Frequently Asked Questions About Mineral Severance Tax
Will a postmark date be acceptable proof of timely filing of the return and payment of tax?
Yes, postmark dates will be relied upon in making determinations of whether filings and payments are timely.
Will adjustments be allowed to be made to taxable value for oil and condensate transportation costs and for gas gathering, dehydration, sweetening and compression costs?
The gross value will be calculated using Revenue Ruling 92-1998-01. Please refer to the Kansas Department of Revenue Home Page and select Policy Library.
Is average daily oil production calculated on the basis of production or sales volumes?
K.S.A. 79-4217(b)(2) requires that the calculation shall be based on production, therefore exemptions based on sales cannot be granted.
Is the Mineral Severance Tax Due on production from a lease prior to removal from the lease or production unit?
No, K.S.A. 79-4220(a) provides that the tax "shall be due and payable on or before the 20th day of the second month following the end of the month in which the coal, oil or gas is removed from the lease or production unit....." See http://www.kslegislature.org/li/statute/.
Is the Minerals Severance Tax on processed gas, based on sales value of residue gas plus full value of natural gas liquids recovered by the gas plant?
Refer to Revenue Ruling 92-1998-01. Please refer to the Kansas Department of Revenue Home Page and select Policy Library.
Does the gas exemption which covers lease use gas also include gas used by a gas plant as fuel?
Yes, if the gas is used in connection with the operation and development for, or production of, oil or gas on the lease or production unit where severed. However, gas consumed off lease for any purpose is subject to the Minerals Severance Tax.
If individual well meters are utilized in measuring gas on a multiple well lease, is the $87/day exemption calculated on each well or the average of all wells?
The exemption is calculated for each individual well. Refer to K.S.A 79-4217 (1) (b). See http://www.kslegislature.org/li/statute/.
Note: Allocation for each well is required when reporting the same lease code. This can be done by reporting each well with a separate line on the report, identifying each well by name or by submitting support that shows allocation by well for the lease each month.
If a central meter is utilized for measuring the total production from a multiple well lease, is the calculation based on the average well value?
Yes, the law does authorize the averaging of producing wells. K.S.A. 79-4217 (b)(1)(D), "…in the event that the production of gas from more than one well is gauged by a common meter, eligibility for exemption here-under shall be determined by computing the gross value of the average daily combined production from all such wells and dividing the same by the number of wells gauged by such meter." See http://www.kslegislature.org/li/statute/.
What kinds of notification will the purchaser need to receive from the operator should the operator wish to report the tax?
The operator is required to provide the Director of Taxation and the first purchaser with written notification of this fact. Any form is satisfactory as long as the message is conveyed. The operator must provide the Department with the name of the lease, the Kansas lease code number and the name(s) and Kansas registration number(s) of all first purchasers. K.S.A. 79-4221 (b), "If oil or gas is removed from the lease or production unit but not sold to a purchaser or if the operator elects to remit the tax as authorized under K.S.A. 79-4220 and amendments thereto, or the operator is required to remit the tax pursuant to K.S.A. 79-4220, ……". See http://www.kslegislature.org/li/statute/.
Who is entitled to claim a new pool exemption and how long is the exemption in effect?
Prior to July 1, 2012, all operators who have wells producing from a new pool, as determined by the state corporation commission, can claim a new pool exemption. A new pool exemption is effective for a period of 24 calendar months following the month in which oil or gas was first commercially produced from such pool, plus the fraction of the month in which oil or gas was first produced. If an operator completes a well that produces from a new pool for which another operator has already obtained an exemption certificate, the new operator's exemption will expire at the same time as the initial exemption granted for the new pool.
During the 2012 Legislative Session House Bill 2117 was passed and signed into law. Section 29 of the Bill amends K.S.A. 79-4217 so that, on and after July 1, 2012, the 24 month exemption for all new gas pools is eliminated, regardless of the amount of gas produced. There is a 24 month exemption for new oil pools, but only if oil production from the pool does not exceed 50 barrels, per well per day. See Notice 12-02.
Are new pool exemption request required to include the KCC Certification Letter?
Yes, new pool exemption request are required to include the KCC Certification Letter.
What is the pressure base for gas in Kansas?
14.65 at 60 degrees Fahrenheit. Refer to K.S.A. 79-4217. See http://www.kslegislature.org/li/statute/.
Will the Department of Revenue pay interest on refunds of severance tax?
No, there is no statutory authority to pay interest on refunds of this tax.
Is there any liability on the purchaser if they do not withhold or refuses to withhold the tax because of lack of information or other reasons?
The law imposes the duty to withhold report and remit the tax on the first purchaser unless the operator makes the election to do this himself. The Department will enforce the provisions of the act by initiating any action in this regard against the purchaser. In the case that any such enforcement action is unsuccessful, it must be pointed out that the ultimate responsibility for payment of the tax is on the producers and the Department would proceed against them in the event efforts to hold the purchaser responsible are frustrated. Refer to K.S.A. 79-4221. See http://www.kslegislature.org/li/statute/.
In the case of an oil well, can missed production days be considered in computing average daily production if the oil well subsequently makes up the production?
No. Missed production days will not be considered in the computation of average daily production unless the production is immediately replaced or made up.
Can working interest holders who elect to take their portion of oil or gas production, remit mineral severance tax directly to the Kansas Department of Revenue?
No, Statues require that the operator or first purchaser remit the tax. Please refer K.S.A. 79-4221. See http://www.kslegislature.org/li/statute/.
How is the average daily production of a gas well, during a calendar month, calculated in determining whether or not the well qualifies for an exemption from the severance tax on gas?
The average daily production of a gas well for a calendar month is calculated as follows: Gross value of production from the gas well in the applicable month divided by Number of well producing days in the month.
The number of well producing days is determined as follows: Number of well operating (producing or flow) hours in the month divided by 24.
Neither gross value nor the well operating hours should include data from days during the month when there has been a significant disruption of production as defined in K.S.A. 79-4216(m). See http://www.kslegislature.org/li/statute/.
What information is needed to locate a Kansas Department of Revenue lease code number?
- County Name
- Legal Description (Section, Township, and Range)
- Current Operator
- Current first purchaser
- Well Name
- Date of First Production
- Depth of Well
- Commodity Type, Oil or Gas
- API Number (Assigned by the Kansas Corporation Commission)
Can Mineral Severance Reports be filed electronically?
Yes, Mineral Severance Reports can be filed through KOLAR (Kansas Online Automated Reporting), after becoming a certified USER. See https://kolar.kgs.ku.edu/ or contact email@example.com
Does the Kansas Department of Revenue provide Electronic Funds Tranfer (EFT)?
Yes. To register for the electronic funds transfer program: Fax or mail a completed EF-101 form OR Call the electronic services support staff: 785-296-6993 or 1-800-525-3901. For further information, go to the KS WebTax page: http://www.ksrevenue.org/kswebtax.html.