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VideoSuccess Story: Turning Severance Tax Refunds into Real-Time Savings
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The Client
A Texas-based upstream oil and gas operator producing in the Permian Basin sought opportunities to improve its severance tax process. While the organization already relied on a third-party provider for monthly severance tax compliance, its leadership believed additional savings opportunities may have been overlooked.
The Challenge
The operator was paying more severance tax than necessary because its monthly filings did not include all eligible deductions related to marketing costs and natural gas sales. Historically, overpayments could be recovered through refund claims. But as refund processing times stretched from months to years, more cash remained tied up with the state, making that approach far less practical.
The operator needed a more proactive approach that would identify eligible deductions before returns were filed rather than relying on future refund claims.
The Process
Weaver’s state and local tax (SALT) team reviewed the company’s severance tax filings and monthly compliance process to determine whether additional savings opportunities existed.
The engagement began with a four-year lookback review to identify historical overpayments eligible for refund claims under Texas’ statute of limitations. At the same time, Weaver evaluated the client’s monthly filing methodology, reviewing marketing costs, purchaser agreements and internal expenses to determine whether additional allowable deductions were available.
Once the historical review was complete, Weaver’s SALT team began managing the client’s ongoing monthly severance tax compliance. Weaver then updated the client’s monthly filing process so eligible deductions were claimed before returns were filed instead of waiting to recover years later.
The Deliverables
Ultimately, the client no longer had to wait years to recover overpaid taxes. Weaver helped shift tax savings from a reactive refund strategy to proactive monthly tax optimization. The revised filing methodology generated approximately $70,000-$80,000 in severance tax savings each month, while historical refund claims remained in process with the state.
By claiming eligible deductions as returns were filed, the company retained more working capital and reduced the administrative effort associated with pursuing future refund claims.
Authored by Mayur Naik and Tanner Owens
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