After reading through the different state taxes, I was wondering if these taxes (severance taxes, etc…) are deducted directly from the royalty check, or if this is something I would take into account when filing.
i am waiting for my frac sand mine to produce and am trying to find out ablut the tax i will be paying,
Please check with your tax attorney. I think that you will find that post production costs and taxes are a deductible item on, I think, Schedule E.
NOT LEGAL OR TAX ADVICE
Dear Mr. Maple,
My understanding is that in Texas severance taxes are paid by the producer directly to the state government upon extraction of marketable product from the ground, and your pro rata portion is deducted from your royalty checks to reimburse the producer. In other words, you do not pay severance taxes.
I guess the way to know if anything can be deducted is to compare the amount of royalties that the company paid to you directly for the year and compare that to the amount of royalties that the company reports to the IRS as having paid to you for the year. The difference might be the amount you paid for severance taxes. Great question.
Sincerely,
Philip Wynne