Can someone share how taxes are calculated for Montana royalties. google suggests state income tax withholding; but our check only has one tax line. the tax seems too high; but even combining severance and state taxes - I can’t get the number to match. in the attachment, I show on the left the calculation using the NRI. the net is calculated automatically. when comparing the paystub (on the right) to the calculation (on the left); you can see the royalty matches, but the tax does not.
I’d appreciate some local MT folks commenting on this to help me understand. thank you.
After reviewing the pay information further - it looks like this can’t be state withholding because there is a separate box for this in the check summary. that means it has to be all severence tax - which further confuses me. this is not a lot of money; but just looks wrong to me. also if this is an error in their system - then it would likely be affecting 100% of all their royalty owners?
There is a problem with the application of your DOI to the tax. 42739.37 X 0.00045622 = 19.50. 1288.21 X 0.00045622 = 0.59. To get to the net 2.95 charge, the gross tax would be 6466.18. This is calculated by 2.95 / 0.0456622 = 6466.18. You need to contact the operator and get an explanation. It is possible that they are charging other expenses to your net tax instead of showing on a separate line or it could be a programming error.
@TennisDaze
yeah - I was guessing operator error on the calc, but didn’t want to go straight to the assumption. the NRI on the oil sales is accurate (as you point out). on the tax it’s not. I know some states have complicated severence as a function of price / prod rates / etc - so wanted to reach out and test this thought.
I’ve contacted the operator. unfortunately, they are very small. no website, no email, phone not on their paystub; so it took some work. anyway, they’ve not returned my call - but hopefully will.
thank you for chiming in. I very much appreciate it.
I have seen severance tax accounting error in Texas where part of minerals were owned by State of Texas and no severance taxes are due for State’s share of production. The check detail charged listed 100% severance tax on 100% of sales and then overcharged to the mineral owners. Accounting said they could not charge State and so were overcharging all other owners. I had to explain to accounting department that the compliance department was not paying severance tax on State’s share of revenues to Comptroller and only paying on private owners (WI and RI) share. So the company was collecting more severance taxes than it paid. Accounting talked with Compliance and then refunded all the excess charges and fixed the accounting system.
