This form lists your gross income on which you must calculate your severance tax and the amount the producer has withheld and paid to the state from your royalty or production payments. If you own interest in more than one well or field, you should receive a separate withholding statement from each producer. In summary, calculate the amount of severance tax based on your share of gross income from production. Then deduct 87.5 percent of your share of any ad valorem taxes paid to local governments on production. Finally, deduct the amount withheld from your royalty or interest payments to determine whether you owe the State of Colorado additional severance tax or whether Colorado owes you a refund.
Severance tax is different from income tax.
If you receive oil and gas income from Colorado sources you must also complete and file a Colorado state income tax return. The deduction is accounted for in your federal taxable income, which is the basis of your Colorado income tax. Contact the Department of Revenue for the state income tax return form 104 . A Colorado severance tax refund must be reported as income on your federal return if it was used as a deduction on the Schedule E for the previous tax year.