Louisiana Severance Tax: Rates, Rules, and Filing

A severance tax is a state-levied tax on the extraction, or “severing,” of non-renewable natural resources from the soil or water. Its purpose is to compensate the state for the depletion of its finite natural assets. When private entities extract and sell these resources, the state collects a portion of the value to fund public services, accounting for the permanent loss of its natural wealth. This tax applies to the activity of removing resources for commercial use.

Resources Subject to Severance Tax and Applicable Rates

The Louisiana severance tax applies to various natural resources, with rates and valuation methods tailored to each commodity. The tax structure is designed to capture the value of the resource at the point of extraction.

Oil and Condensate

Oil and condensate are taxed at a rate of 12.5% of their value at the time and place of severance. This value is determined by the higher of either the gross receipts from the first purchaser, less any transportation charges, or the posted field price. For certain low-production wells, known as stripper wells, a reduced rate of 3.125% applies. These provisions are intended to encourage continued production from marginal wells.

Natural Gas

The severance tax on natural gas is calculated based on a volumetric rate that is adjusted annually. For the period of July 1, 2024, through June 30, 2025, the rate is 9.8 cents per thousand cubic feet (MCF). This rate is determined by multiplying a base rate by a “gas base rate adjustment,” which is calculated based on the average of the New York Mercantile Exchange (NYMEX) Henry Hub settled price over a prior 12-month period.

Timber

Timber severance tax is calculated based on the type of wood and its value. The Louisiana Forestry Commission establishes stumpage values annually, which serve as the basis for the tax computation. Sawtimber is taxed at 2.25% of its stumpage value, while pulpwood is taxed at a rate of 5% of its stumpage value. This system ensures the tax reflects the current market value of timber products at the time of harvest.

Other Resources

Louisiana also levies a severance tax on other extracted resources. These include materials like coal, lignite, ores, salt, and various types of stone. The tax rates for these resources are specific to each commodity and are typically based on a per-ton measurement.

Determining Who is Responsible for Payment

The legal responsibility for paying the severance tax falls upon the “severer,” defined as any person or entity severing natural resources from the soil or water. This includes the landowner, lessee, or operator who physically performs the extraction. The tax is owed regardless of whether the resource is used by the severer or sold to another party.

In practice, the operator of a well, mine, or timber harvest remits the tax payment to the state. The operator calculates the total tax due on all resources from a site and often withholds the tax amount from payments made to other interest holders, such as landowners receiving royalties.

The operator then combines this withheld amount with the tax due on their own share of production. This total sum is remitted to the Louisiana Department of Revenue, ensuring all parties meet their proportional tax obligation.

Required Information and Forms for Filing

Filers must gather specific data to ensure accuracy. This includes:

• The producer’s name, address, and 10-digit Louisiana Department of Revenue account number
• The 5-digit producer or transporter code from the Louisiana Office of Conservation
• Parish code, field codes, and specific well serial numbers for each production site
• Detailed production volumes, such as barrels of oil, MCF of gas, or tons of timber
• The corresponding gross value of the severed resources

Different resources require specific forms for reporting. Oil and condensate returns use the O-1D, O-3, and O-5 series, while natural gas filers use the G-1D, G-3, and G-5 series. Timber producers file returns using forms like the T-1A and the Timber Parish Summary Return.

On these forms, filers enter information like total production volume, gross taxable value, and any applicable transportation charges. The forms require specific codes from the Department of Revenue to designate the tax rate and resource type. All forms are available for download on the Louisiana Department of Revenue’s website.

The Filing and Payment Process

The primary method for submitting severance tax returns is electronic filing through the Louisiana Department of Revenue’s online portal, the Louisiana Taxpayer Access Point (LaTAP). For oil and gas, returns must be filed electronically via the department’s Severance Application. Payments can be made via Electronic Funds Transfer (EFT) through LaTAP.

While electronic submission is preferred, paper forms can be mailed to the Department of Revenue. Those filing by mail can include a check or money order and should write the last four digits of their SSN or business ID on the payment to ensure it is correctly applied.

Deadlines for filing and payment are strict. For oil and gas, the due date is the 25th day of the second month following production. For timber, the deadline is the last day of the month following the taxable period. Taxpayers who file electronically typically receive an immediate confirmation receipt.