Utah Administrative Code

The Utah Administrative Code is the body of all effective administrative rules as compiled and organized by the Division of Administrative Rules (see Subsection 63G-3-102(5); see also Sections 63G-3-701 and 702).

NOTE: For a list of rules that have been made effective since April 1, 2019, please see the codification segue page.

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R865. Tax Commission, Auditing.

Rule R865-14W. Mineral Producers' Withholding Tax.

As in effect on April 1, 2019

Table of Contents

R865-14W-1. Mineral Production Tax Withholding Pursuant to Utah Code Ann. Sections 59-6-101 through 59-6-104.

(1) Definitions.

(a) "Working interest owner" means any person who is the owner of an interest in oil, gas, other hydrocarbon substances, or all other metalliferous and nonmetalliferous minerals who is burdened with a share of the expense of developing and operating the property.

(b) "First purchaser" means the first person to pay for production after it is extracted from deposits in this state.

(c) "Person" means any natural person, company, corporation, association, partnership, joint venture, cooperative, estate, trust, receiver, or any other party or entity that has a working interest, royalty interest, overriding royalty interest, production payment, production payment including in-kind exchanges, or any other ownership interest entitled to production proceeds from deposits in this state.

(d) "Producer" as defined in Section 59-6-101 includes any non-operating working interest owner that makes payments to persons having an interest in minerals produced or extracted from deposits in this state.

(2) Advance mineral production payments that relate to, refer to, or concern production are subject to the mineral production tax withholding requirements.

(3) Each producer who disburses funds that are owed to any person owning a working interest, a royalty interest, overriding royalty interest, production payment or any other interest in minerals produced in this state, is subject to the withholding requirement of Section 59-6-102.

(4) Withholding requirements on further distributions are as follows:

(a) Unless otherwise provided by statute, each producer who disburses funds to any producer, working interest owner or any other interest owner must withhold five percent of the gross payment due if that producer or any other interest owner does not make further distributions. For producers or any other interest owners making further distributions, the procedures outlined in Subsection (4)(b) must be followed.

(b) The working interest owner or producer who makes further distributions must be licensed to withhold on the disbursements and is responsible for remitting the tax withheld each quarter. Upon approval by the Auditing Division of the Tax Commission, a working interest owner or producer who makes further distributions of the mineral production proceeds may furnish an exemption certificate approved by the Tax Commission to the producer or first purchaser.

(c) If an exemption certificate approved by the Auditing Division of the Tax Commission is not received, withholding is required.

(5) If a mineral is taken in kind by an interest owner of a mineral production property, the initial withholding responsibility rests with the first purchaser who receives the mineral. A person taking a mineral under an exchange agreement with the interest owner is considered to be the first purchaser and is subject to the requirement of withholding and remitting the tax on any payments made to the interest owner.

(6) Claiming credit for the tax withheld shall be accomplished as follows:

(a) Credit must be claimed for the tax withheld on a Utah individual income tax return or a Utah corporation franchise tax return.

(b) Taxpayers who are shareholders in a corporation taxed under Subchapter S of the Internal Revenue Code and are Utah residents, members of a Utah limited liability company, or members of a partnership doing business in this state may claim credit for the amount shown on the federal schedule K-1 or the Utah schedule K-1 as their percentage share of the tax withheld from Utah mineral production payments by the corporation, limited liability company, or partnership.

(c) An estate or trust is entitled to credit for the tax withheld in proportion to its share of federal distributable net income. The remaining credit must be passed through to the beneficiaries in proportion to their respective shares of federal distributable net income of the estate or trust. The beneficiaries may claim credit for the amount shown by the fiduciary on the federal schedule K-1 or the Utah schedule K-1 as their percentage share of the tax withheld from Utah mineral production payments.

(d) A corporation or individual taxpayer filing on a fiscal year ending other than December 31, must claim a credit for the withholding tax shown on Form TC-675R on the corporation franchise or individual income tax return required to be filed during the year following the December closing period of the Form TC-675R.

(7) The return prescribed by the Tax Commission for reporting the information specified in Section 59-6-103 may be obtained from the Tax Commission.

(8) If the producer, operator, or first purchaser fails to withhold the tax required under Section 59-6-102, and thereafter, the income subject to withholding is reported, and the resulting tax is paid by the recipient, any tax required to be withheld shall not be collected from the producer, operator, or first purchaser. However, the producer, operator, or first purchaser shall remain subject to penalties and interest on the total amount of taxes that should have been withheld.

KEY

taxation, mineral resources, withholding tax

Date of Enactment or Last Substantive Amendment

August 25, 2011

Notice of Continuation

November 10, 2016

Authorizing, Implemented, or Interpreted Law

59-6-101; through; 59-6-104


Additional Information

Contact

For questions regarding the content or application of rules under Title R865, please contact the promulgating agency (Tax Commission, Auditing). A list of agencies with links to their homepages is available at http://www.utah.gov/government/agencylist.html or from http://www.rules.utah.gov/contact/agencycontacts.htm.