(a) There is levied a severance tax on all gas and oil removed from the ground in Tennessee. The measure of the tax for such gas and oil shall be three percent (3%) of the sale price of such gas and oil. Every person actually engaged in severing oil or gas, or actually operating oil or gas property under contracts or agreements requiring direct payments to the owners of any royalty interest, excess royalty or working interest, either in money or otherwise, shall be liable for the tax imposed by this section and shall, prior to making any such payments, withhold from any quantity or amount due the amount of tax due pursuant to this section.
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Terms Used In Tennessee Code 60-1-301

  • Gas: means all natural gas and all other fluid hydrocarbons not defined as oil, including condensate because it originally was in a gaseous phase in the reservoir. See Tennessee Code 60-1-101
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Oil: means crude petroleum that was originally in an oil phase in the reservoir. See Tennessee Code 60-1-101
  • Owner: means the person who has the right to drill into and to produce from any pool, and to appropriate the production for such person or others. See Tennessee Code 60-1-101
  • Person: means any natural person, corporation, association, partnership, receiver, trustee, guardian, executor, administrator, fiduciary or representative of any kind. See Tennessee Code 60-1-101
  • Property: includes both personal and real property. See Tennessee Code 1-3-105
  • State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
(b) The tax shall be levied for the use and benefit of the state, as well as the county governments and one third (1/3) of all revenues collected from the tax shall be allocated to the county which was the site of the wellhead for that gas or oil. The remaining two thirds (2/3) of such revenues shall be deposited to the credit of the state treasurer as a part of the general funds of the state.
(c) No other tax shall be imposed on such gas and oil by the state, counties or any other political subdivision of the state; provided, however, that:

(1) Free gas used by the property owner or tenant under the terms of the lease, unless it be in lieu of cash payment; and
(2) Gas which has been injected into the ground for underground storage and thereafter withdrawn shall not be subject to this, or any taxation.
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