Operators and first purchasers who disburse income from oil and gas production in Colorado to any interest owner must:
- Open and maintain a Colorado oil and gas severance withholding tax account with the Colorado Department of Revenue.
- Withhold 1% from the gross income disbursed and electronically remit withholding to the department monthly.
- File with the department an annual reconciliation of withholding.
- Notify each interest owner annually of the amount of severance tax withheld from his/her interest payments.
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.
For more information, please see Publication FYI Withholding 4, Colorado Oil and Gas Severance Withholding Requirements.