Severance Tax


Severance Tax
A tax imposed on the removal of nonrenewable resources such as crude oil, condensate and natural gas, coalbed methane and carbon dioxide.

Severance tax is charged to producers, or anyone with a working or royalty interest, in oil or gas operations in the imposing states. You may be charged severance tax even if you do not realize a net profit on your investment.

Certain wells may be exempt from severance tax based on the amount they produce. Different states have different rules. For example, in Colorado, as of 2008, an oil well that produces less than an average of 15 barrels per producing day, or a gas well that produces less than an average of 90,000 cubic feet per producing day, is exempt from this tax.

It is important to note that severance tax is different from income tax, and you still have to pay all federal and state income taxes on oil and gas income in addition to severance tax.


Investment dictionary. . 2012.

Look at other dictionaries:

  • severance tax — noun : a tax on the taking and use of natural resources imposed at the time the mineral or other product is extracted or severed from the earth * * * a tax levied by a state on the extraction and use of a natural product, as coal, that is sold… …   Useful english dictionary

  • severance tax — A tax directed against the production, or severance from the soil, of natural resources such as timber, oil, natural gas etc. 51 Am J1st Tax § 1259. A tax on the skin of a fur bearing animal taken within the state. 35 Am J2d Fish § 41 …   Ballentine's law dictionary

  • severance tax — sev′erance tax n. cvb bus gov a tax levied by a state on the extraction and use of a natural product, as coal, that is sold outside the state • Etymology: 1925–30 …   From formal English to slang

  • severance tax — noun Date: 1928 a tax levied by a state on the extractor of oil, gas, or minerals intended for consumption in other states compare royalty 5a …   New Collegiate Dictionary

  • severance tax — a tax levied by a state on the extraction and use of a natural product, as coal, that is sold outside the state or during a certain period. [1925 30] * * * …   Universalium

  • severance tax — noun a state tax on the extraction of nonrenewable natural resources (such as minerals, petroleum, or natural gas) that will be used in another state …   Wiktionary

  • severance — I noun bifurcation, cleavage, demarcation, detachment, differentiation, disassociation, discrimination, distinction, distinguishment, division, divorce, fission, isolation, scission, segregation, separation, sunderance, withdrawal associated… …   Law dictionary

  • tax — A charge by the government on the income of an individual, corporation, or trust, as well as the value of an estate or gift. The objective in assessing the tax is to generate revenue to be used for the needs of the public. A pecuniary burden laid …   Black's law dictionary

  • Tax system in China — Taxes provide the most important revenue source for the Government of the People s Republic of China. As the most important source of fiscal revenue, tax is a key economic player of macro economic regulation, and greatly affects China s economic… …   Wikipedia

  • income tax — Synonyms and related words: VAT, ad valorem duty, alcohol tax, amusement tax, assessment on default, capital gains tax, capitation, capitation tax, corporation tax, customs, customs duty, death duty, death tax, doomage, duty, estate duty, estate… …   Moby Thesaurus


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