Oil & Gas Severance Tax | Business Filers

Anyone who receives 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.

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 0021W 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.

Organizational Structure

  • 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

Estimated Payments

Businesses that expect their Colorado severance tax liability for the year to exceed their Colorado severance credits by $1,000 or more are required to make estimated tax payments. Estimated tax payments are due each month by the 15th day of that month and must be submitted via Electronic Funds Transfer (EFT). To make payments through EFT use the Authorization For Electronic Funds Transfer for Tax Payments (DR 5785). A paper voucher for these tax payments is not required.