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.
It is not necessary to file a severance tax return if you meet both of the following conditions:
- The total gross oil and gas withholding on form(s) DR 0021W for the calendar year is less than $250, and
- The producer has withheld sufficiently from royalty or production payments to cover the severance tax liability.
For more information, please see FYI Withholding 4: Colorado Oil and Gas Severance Withholding Requirements.