For the following example, we updated the tax rate on the Tax Code to 0.04000000. If this rate applies to all properties using this code, then adjust the tax percentage. If the adjusted rate applies to only one property, then usually a new tax code is set up and assigned to that property.

Correcting severance tax needs to be a property level Revenue Distribution Correction.  If you have multiple products on a lease, you want to specify the product. Generally, one can also specify the run dates (production date). You may not need to correct all run dates.

Select the entry to correct. This entry will show the 100% net number for the entry.

On the next screen, check the option to have the system recalculate the new severance tax entries. If the check box is not visible, the system did not generate the severance tax entries. Proceed and allow the system to generate the severance tax amounts.

Once the correction finishes, Pak Accounting makes a reversing entry in the gross sales, tax, and other deduct and revenue offset accounts. The new corrected calculation of gross, severance tax liability account, and suspense will post to the respective GL accounts.

Since the new entry has no severance tax entry to the revenue tax account, the cycle will calculate the severance tax at the corrected rate or the property’s new tax code rate.

Looking at the gross account, a new revenue entry has been created so that severance tax can be recalculated through the next distribution cycle:

Begin a Revenue Cycle. The preview page from the Extract Entries screen will show the calculated severance tax amount. Once the cycle is complete, the new entries will be available in View/Trend:

Should a Revenue/Billing cycle run without a severance tax code added to a property, it is possible to add a tax code after the fact. The system will look at the associated revenue tax accounts. If there are no entries for that production month, then the system will calculate the entries needed for that property, even after processing the gross sales for that production month through a cycle.

Using a blank effective date will set the Tax Code to the beginning of production. If this property has several untaxed production months, then run a correction for the range of production months needed.

After adding the Tax Code to the property, run a Revenue Distribution Correction for the production months that had no severance tax entries. Notice that as the correction is made, the omit box is not available. This is because system did not originally calculate the severance tax since the property did not have a Tax Code applied for that production date:

After creating a correction, run a Correction Cycle. The new severance tax entry will appear in the Extract Entries preview as follows:

The Office Copy will also show the newly created severance tax amount:

Once the cycle updates, the General Ledger account for the Oil Production Tax will show the entry.

If a property has an approved lower tax rate, but was originally charged at the normal rate, first make sure Severance Tax Codes in Revenue/Billing Company Maintenance reflects the lower rate.

Next, make sure to apply the new tax code to the property with the correct effective date.

Once the rates are established and the correct tax code is on the property, a Revenue Distribution Correction is needed.

This will be a property level correction for the 04/2023 production date. Locate the entry to process.

Remember to check the option “Omit system generated Severance Tax Entries: (have system recalculate during next distribution)”.

A correcting entry will be visible in View/Trend:

Run a Correction Only cycle. The Extract Entries screen will list the correct calculated Severance Tax.

When the cycle updates, the new tax entry is posted to the Revenue Gas tax account.