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Gross Production Tax, What's That?

The gross production tax, or severance tax, is a value-based tax levied at a basic rate of 7 percent upon the production of oil and gas in Oklahoma. Under legislation approved in 2014 (HB 2562), effective July 1, 2015, oil and gas from newly-spudded wells will be taxed at 2 percent for the first 36 months of production. One percent of gross production tax revenues is divided between counties and school districts, with the remainder going to the state.

In 2013, the state collected $94.9 million from the gross production tax on gas and $418.7 from oil; together, gross production taxes accounted for 6.1 percent of total tax revenues and were the fifth largest revenue source.

While HB 2562 did away with most incentives for oil and gas production and lowered the base tax rate, the state will continue to offer incentives for production enhancement projects, secondary recovery projects and tertiary recovery projects through 2020.

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