Oil and gas tax compliance

The oil and gas industry faces many complex tax issues:  

• Severance taxes are charged by each state for extracting non-renewable resources, but each has its own rates and regulations. It’s a challenge for companies operating in multiple states to comply with all the laws.  
• The Depletion Allowance allows producers to deduct a percentage of their earnings based on how much of their product's reserves are being used up. However, determining the correct allowance can be difficult due to strict rules.  
• The depreciation of expensive equipment like drilling rigs and pipelines, must also be accounted for adding further complexity.
• International taxation and transfer pricing pose another set of difficulties for oil and gas tax compliance. Many oil and gas companies operate globally, which means complex international tax. Transfer pricing requires determining appropriate prices for transactions between different parts of the same company. Businesses must adhere to the tax laws of each country involved and there are challenges related to double taxation and tax treaties between countries, adding more complexity.

Overcoming oil and gas tax issues and reaching compliance means implementing robust systems to ensure accuracy in tax determination and reporting.

Vertex is a powerful tax calculation engine addressing oil and gas tax issues and featuring:

• Automated tax content for the unique needs of upstream, midstream, and downstream transactions in the U.S. oil and gas industry
• Improved situs determination for oil rigs, wells, and other equipment without a traditional street address, convert latitude and longitude coordinates to a Tax Area ID for improved tax accuracy and calculation  
• The tax function will become more agile to support changes in the energy market while proactively reducing risk and lowering costs.

Automating sales and use tax for oil and gas businesses

In the oil and gas industry, success revolves around accurately pinpointing the location of precious natural resources in vast geographic expanses. For tax professionals, this means increased challenges and complexity. From complicated situs rules, definitions, determinations, and tax categories, to overlapping jurisdictions, and fluctuating legal interpretations and precedents the complexity is continually evolving. Tax teams must also contend with resource limitations and, in many instances, data management challenges associated with legacy technology systems.

Vertex offers flexible and robust sales and use tax automation software to support both procurement and sales transactions for energy companies, addressing the unique tax compliance challenges within upstream, midstream, and downstream oil and gas sectors.  

Vertex O Series can help tax teams thrive in their ongoing showdown against oil and gas tax compliance and complexity. Implementing Vertex results in process and efficiency improvements, financial benefits via tax minimisation and or recovery, and improved cashflow.  

Webinar: oil and gas tax compliance using sales and use tax automation software

Our sales and use tax automation for oil and gas on-demand webinar features a detailed discussion of the key sales and use tax challenges and issues facing oil and gas businesses now and how automation can help meet the challenge and support compliance.