Gross Production Tax

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 (the tax rate is lower when oil and gas prices fall below a certain threshold). Under legislation approved in the 2017 special session (HB 1010xx), oil and gas from newly-spudded wells are taxed at 5 percent for the first 36 months of production effective June 27, 2018. Previously, new production was taxed at 2 percent for 36 months. Whatever the tax rate, one percent of gross production tax revenues is divided equally between counties and school districts, with the remainder going to the state.

In FY 2020, the state collected $214.3 million from the gross production tax on gas and $570.8 million from oil; together, gross production taxes accounted for 7.5 percent of total tax revenues and were tied for the third largest revenue source, along with motor vehicle taxes, after the personal income tax and sales tax.

 

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