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 January 1, 2020, please see the codification segue page.

NOTE TO RULEFILING AGENCIES: Use the RTF version for submitting rule changes.

R865. Tax Commission, Auditing.

Rule R865-15O. Oil and Gas Tax.

As in effect on January 1, 2020

Table of Contents

R865-15O-1. Oil and Gas Severance Tax Pursuant to Utah Code Ann. Sections 59-5-102 and 59-5-104.

(1) Definitions

(a) "Person" means any individual, partnership, company, joint stock company, association, receiver, trustee, executor, administrator, guardian, fiduciary agent or other representative of any kind.

(b) "Operator" means any person engaged in the business of operating oil or gas wells, whether as a working interest owner, an independent contractor, or otherwise. An operator who is also a working interest owner shall be referred to as a producer.

(2) For purposes of filing the statement required under Section 59-5-104, if working interest owners engage in a unitization agreement or other business arrangement in which someone other than themselves are conducting the operations of an oil or gas lease,:

(a) Each working interest owner who receives a share of production in kind must file the statement required in Section 59-5-104. The operator of the well must inform the commission, on forms provided by the commission, of any party taking production in kind.

(b) A working interest owner may enter into an agreement with the lease operator requiring the lease operator to distribute the proceeds from the purchase or sale of oil and gas production to the working interest owners and any other parties claiming an interest through them.

(c) Working interest owners who are parties to the unitization agreement or other business arrangement may designate the operator as the person who shall file the statement on behalf of all working interest owners. For these arrangements to be recognized by this state, the designated operator must also be empowered to deduct, from the share of each interest owner, the tax imposed under Title 59, Chapter 5, Part 1.

(d) If a designated operator fails to file the tax return, or files a false, fraudulent, or otherwise inaccurate statement, or fails to pay the full amount of the tax due, the primary and ultimate liability for the statement and the tax shall rest solely upon the producers or interest owners.

(i) If the designated operator fails to file and pay the tax due, the state shall hold a hearing and is no longer bound by any arrangement between the parties.

(ii) Nothing in Subsections (2)(b) through (d) shall deprive the commission of the authority to require each working interest owner to file the required statement where the commission determines that a jeopardy situation exists.

(3) A person entering into an agreement during the taxable year shall file a return covering independent production prior to entering the agreement.

R865-15O-2. Stripper Well Exemption Pursuant to Utah Code Ann. Sections 59-5-101 and 59-5-102.

A. The annual stripper well exemption applies to producing oil wells and producing gas wells. The exemption cannot be applied to one product but not to another on the same well.

1. If a well is classified as an oil well and has associated gas production, the stripper classification is measured on the basis of oil production only.

2. If an oil well does not qualify as a stripper well on the basis of oil production, all production is taxable regardless of the amount of associated gas produced.

B. For purposes of applying the stripper exemption to oil wells, the twelve consecutive month period need not fall within a calendar year. For example, a well may produce above stripper production up until March of a year and then fall to stripper production beginning in April of the same year. Using April 1 as the beginning measuring point for average daily production, the well may qualify as a stripper from April 1 of the first year to March 31 of the following year. This means that for the first year, January through March production would be subject to the tax, and the next nine months of production would be exempt. The remaining three months of the exempt period falls within the second year.

C. The average daily production, for purposes of determining if an oil well is a stripper well, is based on the maximum rate of flow for the days the well actually produces. Days for which the well is shut in, or not otherwise producing, may not be included in determining the average daily production.

D. The average daily production, for purposes of determining if a gas well is a stripper well, shall be based on the maximum efficient rate of flow for the days the well actually produces. Days for which the well is shut in, or not otherwise producing, may not be included in determining average daily production.

1. If a gas well qualifies as a stripper well, the exemption begins on the first day of the 90-day measuring period and continues for the next 12 months. The annual exemption applies regardless of daily production following the 90-day measuring period.


taxation, petroleum, petroleum industries

Date of Enactment or Last Substantive Amendment

October 13, 2011

Notice of Continuation

November 10, 2016

Authorizing, Implemented, or Interpreted Law

59-5-101; through; 59-5-115

Additional Information


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.