SEVERANCE TAX -
LIABILITY OF COMMON PURCHASER

RAB-89-16. The Michigan Severance Tax Act, MCL 205.301, levies the tax on the producer, including both working and royalty interest owners. Section 3 of the Act, MCL 205.303, states that the common purchaser shall deduct the tax from the price paid to a producer. The Department will not excuse performance by the parties charged by law with the responsibility for reporting, withholding, or paying the tax, reference here being to the producer and common purchaser.

Should a party charged with responsibility for payment of the tax arrange or contract with others (i.e., a third-party processing plant owner) to effect payment of the tax, such responsible party shall not be relieved of liability in the event that the tax goes unpaid.

If the common purchaser does not make payment for the purchase to the producer but rather to a third party (i.e., a plant operator), the responsibility for withholding and payment of the tax to the Department is not removed. (See the Severance Tax Act, MCL 205.306, for interest and penalty provisions under the Act.)