A Texas state court judge in Travis County last week reversed a decision that could have cost state and local governments millions of dollars each year in lost sales tax revenues.

Judge John Dietz of the 200th District Court said equipment purchased for use in oil and gas production is subject to the sales tax.

In April Dietz made a preliminary ruling that exempted the production equipment from the tax.

State officials said the exemption would have reduced sales tax revenue by $500 million a year and required a refund of improperly collected taxes totaling $2 billion.

Texas Comptroller Susan Combs said Dietz’s initial ruling reversed 50 years of state tax law and policy.

The case was brought by Southwest Royalties Inc., which contended that a 1987 law that exempted manufacturing equipment from the sales tax also covered some oil and gas machinery. An appeal is being considered.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.