DOR Taxation web site

Individuals and Corporations

Colorado severance tax is imposed upon nonrenewable natural resources that are removed from the earth in Colorado. The tax is calculated on the gross income from oil and gas and carbon dioxide production.

Anyone who receives taxable income from oil or gas produced in Colorado must file a severance tax return. If you receive oil and gas income from Colorado sources you must also complete and file a Colorado state income tax return.

A limited partnership, LLC or S Corporation must file at the entity level. Partners, members, or shareholders do not file a severance tax return to report oil and gas income received by the pass-through entity.

General partnerships must file at the individual partner level. Each partner, not the partnership, is required to file the return.

Exception: It is not necessary to file a severance tax return if you meet both of the following conditions:

  1. the total gross oil and gas withholding on form(s) DR 21W for the calendar year is less than $250; and
  2. the producer has withheld sufficiently from royalty or production payments to cover the severance tax liability.