Oil and Gas Production Taxes 

There are five taxes that are imposed based on the taxable value of oil, natural gas, liquid hydrocarbons, carbon dioxide, helium and other non-hydrocarbon gases (“products”) severed in New Mexico. In addition, the oil and gas conservation tax applies to uranium, coal and geothermal energy. In general, the taxable value of products is the actual price of the product at the production unit less royalties paid the United States, the State of New Mexico or an Indian tribe or pueblo, and less the reasonable expense of trucking the product from the production unit to the first place of market.

Oil and Gas Severance Tax - The tax rate is a percentage of the taxable value of the products as determined by Section 7-29-4.1 NMSA 1978.

Oil and Gas Conservation Tax - The tax rate is a percentage of the taxable value of products as determined by Section 7-30-4.1 NMSA 1978.

Oil and Gas Emergency School Tax - This is a privilege tax on the business of every person severing oil and other liquid hydrocarbons, carbon dioxide, helium and natural gas in New Mexico. The rate is based on the products’ taxable value as determined under Section 7-31-4.1 NMSA 1978.

Oil and Gas Ad Valorem Production Tax - This is an ad valorem tax on the assessed value of products severed and sold from each production unit. The assessed value is determined by applying the uniform assessment ratio to the taxable value of products. The tax is governed by Section 7-32-1 et seq. NMSA 1978.

Returns and payments of the above taxes are due on or before the 25th day of the second month following the month of production.

Oil and Gas Production Equipment Ad Valorem Tax – This is an ad valorem tax on equipment used in production of oil, natural gas, carbon dioxide and non-hydrocarbon gas. The tax is on the assessed value of the equipment. The assessed value of the equipment is a percentage of its value as established under the Ad Valorem Production Tax multiplied by the uniform assessment ratio.

This tax is due on or before November 30 each year.

Contact Information
New Mexico Taxation and Revenue Department
P.O. Box 2308
Santa Fe, NM 87504-2308 

For assistance, call (505) 827-0806


Links

E-File Oil and Gas Production Taxes at the ONGARD Service Center Web Site.
Who Must Register?
Forms 
Statutory References: Look for Sections 7-29, 7-30, 7-31, 7-32 NMSA 1978 in the New Mexico State Statutes.

Frequently Asked Questions

Q. Where can I find the statutory explanation of severance tax?

Answer:

Q. What is the purpose of the oil and gas severance tax?

Answer:
It taxes all products severed and sold in New Mexico.

Q. On what is the oil and gas severance tax imposed?

Answer:
The tax is imposed on the taxable value of the product.

Q. What is the oil and gas severance tax rate?

Answer:
On all products, the tax rate is three and three-fourths percent (3.75%) of the taxable value.

Q. Are there any tax incentives related to the oil and gas severance tax program?

Answer:
Tax-incentive rates do exist per statute but may or may not be in effect. Tax incentives are included within the Enhanced Oil Recovery Act (Chapter 7, Article 29A) and the Natural Gas and Crude Oil Production Incentives Act (Chapter 7, Article 29B) Please contact the Oil and Gas Bureau  for further information and applicability.
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