Oil & Gas Severance Tax | Owners & Operators

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 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.