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 will be taxed at 5 percent for the first 36 months of production effective June 27, 2018. Previously, new production was being taxed at 2 percent for 36 months. One percent of gross production tax revenues is divided between counties and school districts, with the remainder going to the state.

In 2018, the state collected $317.4 million from the gross production tax on gas and $364.7 million from oil; together, gross production taxes accounted for 6.9 percent of total tax revenues and were the fourth largest revenue source after the personal income tax, sales tax, and motor vehicle tax.