SALT Report 1700 – The Wisconsin Department of Revenue issued guidance regarding the taxability of sand used to extract oil and gas through a process called “fracking.” Sand used for this purpose is referred to as frac sand and is taxable as follows.
When a business obtains frac sand through the purchase or lease of property, the cost of the frac sand is not subject to sales or use taxes. Also, receipts from the lease of land that verify the lessee has the right to extract frac sand from the property are not subject to sales or use.
The sale of frac sand in Wisconsin is subject to tax. However, when frac sand is extracted in Wisconsin and delivered to a purchaser outside Wisconsin the sale is not subject to Wisconsin sales tax.
Washing, cleaning, grading and drying of mineral deposits to produce frac sand for sale is considered manufacturing. Wisconsin provides an exemption from sales and use taxes for machinery and processing equipment, consumables, and fuel and electricity used in manufacturing.
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