Title: Stingray Pressure Washing, L.L.C. v. Harris

State: ohio

Issuer: Ohio Supreme Court

Document:

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Stingray Pressure Pumping, L.L.C. v. Harris, Slip Opinion No. 2023-Ohio-2598.] 
 
                                                                
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in an 
advance sheet of the Ohio Official Reports.  Readers are requested to 
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65 
South Front Street, Columbus, Ohio 43215, of any typographical or other 
formal errors in the opinion, in order that corrections may be made before 
the opinion is published. 
 
 
SLIP OPINION NO. 2023-OHIO-2598 
STINGRAY PRESSURE PUMPING, L.L.C., APPELLANT, v. HARRIS,1 TAX COMMR., 
APPELLEE. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as Stingray Pressure Pumping, L.L.C. v. Harris, Slip Opinion No. 
2023-Ohio-2598.] 
Taxation—Use tax—Some of the taxpayer’s fracking equipment at issue qualifies 
for tax exemption—R.C. 5739.02(B)(42)—Decision affirmed in part and 
reversed in part. 
(No. 2022-0304—Submitted February 28, 2023—Decided August 2, 2023.) 
APPEAL from the Board of Tax Appeals, Nos. 2015-1465 and 2015-1823. 
_________________ 
DEWINE, J. 
{¶ 1} This case requires that we decide whether certain equipment used in 
fracking is subject to Ohio’s sales and use tax.  Generally, Ohio exempts from 
 
1. Under S.Ct.Prac.R. 4.06(B), the current tax commissioner, Patricia Harris, is automatically 
substituted as a party to this action for the former tax commissioner, Jeff McClain. 
SUPREME COURT OF OHIO 
 
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taxation equipment used directly in the production of oil and gas.  But not 
everything that is involved in oil and gas production qualifies for the exemption. 
{¶ 2} In this appeal, a taxpayer challenges a decision of the Ohio Board of 
Tax Appeals (“BTA”) concluding that some of its equipment does not qualify for 
the exemption.  We render a mixed verdict.  We hold that most of the equipment at 
issue is exempt from taxation and overrule the BTA as to these items.  But we agree 
that one item is subject to taxation.  So, we affirm in part and reverse in part. 
I.  Background 
{¶ 3} The equipment at issue was purchased back in 2012.  The procedural 
posture of the case is a bit complicated because, while the tax issues were being 
litigated, the legislature changed the law that provides the exemption.  We apply 
the new version of the statute.  But before we can get there, we need to explain the 
taxpayer’s business, the prior proceedings, and the change in the law. 
A.  The taxpayer’s fracking services 
{¶ 4} Stingray Pressure Pumping, L.L.C., is in the fracking business.  
Fracking is a process that entails pumping a pressurized mixture of water, 
chemicals, and sand deep into the earth to fracture and prop open rock formations 
and extract oil and gas.  At issue in this appeal is the eligibility for tax exemption 
of six types of equipment that Stingray uses in fracking: a data van, blenders, sand 
kings, t-belts, hydration units, and chemical-additive units.  (In the paragraphs that 
follow, we will explain how each of these pieces of equipment is used by Stingray.)  
{¶ 5} Before Stingray begins its work, other companies drill the well, secure 
it with cement and casing, and perforate the casing.  The perforations provide a 
doorway from the casing to the adjacent rock formation in which the oil and gas 
lie.  After the site is prepared, a truck convoy hauls Stingray’s equipment to the site. 
{¶ 6} Stingray performs its work in stages that occur in different zones 
within the well.  A stage may last anywhere from two to four hours, and a well may 
require as many as 50 stages.  At the beginning of every stage, Stingray pumps 
January Term, 2023 
 
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diluted hydrochloric acid into the well to dissolve the rock around the perforations, 
ensuring that the perforations remain open. 
{¶ 7} Immediately thereafter, Stingray pumps a water-and-chemical 
mixture into the well under very high pressure.  This mixture opens and enlarges 
fractures in the rock.  Next, Stingray pumps a pressurized mixture of water, sand, 
and chemicals into the well.  The sand particles prop open the fractures, allowing 
the oil and gas to seep through the well. 
{¶ 8} Stingray’s equipment works in tandem during this process.  A 
hydration unit draws fresh water from “frack” tanks, mixes the water with a gelling 
agent or a friction reducer, and pumps the mixture into the blender.  At the same 
time, a sand king 2 feeds sand onto a conveyor belt, called a t-belt, which transports 
the sand to the blender.  Simultaneously, a chemical-additive unit adds friction 
reducer (which reduces the surface tension of the fluid) and other chemicals into 
the fluid.  The blender mixes together the water, chemicals, and sand and transports 
the mixture to the manifold.  The manifold transports the mixture to the pumps, 
which pressurize the mixture and return it to the manifold, which then sends the 
mixture down the well. 
{¶ 9} According to Stingray’s vice president of operations, Michael 
Rexroad, all of this happens in a rapid, synergetic process.  He analogized the 
operation to a recipe in which all the ingredients must be added together: 
 
Everybody’s got to work in synergy and [be] synchronized 
in their particular job performance to complete this at the same time.  
* * * [I]f you look at the recipe of what the customer is trying to 
achieve, you’ve got to have the proper sand amount going at the 
same time.  You’ve got to have the proper chemical amount going 
 
2. A vertical version of the “sand king” is referred to in the record as a “sand silo.”  We will use the 
term “sand king” to refer to both pieces of equipment.  
SUPREME COURT OF OHIO 
 
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at the same time.  You have to have the proper friction reducer.  You 
have to have the proper amount of acid. 
It’s like a recipe.  You’ve got to have the recipe so close 
together to make that frack fluid sufficient * * * [for] that customer’s 
well. 
 
{¶ 10} Because not all well conditions are the same, Stingray must tailor its 
stage work to accommodate a well’s unique features.  Stingray’s data van is the 
command center.  The van sits near the well and contains several monitors that 
display data regarding well pressure and sand and water volumes.  Stingray 
personnel monitor the data and make decisions from inside the van.  A pump 
operator remotely controls the pumps.  Others in the van convey orders via headsets 
to the operators of the blender, the sand king, the t-belt, the chemical-additive unit, 
and the hydration unit. The operators adjust their equipment based on the 
instructions they receive. 
B.  Stingray purchases fracking equipment and is assessed taxes 
{¶ 11} In 2012, Stingray purchased multiple pieces of equipment for use in 
its fracking operations.  Ohio imposes a sales tax on most items that are sold in the 
state.  R.C. 5739.02.  It imposes a corresponding use tax on items that are purchased 
out of state for use in Ohio.  R.C. 5741.02.  Not everything is subject to the sales/use 
tax, however.  There are exemptions.  And when an item is exempt from the sales 
tax, it is generally also exempt from the use tax.  R.C. 5741.02(C)(2).  One 
exemption covers equipment that is used directly in the production of crude oil and 
natural gas.  See R.C. 5739.02(B)(42)(a). 
{¶ 12} Stingray did not pay the use tax on the equipment; instead, it 
represented that the equipment was exempt from taxation because Stingray 
intended to directly use the equipment to produce oil and gas.  The tax 
commissioner challenged Stingray’s claims for exemption.  The commissioner 
January Term, 2023 
 
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initially concluded that all the items purchased by Stingray were taxable, and issued 
60 use-tax assessments, one for each piece of equipment.  Stingray filed petitions 
for reassessment, and in 2015, the tax commissioner issued final determinations, 
canceling about half the assessments. 
{¶ 13} At the time, Ohio law provided that the tax did not apply “where the 
purpose of the purchaser” was to “use or consume the thing transferred directly in 
producing tangible personal property for sale by mining, including, without 
limitation * * * production of crude oil and natural gas.”  Former R.C. 
5739.02(B)(42)(a), 2014 Am.Sub.H.B. No. 533 (“2014 H.B. 533”).  The tax 
commissioner read this provision to mean that equipment was exempt only if it was 
“directly used in injecting the high-pressure fracking fluid into the well.”  Applying 
this standard, the tax commissioner concluded that pumps used to inject the 
hydraulic mixture into the well and the manifolds used in conjunction with the 
pumps were tax exempt.  But he found that the sand kings, blenders, hydration 
units, chemical-additive units, t-belts and data van were taxable because their use 
was preliminary to the actual insertion of the hydraulic mixture into the well.3  
{¶ 14} Stingray appealed to the BTA, which affirmed the assessments.  
BTA Nos. 2015-1465 and 2015-1823, 2018 WL 1372693, at *4 (Jan. 17, 2018). 
C. The legislature amends the statute, and the court of appeals remands for 
application of the new statute 
{¶ 15} Stingray appealed the BTA’s decisions to the Tenth District Court 
of Appeals.  10th Dist. Franklin Nos. 18AP-110 and 18AP-111, 2019-Ohio-5198, 
¶ 1.  While the appeal was pending, the General Assembly substantially amended 
the statute, see 2018 Sub.H.B. No. 430.  As explained previously, the old statute 
provided a general standard for tax exemption where the purpose of the purchaser 
was “to use or consume the thing transferred directly” in the production of crude 
 
3. The tax commissioner also determined that some equipment falling outside these six categories 
was taxable, but Stingray has not placed the taxation of this equipment at issue. 
SUPREME COURT OF OHIO 
 
6 
oil and natural gas.  Former R.C. 5739.02(B)(42)(a), 2014 H.B. 533.  The new 
statute retains this “to use or consume the thing transferred directly” language but 
adds two lists. Specifically, it adds a non-exhaustive list of equipment that 
constitutes a “thing transferred” and a non-exhaustive list of equipment that does 
not constitute a “thing transferred.”  See R.C. 5739.02(B)(42)(q).  The court of 
appeals concluded that the amendment applies retrospectively and remanded the 
case for application of the new statute to the equipment at issue here.  2019-Ohio-
5198 at ¶ 17. 
{¶ 16} On remand, the BTA determined that even under the new statute, all 
the equipment at issue remained taxable.  BTA Nos. 2015-1465 and 2015-1823, 
2022 WL 659239, at *5 (Feb. 25, 2022) (“Remand Decision”).  In doing so, it 
applied the principle that when a taxpayer “claims an exemption from the general 
operation of sales tax, it must show that the amended statute ‘clearly expresses the 
exemption in relation to the facts of its claim.’ ”  Id. at *2, quoting, N.A.T. Transp., 
Inc. v. McClain, 165 Ohio St.3d 250, 2021-Ohio-1374, 178 N.E.3d 454, ¶ 15. 
{¶ 17} The BTA explained that in enacting the new statute, “the General 
Assembly demonstrated an intent to detail the specific classes of property that 
qualify for exemption in place of the more general language prior to the 
amendment.”  Id. at *3.  Thus, the BTA went through each of the disputed items 
and applied the new statutory categories as to what does and what does not 
constitute a “thing transferred.”  Based on its application of these categories, it 
determined that each piece of equipment was not a “thing transferred,” and thus not 
exempt from the tax.  Id. at *3-4.  Stingray then filed this appeal. 
II.  ANALYSIS 
{¶ 18} We must determine whether various pieces of equipment qualify for 
a tax exemption.  The factual issues are largely undisputed.  Both sides accept the 
testimony about the use of the equipment at issue.  Thus, the question we must 
answer with respect to each piece of equipment is a legal one: does the equipment 
January Term, 2023 
 
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meet the legal requirements for a tax exemption?  We apply de novo review to such 
legal questions. See SFZ Transp., Inc. v. Limbach, 66 Ohio St.3d 602, 605, 613 
N.E.2d 1037 (1993).  That means we answer them without any deference to the 
legal determinations of the BTA or the tax commissioner.  See TWISM Ents., L.L.C. 
v. State Bd. of Registration for Professional Engineers & Surveyors, __ Ohio St.3d 
__, 2022-Ohio-4677, __ N.E.3d __. 
{¶ 19} In reaching its decision, the BTA applied a principle of construction 
that tax exemptions must be strictly construed against the taxpayer.  Remand 
Decision, 2022 WL 659239, at *2 (“because Stingray claims an exemption from 
the general operation of sales tax, it must show that the amended statute ‘clearly 
expresses the exemption in relation to the facts of its claim’ ”).  Stingray contends 
that this was improper and that we ought simply to apply our “normal rules of 
construction without a construction tilted toward taxation.” 
{¶ 20} It is true that in the past we have sometimes said that tax exemptions 
must be construed against the taxpayer.  See, e.g., N.A.T. Transp., Inc., 165 Ohio 
St.3d 250, 2021-Ohio-1374, 178 N.E.3d 454, at ¶ 15; Cincinnati Fed. S. & L. Co. 
v. McClain, 168 Ohio St.3d 123, 2022-Ohio-725, 196 N.E.3d 799, ¶ 49 (DeWine, 
J., concurring in judgment only) (collecting cases).  But such statements are in 
tension with our often-expressed commitment to apply the plain and ordinary 
meaning of statutory text.  See, e.g., Jones v. Action Coupling & Equip., Inc., 98 
Ohio St.3d 330, 2003-Ohio-1099, 784 N.E.2d 1172, ¶ 12 (“When the statutory 
language is plain and unambiguous, and conveys a clear and definite meaning, we 
must rely on what the General Assembly has said”); State v. Taylor, 161 Ohio St.3d 
319, 2020-Ohio-3514, 163 N.E.3d 486, ¶ 9 (“the proper role of a court is to construe 
a statute as written without adding criteria not supported by the text”). 
{¶ 21} The idea that special rules apply to tax exemptions appears to be a 
carryover from 19th-century federal caselaw dealing with the Contracts Clause of 
the United States Constitution and limitations on intrusions into state sovereignty.  
SUPREME COURT OF OHIO 
 
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See Scalia & Garner, Reading Law: The Interpretation of Legal Texts 359-363 
(2012). While this court has continued to cite the principle, we have not grounded 
the strict-construction rule in the statutory language of  the tax exemption under 
consideration.  Rather, we have justified the rule based upon notions about what 
constitutes good tax policy.  See, e.g., Parma Hts. v. Wilkins, 105 Ohio St.3d 463, 
2005-Ohio-2818, 828 N.E.2d 998, ¶ 10 (observing that because tax exemptions 
place a heavier burden on the nonexempt, the proponent of a tax exemption must 
overcome a strict construction of the statute against exemption); Lutheran Book 
Shop v. Bowers, 164 Ohio St. 359, 362, 131 N.E.2d 219 (1955) (strict construction 
“must necessarily be the rule in order to preserve equality in the burden of 
taxation”).  But what is and what is not wise tax policy is a matter to be determined 
by the legislature. 
{¶ 22} Our task is not to make tax policy but to provide a fair reading of 
what the legislature has enacted:  one that is based on the plain language of the 
enactment and not slanted toward one side or the other.  “Like any other 
governmental intrusion on property or personal freedom, a tax statute should be 
given its fair meaning, and this includes a fair interpretation of any exception it 
contains.”  Scalia & Garner, supra, at 362.  Tax statutes must be read through a 
clear lens, not one favoring tax collection.  Thus, we make clear today that 
henceforth we will apply the same rules of construction to tax statutes that we apply 
to all other statutes. 
A.  The statutory scheme 
{¶ 23} The parties do not challenge the court of appeals’ determination that 
the new statute, the amended version of R.C. 5739.02(B)(42)(q), applies to this 
dispute.  But they take divergent approaches to the new statute’s meaning. 
{¶ 24} Under the older versions of the statute, whether equipment used in 
fracking qualified for the tax exemption turned largely on whether something was 
deemed to have been used “directly” in oil and gas production.  See 2014 H.B. 533; 
January Term, 2023 
 
9 
1988 Am.Sub.H.B. No. 689.  Thus, a body of caselaw developed that focused on 
whether equipment was used in the production process itself or whether its use was 
“preliminary and preparatory to production,” Lyons v. Limbach, 40 Ohio St.3d 92, 
95, 532 N.E.2d 106 (1988); see also Kilbarger Constr., Inc. v. Limbach, 37 Ohio 
St.3d 234, 525 N.E.2d 483 (1988). 
{¶ 25} The new statute retains the requirement that to qualify for the tax 
exemption, a piece of equipment must be used “directly” in the production of oil or 
gas.  R.C. 5739.02(B)(42)(q).  But it adds a non-exhaustive list of items that qualify 
as “thing[s] transferred” and a non-exhaustive list of items that do not qualify as 
“thing[s] transferred.” 
{¶ 26} The statute begins by explaining that the sales tax does not apply 
where the purpose of the purchaser is to “use or consume the thing transferred 
directly in production of crude oil and natural gas for sale.”  R.C. 
5739.02(B)(42)(a).  It then defines “production” as “operations and tangible 
personal property directly used to expose and evaluate an underground reservoir 
that may contain hydrocarbon resources, prepare the wellbore for production, and 
lift and control all substances yielded by the reservoir to the surface of the earth.”  
R.C. 5739.02(B)(42)(q) 
{¶ 27} It next sets forth categories of equipment and services that constitute 
a “thing transferred” and those that do not constitute a “thing transferred.”  The 
distinction between what is and what is not a “thing transferred” appears to be based 
largely on the closeness of the item’s connection with the extraction process.  For 
the most part, items used for drilling a well or extracting oil and gas from the well 
are categorized as “thing[s] transferred.” And items more remotely connected to 
those activities are categorized as not “thing[s] transferred.” 
{¶ 28} “Thing transferred” includes, but is not limited to, the following:  
 
SUPREME COURT OF OHIO 
 
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(I) Services provided in the construction of permanent access 
roads, services provided in the construction of the well site, and 
services provided in the construction of temporary impoundments; 
(II) Equipment and rigging used for the specific purpose of 
creating with integrity a wellbore pathway to underground 
reservoirs; 
(III) Drilling and workover services used to work within a 
subsurface wellbore, and tangible personal property directly used in 
providing such services; 
(IV) Casing, tubulars, and float and centralizing equipment; 
(V) Trailers to which production equipment is attached; 
(VI) Well completion services, including cementing of 
casing, and tangible personal property directly used in providing 
such services; 
(VII) Wireline evaluation, mud logging, and perforation 
services, and tangible personal property directly used in providing 
such services; 
(VIII) Reservoir stimulation, hydraulic fracturing, and 
acidizing services, and tangible personal property directly used in 
providing such services, including all material pumped downhole; 
(IX) Pressure pumping equipment; 
(X) Artificial lift systems equipment; 
(XI) Wellhead equipment and well site equipment used to 
separate, stabilize, and control hydrocarbon phases and produced 
water; 
(XII) Tangible personal property directly used to control 
production equipment. 
 
January Term, 2023 
 
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R.C. 5739.02(B)(42)(q)(i). 
{¶ 29} The statute then specifies that “thing transferred” does not include: 
 
(I) Tangible personal property used primarily in the 
exploration and production of any mineral resource regulated under 
Chapter 1509. of the Revised Code other than oil or gas; 
(II) Tangible personal property used primarily in storing, 
holding, or delivering solutions or chemicals used in well 
stimulation as defined in section 1509.01 of the Revised Code; 
(III) Tangible personal property used primarily in preparing, 
installing, or reclaiming foundations for drilling or pumping 
equipment or well stimulation material tanks; 
(IV) Tangible personal property used primarily in 
transporting, delivering, or removing equipment to or from the well 
site or storing such equipment before its use at the well site; 
(V) Tangible personal property used primarily in gathering 
operations occurring off the well site, including gathering pipelines 
transporting hydrocarbon gas or liquids away from a crude oil or 
natural gas production facility; 
(VI) Tangible personal property that is to be incorporated 
into a structure or improvement to real property; 
(VII) Well site fencing, lighting, or security systems; 
(VIII) Communication devices or services; 
(IX) Office supplies; 
(X) Trailers used as offices or lodging; 
(XI) Motor vehicles of any kind; 
(XII) Tangible personal property used primarily for the 
storage of drilling byproducts and fuel not used for production; 
SUPREME COURT OF OHIO 
 
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(XIII) Tangible personal property used primarily as a safety 
device; 
(XIV) Data collection or monitoring devices; 
(XV) Access ladders, stairs, or platforms attached to storage 
tanks. 
 
R.C. 5739.02(B)(42)(q)(ii). 
{¶ 30} Stingray argues that all the equipment at issue qualifies for the tax 
exemption because it is used directly in the production of oil and gas and falls 
within the category “thing transferred.”  The tax commissioner makes two 
arguments in response.  First, the commissioner contends that the new statute does 
not change the substantive law that controls this case.  In this view, regardless of 
whether any of the equipment falls into the category “thing transferred,” the 
equipment does not qualify for the exemption, because it is not used directly in the 
actual extraction of oil or gas from the well.  Second, the tax commissioner argues 
that none of the equipment falls into the category of “thing transferred.” In the tax 
commissioner’s view, either ground is a sufficient basis to deny the exemption. 
{¶ 31} The BTA denied the exemption primarily on the basis that none of 
the equipment at issue constitutes a “thing transferred.”  Thus, we will first consider 
whether each item qualifies as a “thing transferred.”  Then, we will consider the tax 
commissioner’s argument that the exemption should be denied because the 
equipment is not used directly in the production of oil or gas. 
B.  Thing Transferred 
{¶ 32} Stingray contends that all the equipment at issue is a “thing 
transferred” under subsection VIII because each piece of equipment is used for 
“Reservoir stimulation, hydraulic fracturing, and acidizing services, and tangible 
personal property directly used in providing such services, including all material 
pumped downhole,” (emphasis added) R.C. 5739.02(B)(42)(q)(i)(VIII).  Stingray 
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relies on the tax commissioner’s administrative definition of hydraulic fracturing: 
“the use of fluid and material to create or restore small fractures in a formation in 
order to stimulate production from new and existing crude oil and natural gas 
wells,” Ohio Adm.Code 5703-9-63(B)(13).  And it also points to the administrative 
definition of “reservoir stimulation,” which “includes hydraulic fracturing, 
acidizing, and any means by which the reservoir is acted upon, by chemicals, gases, 
pressure related services, or otherwise as a way to stimulate production of the 
hydrocarbons,” Ohio Adm.Code 5703-9-63(B)(24). 
{¶ 33} With the exception of the data van (more on that later), we agree that 
each piece of equipment qualifies as a “thing transferred.” 
1.  Most of the equipment falls into the category “thing transferred” 
{¶ 34} The BTA determined that all the equipment at issue best corresponds 
with R.C. 5739.02(B)(42)(q)(ii)’s list of equipment that does not constitute a “thing 
transferred.”  For all the equipment except the data van, the BTA looked principally 
to R.C. 5739.02(B)(42)(q)(ii)(II), which states that the following does not qualify 
as a “thing transferred”: “[t]angible personal property used primarily in storing, 
holding, or delivering solutions or chemicals used in well stimulation as defined in 
section 1509.01 of the Revised Code,” (emphasis added).  Thus, it concluded that 
the blenders, hydration units, chemical-additive units, and sand kings are not 
“thing[s] transferred,” because they are used for storage.  Remand Decision, 2022 
WL 659239, at *3-4.  Similarly, it concluded that the t-belts are not a “thing 
transferred,” because they are used for delivering solutions or chemicals.  Id. at *3. 
{¶ 35} Before we turn to these specific items, it is worth noting a couple of 
general points about the construction of the statute.  As indicated by the tax 
commissioner’s and Stingray’s dueling interpretations, each piece of equipment at 
issue serves multiple purposes and potentially implicates both the thing-transferred 
and the not-a-thing-transferred categories.  All the aforementioned equipment is 
undoubtedly used in hydraulic fracturing but also has a storage or delivery function.  
SUPREME COURT OF OHIO 
 
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Indeed, numerous everyday items have storage, holding, or delivery functions in 
addition to other functions.  We think of a mechanical pencil as being used for 
writing, but it also stores—and may even deliver—the graphite that creates one’s 
signature.  A flashlight produces light, but it also holds and stores batteries.  And a 
squirt gun wouldn’t be much use in soaking a victim if it didn’t also hold and deliver 
water. 
{¶ 36} R.C. 5739.02(B)(42)(q)(ii)(II) recognizes this reality by limiting its 
application to items that are “used primarily” for the storing, holding, or delivering 
of chemicals.  This formulation invokes the primary-use test that has been 
developed in our caselaw.  As we explained in Manfredi Motor Transit Co. v. 
Limbach, “[i]f the item is used in a manner which would provide exception from 
the tax and in another manner which would not provide an exception from the tax, 
the primary use test is applied.”  35 Ohio St.3d 73, 76, 518 N.E.2d 936 (1988).  
“ ‘[P]rimary use’ is not merely the quotient of the time that a device is utilized in a 
taxable, vis-à-vis a nontaxable, activity.  ‘Primary use’ connotes primacy in utility 
or essentiality, in quality as well as quantity.”  Ace Steel Baling, Inc. v. Porterfield, 
19 Ohio St.2d 137, 140-141, 249 N.E.2d 892 (1969). 
{¶ 37} In our interpretative task, we are also mindful that words must be 
read in the context in which they appear.  Great Lakes Bar Control, Inc. v. Testa, 
156 Ohio St.3d 199, 2018-Ohio-5207, 124 N.E.3d 803, ¶ 9.  Thus, “[r]ather than 
limit our analysis to the ‘hyperliteral meaning of each word,’ we [must] consider 
the ordinary meaning of the word as it is used within the surrounding text.”  Id., 
quoting Scalia & Garner, supra, at 356.  Here, this means that we do not consider 
the words “storing,” “holding,” and “delivering” in isolation but rather consider 
them in the context of the rest of the statutory scheme that distinguishes categories 
of “thing transferred” and not “thing transferred.” 
{¶ 38} With these principles in mind, we review the BTA’s determinations. 
January Term, 2023 
 
15 
{¶ 39} Blender.  Rexroad explained, “[The] blender mixes all the other 
chemicals, the water, the gel, and the sand together.  That’s why it’s called a 
blender, blends it all up.”  Nonetheless, the BTA determined that under R.C. 
5739.02(B)(42)(ii)(II), the blender is not a thing transferred, because it is used to 
hold the hydraulic mixture before the mixture is pumped downhole.  Remand 
Decision, 2022 WL 659239, at *4.  We disagree.  Rexroad’s testimony conveys 
that the use of the blender for blending outranks, in terms of essentiality or utility, 
the use of the blender for holding.  A washing machine holds clothes during a wash 
cycle, but no one would say that its primary use is to hold clothes.  Similar logic 
applies here. 
{¶ 40} In concluding that a blender is not a “thing transferred,” the BTA 
relied on one of its earlier decisions, Independent Frac Serv., Inc. v. Limbach, BTA 
No. 89-J-863, 1991 WL 155552 (June 28, 1991), in which it found under a prior 
version of the statute that a blender used in fracking was not taxable.  Remand 
Decision at *4.  It was error for the BTA to rely on Independent Frac.  The language 
of the statute controls, not a prior administrative decision applying a different 
version of the statute. 
{¶ 41} Although the blender undoubtedly performs a holding function, that 
is not its primary use.  The primary use of the blender is exactly what its name 
suggests.  As Rexroad explained, the blender mixes the critical ingredients in the 
fracking recipe seconds before the mixture is inserted into the well.  Thus, we have 
little difficulty concluding that the blender qualifies as a “thing transferred” under 
subsection VIII because it is directly used in performing hydraulic fracking 
services. 
{¶ 42} Hydration unit.  The BTA determined that the hydration unit does 
not qualify for the exemption, because it is used to store water and chemicals before 
pumping the mixture to the blender.  Remand Decision, 2022 WL 659239, at *4.  
But Rexroad testified that the “[h]ydration unit pulls the water from the frack tanks, 
SUPREME COURT OF OHIO 
 
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mixes it with gel or friction reducer, mixes it up, then pumps it over to the blender 
where the blender can do its job.”  His testimony conveys that the hydration unit’s 
primary use is in mixing water and the various chemicals, not storage.  Thus, the 
hydration unit also qualifies as a “thing transferred” under subsection VIII because 
it is “tangible personal property directly used” in hydraulic fracking services. 
{¶ 43} Chemical-additive unit.  The BTA similarly determined that the 
chemical-additive unit does not constitute a “thing transferred,” because it is 
primarily used for holding chemicals.  Remand Decision at *4.  But, again, 
Rexroad’s testimony conveys that the chemical-additive unit is not primarily used 
for holding.  Rather, the primary function of the unit is to provide chemicals to the 
hydration unit and the blender by way of hoses.  Because the chemical-additive unit 
is “tangible personal property directly used” in hydraulic fracking services, R.C. 
5739.02(B)(42)(q)(i)(VIII), it qualifies as a “thing transferred.” 
{¶ 44} Sand king.  The BTA concluded that Stingray primarily uses the sand 
king to store or hold the sand before adding it to the fracturing liquid.  Remand 
Decision at *3.  The record, however, demonstrates that the sand is primarily stored 
at an off-site plant.  The sand is driven to the well and blown from pneumatic air 
cans into the sand king.  Id.  The sand king then holds the immediate supply of sand 
to be used for a single stage of operations. 
{¶ 45} Undoubtedly, the sand king holds sand for a brief period before it is 
injected into the mixture that is sent down the well.  But the record indicates that 
the primary use of the sand king is to feed sand into the blender.  Rexroad testified 
that an operator using hydraulic levers operates gates on the sand king controlling 
the unloading of sand onto the t-belt, which delivers the sand to the blender.  Indeed, 
elsewhere in its decision, the BTA found that the sand kings “are used to supply 
sand to the blender.”  Remand Decision, 2022 WL 659239, at *2.  As we have 
explained, when the BTA’s findings contradict its legal conclusion, “the latter must 
January Term, 2023 
 
17 
fall and the findings must prevail.”  Ace Steel Baling, 19 Ohio St.2d at 142, 249 
N.E.2d 892. 
{¶ 46} Furthermore, the provision relied on by the BTA applies to 
“[t]angible personal property used primarily in storing, holding, or delivering 
solutions or chemicals used in well stimulation.”  (Emphasis added.)  R.C. 
5739.02(B)(42)(q)(ii)(II).  Sand is neither a solution nor a chemical.  No ordinary 
speaker of the English language would describe a walk along a sandy beach as 
being a walk along solution or chemicals. 
{¶ 47} The record establishes that the sand king is used to supply sand to 
the pressurized mixture that is immediately injected into the well.  Under these 
circumstances, the sand king constitutes “tangible personal property directly used” 
in hydraulic fracking services, R.C. 5739.02(B)(42)(q)(i)(VIII), and thus qualifies 
as a “thing transferred.” 
{¶ 48} T-belt.  A similar analysis applies to the t-belt.  The BTA 
characterized the t-belt as being used to “deliver[] sand to the blender” and 
concluded that it is not a “thing transferred,” because it is “ ‘[t]angible personal 
property used primarily in storing, holding, or delivering solutions or chemicals 
used in well stimulation.’ ”  Remand Decision, 2022 WL 659239, at *3, quoting 
R.C. 5739.02(B)(42)(q)(ii)(II).  But, again, sand is not a solution or chemical, so 
the provision relied on by the BTA is inapplicable. 
{¶ 49} The record demonstrates that the t-belts are used directly in the 
fracking process, moving sand into the blender split seconds before it is injected 
into the manifold and sent down the well shaft.  Because the t-belt is “tangible 
personal property directly used” in hydraulic fracking services, R.C. 
5739.02(B)(42)(q)(i)(VIII), it is a “thing transferred.” 
2.  The data van is not a thing transferred 
{¶ 50} We come last to the data van.  The BTA determined that because the 
data van is a motor vehicle, it is not a “thing transferred,” see R.C. 
SUPREME COURT OF OHIO 
 
18 
5739.02(B)(42)(q)(ii)(XI), and is therefore taxable.  Remand Decision at *3.  The 
picture of the data van in the record clearly establishes that it is a motor vehicle.  
The record also shows that the data van contains various screens and monitoring 
devices.  “Data collection or monitoring devices” are also items that the statute 
specifies as not falling into the category of “thing transferred.”  R.C. 
5739.02(B)(42)(q)(ii)(XIV). 
{¶ 51} Stingray, however, argues that the data van more closely aligns with 
equipment described as “thing transferred.” It first argues that the data van is a 
“thing transferred” under subsection VIII because it is tangible personal property 
directly used in providing hydraulic fracking services.  But recall the administrative 
code’s definition of fracking: “the use of fluid and material to create or restore small 
fractures in a formation in order to stimulate production from new and existing 
crude oil and natural gas wells.”  Ohio Adm.Code 5703-9-63(B)(13).  The data van 
is not used in the fracking process in the same way as the other items—it does not 
act directly on the “fluid and material.”  Thus, it does not fit squarely within 
subsection VIII’s delineation of a “thing transferred.” 
{¶ 52} Stingray also argues that the data van is a “thing transferred” under 
subsection XII, which encompasses “[t]angible personal property directly used to 
control production equipment.”  In support, Stingray points to the BTA’s finding 
that the data van serves as a “command post, where computers and operators 
measure, control, and direct the fracturing process.”  Remand Decision, 2022 WL 
659239, at *2.  The problem, though, is that the BTA did not find that the data van 
controls production equipment—it concluded that the computers and operators do. 
{¶ 53} Third, Stingray makes a passing claim that the data van falls within 
R.C. 5739.02(B)(42)(q)(i)(V) as a “trailer[] to which production equipment is 
attached.”  Stingray reads this language to mean that “equipment on a trailer can be 
exempt if the equipment is used in the production of oil and gas.”  But that’s not 
January Term, 2023 
 
19 
what the provision says.  Subsection V speaks to a trailer’s eligibility for exemption, 
not the eligibility of the equipment attached to it. 
{¶ 54} The data van fits squarely within R.C. 5739.02(B)(42)(q)(ii)(XI)’s 
enumeration of items that are not “thing[s] transferred”—the data van is 
unquestionably a motor vehicle.  None of the categories under R.C. 
5739.02(B)(42)(q)(i) proposed by Stingray provide nearly such a good fit.  We 
agree with the BTA that the data van is not a “thing transferred” under the statute. 
C.  Directly used in production 
{¶ 55} The tax commissioner contends that even if the pieces of equipment 
at issue fall into the category “thing transferred” they still do not qualify for tax 
exemption.  The commissioner notes that the statute requires that to qualify for the 
exemption, a “thing transferred” must be used “directly in production of crude oil 
and natural gas for sale.”  R.C. 5739.02(B)(42)(q).  And he contends that the statute 
does nothing to alter this court’s prior caselaw that only items used to send material 
directly into the well—as opposed to items used “preliminary and preparatory” to 
production, Lyons, 40 Ohio St.3d at 95, 532 N.E.2d 106—can qualify for the 
exemption. 
{¶ 56} We decline to read the statutory amendments as narrowly as the 
commissioner suggests.  To do so would render the new statute’s list of “thing[s] 
transferred” to be largely meaningless.  For example, the first thing that qualifies 
as a “thing transferred” is “[s]ervices provided in the construction of permanent 
access roads, services provided in the construction of the well site, and services 
provided 
in 
the 
construction 
of 
temporary 
impoundments.” 
 
R.C. 
5739.02(B)(42)(q)(i)(I).  But under the commissioner’s reading of the statute, such 
services could never qualify for the exemption, because they are “preliminary and 
preparatory” to the actual extraction process.  The same goes for the second thing: 
“Equipment and rigging used for the specific purpose of creating with integrity a 
wellbore pathway to underground reservoirs.”  R.C. 5739.02(B)(42)(q)(i)(II).  
SUPREME COURT OF OHIO 
 
20 
Indeed, under the commissioner’s reading of the statute, most of the things that fall 
into the category “thing transferred” could never qualify for the exemption.  But 
why would the legislature go to the trouble of describing things that fall into the 
category “thing transferred” when those things could never qualify for the 
exemption?  That would hardly make sense. 
{¶ 57} Further, under the commissioner’s reading of the new statute, the 
only impact of the statutory amendment is to restrict the items that qualified as tax 
exempt.  In this view, the description of items that do not fall into the category 
“thing transferred” removes items that would otherwise be tax exempt.  But the 
enumeration of items that constitute a “thing transferred” does nothing to expand 
the applicability of the exemption because the pre-amendment “preliminary and 
preparatory” exclusion continues to apply. 
{¶ 58} We are not inclined to believe that the legislature chose to engage in 
such a pointless exercise.  There is no reason to think that the legislature would 
have created categories of items that constituted a “thing transferred” unless it 
intended that, in at least some circumstances, items in that category could qualify 
for the tax exemption.  Thus, rather than adopt the tax commissioner’s construction, 
we apply the ordinary meaning of “use[d] * * * directly in production of crude oil 
and natural gas for sale,” R.C. 5739.02(B)(42)(q). 
{¶ 59} Recall that the tax commissioner has already determined that 
Stingray uses some of its equipment directly in the production of oil and natural gas 
for sale.  In his final determination, he determined that the manifold and the pumps 
qualify for exemption because they “function in unison to create the high-pressure 
injection that actually fractures the rock formation and frees the oil and gas.”  But 
he determined that the remaining equipment is not used directly in oil and gas 
production.  We disagree. 
{¶ 60} The statute defines “production” as “operations and tangible 
personal property directly used to expose and evaluate an underground reservoir 
January Term, 2023 
 
21 
that may contain hydrocarbon resources, prepare the wellbore for production, and 
lift and control all substances yielded by the reservoir to the surface of the earth.”  
R.C. 5739.02(B)(42)(q).  Rexroad’s testimony demonstrates that, other than the 
data van, the equipment at issue—like the manifold and the pumps—works directly 
to expose the underground reservoir that contains oil and gas.  He testified that the 
mixture arrives at the manifold as a package by way of a synergetic process.  He 
explained that the process happens so quickly that if you dropped a marble into the 
hydration unit, it would take only three seconds for the marble to work its way to 
the manifold and be pumped into the well. 
{¶ 61} The record demonstrates that the equipment is used in unison to 
create the injection of the mixture that is sent downhole to free the oil and gas.  The 
blenders, hydration units, chemical-additive units, sand kings, and t-belts all work 
in unison with the manifold and pumps.  Thus, we have little difficulty in 
concluding that they are used directly in the production of oil and gas. 
III. CONCLUSION 
{¶ 62} We conclude that the blenders, hydration units, chemical-additive 
units, sand kings, and t-belts are tax exempt, and we reverse the BTA’s contrary 
decision.  We uphold the BTA’s determination that the data van is not tax exempt. 
Decision affirmed in part  
and reversed in part. 
_________________ 
KENNEDY, C.J., and FISCHER and DETERS, JJ., concur. 
BRUNNER, J., concurs in judgment only. 
DONNELLY, J., concurs in part and dissents in part, with an opinion joined 
by STEWART, J. 
_________________ 
DONNELLY, J., concurring in part and dissenting in part. 
{¶ 63} Respectfully, I dissent in part. 
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22 
{¶ 64} I agree with the majority that the hydration units and blenders whose 
tax-exempt classification is at issue in this appeal constitute “thing[s] transferred” 
under R.C. 5739.02(B)(42)(q)(i) and are therefore tax exempt, and I agree that the 
data van is not a “thing transferred,” see R.C. 5739.02(B)(42)(q)(ii), and is therefore 
not tax exempt.  However, I would hold that the sand kings, the t-belts, and the 
chemical-additive units also do not constitute “thing[s] transferred.”  In my view, 
these latter items fit within the category of equipment that is “used primarily in 
storing, holding, or delivering solutions or chemicals used in” hydraulic-fracturing 
services, R.C. 5739.02(B)(42)(q)(ii)(II).  Equipment that holds such materials at or 
delivers such materials to the site of the hydraulic fracturing will inevitably 
ultimately be connected to other equipment at the site or otherwise manipulated to 
remove the materials.  There would be no point in holding materials at a hydraulic-
fracturing site or delivering materials to the site to have them just sit there.  The 
fact that the storage or delivery equipment eventually has some connection with the 
hydraulic-fracturing process does not change the equipment’s categorization to 
“property directly used in providing [hydraulic-fracturing] services” under R.C. 
5739.02(B)(42)(q)(i)(VIII).  Otherwise, the inclusion of such storage and delivery 
equipment in the list of items excluded from the category of “thing transferred” in 
R.C. 5739.02(B)(42)(q)(ii)(II) would be superfluous. 
{¶ 65} Given the foregoing, I join the majority opinion to the extent that it 
affirms the Board of Tax Appeals’ (“BTA’s”) decision regarding the data van and 
reverses the decision regarding the hydration units and blenders.  But I would 
uphold the BTA’s determination that the sand kings, the t-belts, and the chemical-
additive units are not tax exempt.  Accordingly, I concur in part and dissent in part. 
STEWART, J., concurs in the foregoing opinion. 
_________________ 
 
Baker & Hostetler, L.L.P, Edward J. Bernert, and David D. Ebersole, for 
appellant. 
January Term, 2023 
 
23 
 
Dave Yost, Attorney General, and Daniel G. Kim, Assistant Attorney 
General, for appellee. 
_________________