Home/Court of Appeals of Texas/Calvert v. A-1 Bit & Tool Co.

Calvert v. A-1 Bit & Tool Co.

256 S.W.2d 224, 2 Oil & Gas Rep. 831, 1953 Tex. App. LEXIS 2240
CourtCourt of Appeals of Texas
DecidedFebruary 25, 1953
Docket10104
StatusPublished
Cited by5 cases

This text of 256 S.W.2d 224 (Calvert v. A-1 Bit & Tool Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Calvert v. A-1 Bit & Tool Co., 256 S.W.2d 224, 2 Oil & Gas Rep. 831, 1953 Tex. App. LEXIS 2240 (Tex. Ct. App. 1953).

Opinions

[226]*226HUGHES, Justice.

A-l Bit and Tool Company, a corporation, appellee, sued Robert S. Calvert, Comptroller of Public Accounts of Texas and ihis deputy, William B. Davis, for a declaratory judgment concerning the extent of its liability, if any, for taxes under the provisions of Article 7060a, Vernon’s Texas Annotated Civil Statutes.

This statute provides that every person, including a corporation, who is

“ * * * in this State engaged in the business of furnishing any service or performing any duty for others for a consideration or compensation, with the use of any devices, tools, instruments or equipment, electrical, mechanical, or otherwise, or by means of any chemical, electrical or mechanical process when such service, is performed in connection with the cementing of the casing seat of any oil or gas well or the shooting or acidizing the formation of such wells or the surveying or testing of the sands-or other formations of the earth in any such oil or gas wells, shall report on the 20th day of each month and pay to the Comptroller, at his office in Austin,. Texas, an occupation tax equal to 2.42% of the gross amount received from said service furnished or duty performed, during the calendar month next preceding. * * * ”

Appellee alleged that it:

“ * * * is engaged in the manufacturing, selling, renting and servicing tools used in the drilling of wells. That, among the tools manufactured, sold, rented and serviced by plaintiff is a tool commonly called a wire line core barrel. This tool has been in use for many years and is widely .used and accepted throughout the drilling industry. That in December of 1945 plaintiff perfected the design of a wire line core barrel, which instead of cutting the core vertically as had been the practice, cuts the core at an angle of approximately twenty degrees with the well bore. That the.new or side wall type barrel is rented to the industry . based on the number of cores and the depths at which they are taken. To insure the proper assembly and operation by the drilling crew and to record the cores taken, a serviceman is sent out with each barrel, a charge for this serviceman’s time and the mileage to and from the location is charged to the customer separately from the rental on the tool and the bits or core heads used.”

Appellee further alleged that just prior to May 14, 1951, representatives of the Comptroller advised that it wás considered an “oil and gas well service company” within art. 7060a, supra, and tajcable thereunder as to certain portions of its business. The books of the company were then audited by the Comptroller as to all side wall oil well coring done since December, 1945. This audit resulted in a demand upon appellee by the Comptroller for taxes and penalties under the-above statute in the sum of $18,849.88.

Denying that it was an “oil and gas well service company” within the meaning of such statute appellee alleged that it was

“ * * * predominately engaged in manufacturing, selling and renting of mechanical tools, and that their servicemen are engaged in a mechanical pursuit and as such are exempt from this tax under Article VIII, Section 1, of the Constitution of Texas.”

Alternatively appellee pleaded that if taxable at all it was taxable only on the amount charged the customer for time of the serviceman who accompanied the coring tool to the wells.

The answer of appellants was to the effect that appellee was within the statute and that the tax should be computed upon the gross receipts from the coring operations. . ■

The -judgment of the -trial court sustained appellee’s amenability to the statute but, upheld its alternative position, decreeing that taxes should be computed only upon the charges made for time of the serviceman.

Our view is that this construction of the statute is too narrow.

[227]*227This is a revenue statute ' enacted to aid in the support of the State government and is to be liberally construed to achieve this purpose. Federal Crude Oil Company v. Yount-Lee Oil Company, 122 Tex. 21, 52 S.W.2d 56.

The, evidence shows.that appellee manufactures the side wall coring tool used in the operations involved in this suit. This patented tool is the result of intensive engineering research. It is designed to secure the advantages of drilling the oil or gas well and then coring at selected depths.

We quote from appellee’s brochure regarding this tool:

“This Side Wall Core Barrel is designed to cut cores in hard as well as soft formation. It operates similar to regular Wire Line Barrels except that the cores are cut at an angle of approximately twenty degrees with the well bore. It is fed into the wall of the well bore by means of pump pressure. Rotation is transmitted to the core Cutter Head by the drill pipe resulting in true cores that are not mashed, distorted, or contaminated. Such cores are ideal for Laboratory examination and evaluation. They are 1¾" O.D. and have sufficient volume to allow complete analysis for permeability-vertical and horizontal — porosity, oil and water content, chloride content, and grain size.
“This tool is operated by and with regular Rotary drilling equipment plus an auxiliary Sand Line Hoist. Cores are cut with mud circulating as in regular drilling. Cores are cut quickly and are completely enclosed in an Inner Barrel. Since the cores are cut after the well is drilled and after running the electrical log, non-essential zones or sections are not cored. This results in reduced coring costs and less coring time.’'
“Comments and Recommendations
“The information contained herein is passed on to you in order to help promote more efficient operation of this revolutionary Tool. As you use it, you will learn other things about the tool which will assist you in increasing operating efficiency.
“Due to the nature of this Tool and the fact that the Core Barrel, including the coré Cutter Head must pass through the drill pipe, it is obvious' that the Barrel itself is' inherently fragile ás compared to the strength of ‘the 'drill pipe. In view of this fact, it must be operated carefully. Close attention should be paid to operating pressures, drill pipe torque and wear of parts.
“We recommend that you read all of the information contained herein carefully so that you may be fully advised as to the limits of the tool. Note particularly the way in which the Core Barrel is assembled. After you are completely familiar with the structure' of the tool, carefully study the Coring Procedure. As noted above, the operation of the drilling rig while the tool is in the hole must be carefully supervised. Excess pump pressure should be avoided while coring, and in case torque on the drill pipe increases, the operation should be shut-down and the Core Barrel removed.”

Several pages of detailed instructions regarding coring procedure are contained in the brochure.

The tool weighs about 7,000 pounds and is worth about $7,000.

Appellee sells the tool abroad but not in the United States. The use of the tool in Texas is under the following typical circumstances :

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Calvert v. A-1 Bit & Tool Co.
256 S.W.2d 224 (Court of Appeals of Texas, 1953)

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Bluebook (online)
256 S.W.2d 224, 2 Oil & Gas Rep. 831, 1953 Tex. App. LEXIS 2240, Counsel Stack Legal Research, https://law.counselstack.com/opinion/calvert-v-a-1-bit-tool-co-texapp-1953.