A preliminary Travis County state district court ruling on whether oil and gas drilling and production equipment is exempt from the Texas sales tax could cost the state millions of dollars a year in lost revenues and billions more in refunds.

State Judge John Deitz said last week he agreed with lawyers from Southwest Royalties Inc. that the machinery qualifies for the sales-tax exemption on manufacturing equipment.

No formal written order has been issued, but one is expected soon.

State officials said the government would appeal an adverse ruling.

The revenue loss would be minimal if Deitz’s final ruling applies only to equipment purchased by the plaintiffs, but could be severe if it is applied across the state.

Officials with the comptroller’s office said an adverse universal ruling could cost the state $2 billion in refunds and interest, based on the four-year tax statute of limitations.

The annual revenue decline could total $400 million in fiscal 2013 and $580 million by fiscal 2017.

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