Severance taxes are taxes paid for extracting non-renewable resources, such as oil, natural gas, coal, and minerals from a state. Some states also levy a severance tax on timbering. Unlike other taxes, which are levied on ongoing events such as consumption or income-producing activities, severance tax rates are designed to compensate a state and its citizens for the one-time, permanent removal of valuable materials from the state.

In recent years, improved technology such as hydraulic fracturing, known as fracking, has increased access to oil and natural gas that was previously unreachable. This has created new oil and gas boom states such as North Dakota and Pennsylvania and a renaissance in traditional petroleum powerhouses. For new states, particularly Pennsylvania and Ohio, the new development of these resources has resulted in severance tax controversies as citizens and policymakers debate balancing the continued development of this growth industry with the right of the state and its citizens to be compensated for these valuable resources.

Tax Notes contains news, analysis, and other information related to severance taxes by state. Severance tax news coverage includes proposed changes to state severance tax structures; reporting on changes to how a state will spend or allocate its severance tax revenue; coverage of and analysis of states’ use of tax incentives to promote natural resource extraction. Coverage of severance taxes includes coverage related to coal; natural gas; oil; and minerals. Severance tax rates, policy issues and studies are also part of Tax Analysts’ coverage.