2010 Arkansas Code
Title 26 - Taxation
Subtitle 5 - State Taxes
Chapter 58 - Severance Taxes
Subchapter 1 - General Provisions
§ 26-58-115

LexisNexis Practice Insights

Severance Taxes May Be Deducted from Royalty Payments to Owners of Natural Resources

26-58-115. Reports and payment due from producer actually severing or from primary processor -- Methods of accumulating tax payment -- Penalty for noncompliance.

(a) Except as otherwise provided in this subchapter, the monthly report required by 26-58-114 shall be filed and the payment of the severance tax shall be made by the producer actually severing the natural resources whether as owner, lessee, concessionaire, or contractor and, in the case of severance taxes on timber, the monthly report required by 26-58-114 shall be filed and the severance tax shall be paid by the primary processor.

(b) The reporting taxpayer shall collect or withhold out of the proceeds of the sale of the natural resources severed the proportionate parts of the total severance tax due by the respective owners of the natural resources at the time of severance.

(c) Every producer actually operating any oil or gas well, quarry, or other property from which natural resources are severed but under contract or other obligation in which direct payment to the owner of any royalty, excess royalty, or working interest, either in money or in kind is required, is authorized, empowered, and required to deduct the amount of the severance tax in respect thereto from any such royalty or other interest before making the direct payment.

(d) Notwithstanding the sale or delivery, all severed oil or gas sold or delivered to any pipeline company for transportation by it through pipes connected with the oil or gas well of the owner is subject to the severance tax on the severed oil or gas.

(e) A primary processor of timber shall be responsible for the payment of severance taxes on all timber processed or acquired for processing by him or her whether or not the primary processor collects or withholds the tax from the producer.

(f) Any producer or primary processor failing or refusing to comply with any provision of this section shall be guilty of a violation and upon conviction shall be fined in any sum not less than one hundred dollars ($100) nor more than five hundred dollars ($500) for each offense.