What exactly is a severance tax?
Severance taxes are levied on the removal of certain natural resources from the soil or waters of the State of Alabama.
What items are taxed?
The statewide severance taxes are collected from oil, gas, coal, and forest products. In addition, local taxes are collected for certain counties on coal, stone, rock, clay, sand, and gravel. Note: The tax on iron ore was suspended effective October 1, 2014. To view a copy of the notice click here.
When are the tax returns due?
Coal, Uniform Minerals and Local Solid Minerals are due on the 20th of each month. Oil and Gas taxes are due the 15th of each month for the second preceding month’s production. Forest Product returns are due the 30th of January, April, July and October for the preceding quarter’s activity.
If the due date falls on a weekend or a holiday, when is the due date?
The due date is moved to the following business day. Returns must be submitted electronically or postmarked on or before the next business day based on the return type’s mandatory filing requirements. If you remit payment electronically through My Alabama Taxes, then your payment must be initiated on or before the revised due date before 3:45 p.m.
How do I set up a severance tax account?
You must complete a Severance Tax Registration Form at http://revenue.alabama.gov/forms. Click in the search box and enter “B&L-STR”. Complete the form and submit it to the Severance Tax address located on the back of the form. In addition, you must apply for a severance tax account via My Alabama Taxes at https://myalabamataxes.alabama.gov/ by choosing “Register a New Business or Tax Account. If you have any questions, you may call the Severance Tax Section at 334-242-9612 for assistance.
What are the severance tax rates?
|PRODUCT||PRIVILEGE TAX||OTHER TAX|
|Oil and Gas||2% to 8% of value||production tax at 1% or 2% of value|
|Forest Products||Various||processor’s tax 50% of privilege tax|
|Coal||$0.335/ton||Additional tax of $0.025 for underground mining or $0.05 for surface mining|
What are the local severance tax rates?
|Statewide – Uniform (Except: Geneva, Lamar, Lee, Wilcox)||Natural Minerals, Sand, Gravel, Sandstone, Granite, Shale, Clay, Dolomite, Limestone||10¢ per ton||§§40-13-50, 40-13-61, Code of Alabama, 1975|
|Coosa County||Sand, Clay, Silt, Loam, Dirt, Gravel, Rock, Sand-gravel, Sand-Clay||25¢ per ton||99-544|
|Jackson County||Coal||20¢ per ton||79-349, 97-220|
|Marshall County||Coal||20¢ per ton||81-482|
What is the Coal Severance Tax?
Privilege and excise taxes that are levied on all persons severing coal within in Alabama in accordance with Code of Alabama 1975, Title 40, Chapter 13, Articles 1 & 2. Effective Aug. 1, 2017, there is an additional excise and privilege tax that is levied on all persons severing coal by underground or surface mining within Alabama.
Who is considered a producer, purchaser, or transporter?
A producer is any person that is engaged in severing coal from the soil within Alabama. A purchaser is any person that is purchasing coal that is severed within Alabama. A transporter is any person that is transporting severed coal from an Alabama mine from place to place in state or out of state.
Who regulates coal mining operations in Alabama?
The Alabama Surface Mining Commission regulates all underground and surface mining operations in Alabama. For information relating to obtaining permit and licenses and mining locations, please visit ASMC website at http://www.surface-mining.state.al.us/ .
What is the tax rate?
All coal severed within in Alabama is taxed at $0.335 per ton (a $0.135 per ton tax rate and $0.20 per ton tax rate). Effective Aug. 1, 2017, the additional tax rates for coal severed in Alabama are $0.025 per ton on underground mining and $0.05 per ton on surface mining. Note: The additional tax will expire two years after its effective date.
Who receives the proceeds that are collected from the additional cola severance tax on surface or underground mining?
The revenue collected from the additional taxes will be disbursed directly to the Alabama Surface Mining Commission.
Who must file and remit the Coal Severance Tax?
All producers of who sever coal within in Alabama must file a severance tax return and remit payment of the tax. Every purchaser and transporter of coal that was severed in this state must file a report. The Coal Severance Tax Report, the Coal Purchaser’s Report, and the Coal Transporter’s Report are due within 20 days after the preceding month of production. The return and payment should be electronically filed by the 20th of each month before 3:45 p.m. via My Alabama Taxes (MAT) at https://myalabamataxes.alabama.gov.
What are the forest products taxes?
In accordance with the Code of Alabama 1975, Title 9, Chapter 13, Sections 80-108 as amended, effective July 1, 2017, the forest products severance tax is now levied and collected on every person who owns timber prior to severance and engages in the business of severing timber or any other forest products in Alabama from the soil for sale, profit, or commercial use whether as owner, lessee, concessionaire, or contractor. There is also an additional privilege tax known as the forest products manufacturers tax levied against the manufacturer using the forest products in the manufacturing process in an amount equal to 50 percent of the severance tax.
What are the taxable products and rates?
|Pine Logs received by a concentration yard, manufacturer, or processor||$0.10/ton|
|Pine Logs exported out-of-state||$0.10/ton|
|Logs-All Other Species received by a concentration yard, manufacturer, or processor||$0.065/ton|
|Logs-All Other Species exported out-of-state||$0.065/ton|
|Pulpwood received by a concentration yard, manufacturer, or processor||$0.10/ton|
|Pulpwood exported out-of-state||$0.10/ton|
|Stumpwood received by a manufacturer||$0.125/ton|
|Stumpwood exported out-of-state||$0.125/ton|
|Poles/Pilings received by a concentration yard or manufacturer||$0.205/ton|
|Poles/Pilings exported out-of-state||$0.205/ton|
|Inwoods Pulpwood Chips received by a concentration yard or manufacturer||$0.10/ton|
|Inwoods Pulpwood Chips exported out-of-state||$0.10/ton|
Our facility does not have any weight scales. How do I convert from board feet on lumber to tons?
You may use the industry standard to do a measure conversion from board feet to tons.
What additional forest products are nontaxable and taxable?
Wood residue used as fuel chips in the manufacturing process of any manufactured product is not subject to the forest products severance and manufacturers taxes. Residual pulpwood chips that are a byproduct of the manufacturing process are not subject to an additional severance tax; however, residual pulpwood chips that are utilized by the manufacturer in the manufacturing process are subject to the manufacturers tax.
How does a manufacturer obtain exemption from the Forest Products Severance Tax on pulpwood chips and residual pulpwood chips that are purchased from a manufacturer, concentration yard, or processor?
Manufacturers who wish to be exempt from the forest products severance tax on pulpwood chips or residual pulpwood chips purchased from a manufacturer, concentration yard, or processor must obtain an exemption certificate from the seller stating that the seller is registered with the Department to remit the forest products severance tax.
What type of returns must be filed?
The Forest Products Severance Tax Return and the Forest Products Manufacturers Tax Return. Depending on the taxpayer’s activity, one or both may be filed.
Who is responsible for filing and remitting the Forest Products Taxes?
Every manufacturer (paper mill, pulp mill, oriented strand board mill, pellet mill, etc.), concentration yard, processor (chip mill, etc.), and producer (exporter) must file and remit the forest products severance tax to the state each quarter. Every manufacturer located only within this state must file and remit the forest products manufacturers tax to the state each quarter.
When are the Forest Products Returns/payments due?
The payment and return are due within 30 days after the end of each calendar quarter. The return/payment must be submitted electronically through My Alabama Taxes at https://myalabamataxes.alabama.gov before or on the due date by 3:45 p.m.
What is the Oil and Gas Severance Tax?
The oil and gas severance tax consists of the privilege and production taxes which are collected together and reported on the same oil and gas severance tax return, in accordance with Code of Alabama 1975, Title 40, Chapter 20 and Title 9, Chapter 17, Sections 25-35, respectively.
Where does oil and gas production occur in Alabama?
North Alabama is one of the sources of methane gas which is extracted from coal seams. Many of the Southwestern counties have a great deal of oil production. There is also activity in the Gulf waters off the Alabama coast. This offshore activity generates gas and any production occurring within state waters is subject to Alabama severance taxes.
What are the tax rates?
Onshore production tax rates are 1% or 2% of the value. Onshore privilege tax rates are 2%, 3%, 4%, 6% or 8%. The specific rate depends upon when the well is permitted and its monthly production. The deep well offshore production rate is 1.66% of the gross proceeds. The deep well offshore privilege rate is 3.65% of the gross proceeds. For a more detailed breakdown of the tax rates, you may refer to the rate summary table at http://revenue.alabama.gov/business-license/severance-tax-2/severance-taxes-administered/.
What products are included?
The tax includes most oil and gas and by products such as condensate, butane, propane, ethane and plant fuel.
What type of returns may be filed?
Onshore Producer, Onshore Purchaser or Offshore Producer. Depending on a company’s activity, one or all three of these returns may be filed by the same entity.
When is the Oil and Gas Return/payment due?
The oil and gas severance tax return and payment are due before 3:45 p.m. on the 15th of the month for the second preceding month’s activity.
What if I have questions concerning a well in the state of Alabama?
Questions concerning well locations, ownership, permit numbers or past production volumes may be addressed to the State Oil and Gas Board at http://www.ogb.state.al.us/.
What items are exempt from Oil and Gas Severance Taxes?
Natural gas lawfully injected into oil or gas pools or reservoirs in the soil or beneath the soil or waters is exempt from this tax. However, if any gas injected into the earth is sold for such purposes or injected into underground storage facilities as defined in Section 9-17-150, then the gas sold or injected is not exempt. Natural gas lawfully vented or flared in connection with the production, treatment, or processing of oil or gas is exempt.
What costs may be deducted from the workback price in arriving at market price?
Items such as depreciation, return on investment, labor expenses, materials and equipment rentals, administrative and overhead costs, fuel costs, insurance and certain transportation costs. In addition, certain marketing costs are allowed. Please refer to Revenue Rule 810-8-6-.01 for detailed information concerning the valuation of oil or gas at the point of production or allowable deductions.
What is the acceptable method of filing an Oil and Gas Severance Tax Return?
Returns should be filed electronically via My Alabama Taxes (MAT) at https://myalabamataxes.alabama.gov. Return schedules may be keyed into MAT or a schedule template may be used to import the return. Templates may be accessed at http://revenue.alabama.gov/business-license/severance-tax/oil-and-gas-severance-tax-payments/. Fillable tax forms can be found at http://revenue.alabama.gov/forms/. It is mandatory that return payments over $750 are made electronically.
What local severance taxes does the Department administer? What are the tax rates?
The department administers local solid mineral severance taxes for Coosa and Jackson Counties. Click here to view the tax rates administered by the Department of Revenue.
What are local solid minerals?
Local solid minerals are coal and earthen materials that consist of sand, clay, silt, loam, dirt, gravel, rock, sand-gravel, and sand-clay.
What types of returns may be filed?
All persons severing earthen materials in Coosa County must file the Coosa County Earthen Severance Tax Report. All persons severing coal within Jackson County must file the Jackson County Coal Severance Tax Report.
How do I file and pay my state administered local solid minerals taxes for these counties?
The return and payment should be electronically filed by the 20th of each month before 3:45 p.m. via My Alabama Taxes (MAT) at https://myalabamataxes.alabama.gov.
What minerals are covered by the Uniform Severance Tax Act? All natural minerals, including sand, gravel, sandstone, granite, shale, clay, dolomite, limestone, and any other mineral listed as such by the Geological Survey of Alabama (http://www.gsa.state.al.us/) that is not specifically excluded from taxation. Other taxable minerals include bauxite, salt, and silicon.
What minerals are specifically excluded from the Uniform Severance Tax Act? Lime or limestone used for agricultural purposes or for pollution control or abatement purposes, rock dust used for settling coal dust in underground mines or similar uses, any natural minerals used for the purpose of producing Portland cement, processed sand used in the foundry cores, mold, and linings, clay that produces lightweight aggregate, nor any chert including county or municipality owned chert facilities, marble and marble by-products, iron ore, quartzite, coal, oil and natural gas.
What is the tax rate? Natural minerals are taxed at $0.10 per ton.
Who should pay the tax? The purchaser should pay the tax at the time of delivery or point of sale of the natural minerals.
Who must collect and remit the tax? The producer must collect the tax from the purchaser at the point of sale or delivery and remit the tax to the Alabama Department of Revenue. The producer must remit the tax even if he fails to collect the tax from a purchaser.
When is the tax due? It is due by the 20th day of the month next succeeding the month of sale or delivery whichever occurs first.
The return/payment must be submitted electronically through My Alabama Taxes https://myalabamataxes.alabama.gov on or before the due date before 3:45 p.m.
Who receives the net proceeds from the tax that is collected from the producer? Revenue collected under this act is sent in quarterly installments to the county commission in the county where the materials were severed.
How does the severance tax apply? The severance tax applies at the point the natural minerals are sold by the producer to a purchaser.
Is there a standard conversion of cubic yards to tons? A producer should attempt to determine the tonnage of materials sold. A producer, who is unable to determine the tonnage, may use a conversion rate of 2 tons to 1 cubic yard as an alternative method.
What is tangible personal property? Tangible personal property is property that is not attached to the earth at the time it is sold.
Are products used for real property exempt? If a producer uses the natural minerals as a part of a “furnish and install” contract then the material used by the producer would not be subject to the tax. However, if the producer sells the natural minerals to a contractor who completes a real property contract, the natural minerals sold would be subject to the tax.
Are governmental entities subject to the tax? The federal government and the State of Alabama, along with their agencies and political subdivisions, including municipalities, counties, and city and county school boards, are sovereign governmental entities. Direct purchases by sovereign governmental entities are not subject to the tax. Direct sales to contractors working for these entities are not exempt.
What type documentation is needed for purchases? A purchaser claiming an exemption shall provide the producer with the proper documentation which includes the full name and address of the purchaser, the date of sale, the type of product purchased, the product usage, and shall state that the severed materials will be used by an exempt entity or used for an exempt purpose. Purchasers that do not maintain proper documentation may be liable for the tax.
Are materials used for fill taxable? If the producer uses severed materials for fill on his property then the severed materials are not taxable. However, if a producer sells severed material to a purchaser who may use the materials for fill, then the materials are taxable at the point of sale.
Are sales of dirt and top soil subject to the severance tax? Materials which are specifically subject to the tax (i.e. sand and clay) are taxable even if it they are mixed with other materials. Top soil and dirt are not usually considered to be “natural minerals” and are not subject to the severance tax.
Are natural minerals used for pollution control exempt from the severance tax? Only lime and limestone used for pollution control or abatement purposes are tax exempt; provided they meet the requirements for sales tax exemption in the State of Alabama.
Are natural minerals used for agricultural purposes exempt from the severance tax? Only lime and limestone used for agricultural purposes are exempt. Producers and purchasers qualifying for the exemption must be registered with the Department of Agriculture and Industries.
Are materials sold for use outside the state taxable? Materials sold for use outside the State of Alabama are subject to the severance tax unless the materials are never transported on Alabama roads. To qualify for the exemption, the materials must be loaded into a non-road conveyance (railroad car or barge) at the producer’s site.
Are the materials severed and used by the producer subject to the tax? The severance tax does not apply to severed materials stockpiled, transported or used in any other way by the producer until the materials are sold.