Taxes

You can handle severance taxes in two ways within SherWare.

Purchaser withholds tax, and is sending you a check for net revenue:
In the Well Information window, on the Taxes tab, check the option that Purchaser W/H Oil Tax1 (or Gas, as the case may be). Then, when you enter the revenue in the Production Receipt window, enter a separate detail line for the tax amount withheld. Choose the tax type from the Type pull-down menu when entering that amount. The dollar amount will be negative since it’s a deduction from the revenue. When finished you should have a line of positive revenue for the total revenue before tax, and then a line of negative tax for the amount of tax withheld by the purchaser. Your Total Amount on the Production Receipt should match the amount of the check or wire transfer you received. If the purchaser is paying you for multiple wells on one check, enter all wells on the same Production Receipt.

You as the operator are responsible for withholding tax on well revenue:
Under the Maintain menu, open the Well Product Tax Table window. Click the New button on the toolbar to create a new tax table. Use this table to enter the rate at which taxes should be calculated. For example: if the oil severance tax is 5.25%, enter 5.25 in the Oil Tax field under Tax Calculation 1. You can modify the name of the tax, which will change how that tax appears on the Owner Statements. Then, choose whether the tax should be calculated on Amount or Percentage. If you choose Amount, the system will calculate the tax based on the number of units you enter (such as BBLs, or MCFs). If you choose Percentage, the system will calculate the tax based on the dollar amount of revenue entered. Click Save the toolbar after entering the tax rates in the tax table.

After the Well Product Tax Table is created, go to the Well Information window. On the first tab, Well Info, choose the Tax Table in the lower middle area of the tab from the pull-down menu. If the well should not be associated with a tax table, leave this blank. After the table is selected from the pull-down menu, click Save on the toolbar. Then go to the Taxes tab. Make sure that the option for Purchaser W/H Tax is not checked for the rates that you have set up in the Tax Table. On the Taxes tab, you will see four taxes for oil, gas and other. This corresponds directly to the Well Product Tax Table, which allows you four separate tax calculations. Therefore, if you have set up Tax Calculation 1 in the tax table to calculate Oil Tax, then be sure that the option Purchaser W/H Oil Tax 1 is not selected on the Taxes tab. From now on, the system will calculate the tax automatically based on the revenue that you enter for the well.

The liability for you to pay (the calculated tax based on the amounts withheld using the Well Product Tax Table) will be posted to the accounts selected for Product Tax Payable 1-4 in the Rev. Dist/JIB Posting section of the Preferences. If you do not have an account selected here, then you need to select a Liability account here for posting your taxes payable to the state or other entity. After the run has posted and you are ready to pay those taxes to the state, you can create a check (manual) for the amount to be paid, and then offset it to the same liability account used for posting the Product Tax Payable.

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Due to the complex nature of taxes multiple windows have an impact on how taxes calculate.

Well Products Tax Table

A tax table should be set up for taxes withheld by the operator and are calculated the same way for multiple wells. Severance taxes are a common tax to set up with this table. After you setup the tax table you will assign it to all wells that it is applicable for in the Well Information window. The tax calculations set up in this table will then be applied to all owners in the well unless marked otherwise in the Well or Owner Information windows.

You can set up multiple tax tables. If you have wells in different states it is a good idea to name each tax table as its corresponding state.

Well Information window

Enter the tax table to use for the well in the Well Info tab.
The following options are listed in the taxes tab: