.
Pursue processes the sour gas to remove the hydrogen sulfide. From the clean gas available at the tailgate of the plant ("Residue Gas"), most of the processes [sic] gas is sold; however, Pursue uses a portion of the processed gas for plant fuel ("Plant Fuel") and as fuel to run its lease equipment at the well sites, ("Lease Fuel").
The court concluded: The Mississippi Use Tax Law to this Court is clear and unambiguous. All personal property used or consumed within the state is taxable if sales tax has not already been collected. Natural gas is such a personal property. There is no requirement for a "sale" (to take place) within the traditional definition of an exchange of property for monetary consideration.
The court upheld the position noted by the Board of Review: withdrawal of such gas would give rise to sales proceeds under Miss. Code Ann. § 27-65-3(h) and would subject such activity to Mississippi Sales Tax under Miss. Code Ann. §27-65-19. The subsequent use of said natural gas by the taxpayer gives rise to a use tax at the same tax rates as set out under Miss. Code Ann. § 27-65-19 for the sale of such natural gas since the withdrawal of such gas has not been included in the measure of a Mississippi Sales tax under Miss. Code Ann. § 27-65-19.
The full text can be accessed on the Mississippi Lawyers Domain Website.
(Pursue Energy Corporation V. Mississippi State Tax Commission, Mississippi Supreme Court, No. 2006-CA-01390-SCT, September 20, 2007)
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