Opinion No. ( 2006 )

The Honorable Barbara Horn State Senator Post Office Box 64 Foreman, AR 71836-0064

Dear Senator Horn:

I am writing in response to your request for an opinion "regarding sales tax of oil and gas saltwater disposal." You recite the following questions:

Question One: A company that produces oil and gas hires the taxpayer to haul saltwater from various wells the company operates within its proven field. The company has its own saltwater disposal well to which the taxpayer takes the saltwater and injects it into the well. Is this a taxable service?

Question Two: Assume the same facts as Question One, except: the company does not have its own saltwater and the taxpayer hauls the water to a commercial saltwater disposal well and pays a fee to inject it into the well. Is this a taxable service?

Question Three: Assume the same facts as Question Two, except: the taxpayer owns a commercial saltwater disposal well that the saltwater is injected into. Is this a taxable service?

RESPONSE

I must respectfully decline to offer an official Attorney General's Opinion on the matters you have posed. Your request seeks an advisory opinion on the application of the Arkansas "sales tax" or "gross receipts tax." See A.C.A. §§ 26-52-101 through -520 (Repl. 1997 Supp. 2005). A question concerning the propriety of the taxation of a sale under this law is properly posed to the Arkansas Department of Finance and Administration ("DFA"), Revenue Division.

The DFA Revenue Division has specifically stated that no formal or informal opinion of another agency will be binding in its determination of gross receipt tax issues. See Gross Receipts Tax Regulations GR-75(E) ("Opinions issued by any other agency, whether formal or informal, are not binding on the Department of Finance and Administration, Revenue Division"). I therefore suggest that you submit your question to the following office:

Revenue Division Arkansas Department of Finance and Administration Post Office Box 1272 Little Rock, AR 72203

I feel confident that the Revenue Division of DFA will provide a full and prompt response to your questions.

Assistant Attorney General Joel DiPippa prepared the foregoing opinion, which I hereby approve.

Sincerely,

MIKE BEEBE Attorney General