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Severance tax check
Product on the line
Your share of the sale before anything comes off. The line may be called owner value or royalty amount.
Gathering, compression, processing or transportation on the same line, if the stub shows them.
The line is often called severance tax, production tax or state tax.
Tax withheld
4.60%
$94.45 on $2,053.35 of oil. Texas charges 4.6% of the oil’s market value.
- Texas oil rate
- 4.6%
- Tax at that rate4.6% × $2,053.35
- $94.45
- Withheld on your statement
- $94.45
- Difference from the state rate
- $0.00
In line with the Texas rate
Source: Texas Comptroller, oil and natural gas production tax rates. See post-production deductions.
What the line is
Severance tax, also called production tax, is paid to the state when oil or gas is produced. The operator pays it and takes each owner’s share out of that owner’s check. On a stub it appears as a deduction under severance, production tax or state tax.
A worked example
The sample owner’s January 2025 oil share is $2,053.35. At 4.6%, the tax is $94.45. If the stub shows $142.00, that is 6.9% and the check is $47.55 lighter than the state rate explains. Press Show a check that is too high to see how the tool reads it.
How we decide
We compare the tax with your gross value. Within half a point of the state rate is in line. More than half a point over is worth asking about. Below the rate is usually fine: some wells qualify for reduced or suspended tax, and operators may deduct post-production costs from the value before applying the rate.
Only Texas oil and gas rates are built in here. Oklahoma and North Dakota use different production taxes. The statement check applies the Texas rates to every oil and gas line and stays silent when your statement shows no tax.
Questions owners ask
Common questions
Short answers. Sources are at the end of the page.
What is the Texas severance tax on oil and gas royalties?
The Comptroller sets the crude oil production tax at 4.6% of the market value of the oil, the natural gas production tax at 7.5% of the market value of the gas, and the condensate tax at 4.6% of the market value of the condensate. The operator pays it to the state.
Is the tax taken out of my check?
Yes. The operator takes each owner's share of the tax out of that owner's check. On a stub it appears as a deduction called severance, production tax or state tax.
Is the tax figured before or after costs?
For gas, the Tax Code defines market value as the gas's value at the mouth of the well, and the Comptroller lets the operator subtract certain marketing costs, such as compression for sales pressure, dehydration and pipeline transport, to reach it. So the tax on a gas line can be a little under 7.5% of the gross value.
The tax on my stub is higher than the Texas rate. What now?
More than half a point over the state rate is worth asking about. Ask the operator which value the tax was figured on, and ask for the tax it reported for your lease that month.
Can the tax be lower than 4.6% or 7.5%?
Yes. The Tax Code has programs that reduce or suspend the tax, such as the credit for qualifying low-producing wells (Tax Code 201.059) and the temporary exemption or reduction for certain high-cost gas (Tax Code 201.057). A stub with a lower rate is not necessarily wrong.
Does this apply to Oklahoma and North Dakota?
No. This tool has the Texas oil and gas rates only. Oklahoma and North Dakota use different production taxes.
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