Do I have to pay state income taxes on producing minerals in the state where the minerals are located?
I hear this question quite often and the answer to the question is yes! At least that is yes provided that the state that the production is located in has a state income tax. States like Wyoming for instance have no state income tax so if the production is in that state there is no state income tax on the production. California, for example has a huge state income tax so it is a rather large additional burden on your royalty income. Colorado even taxes non-producing minerals even though the tax is quite small.
Taxes for out of state minerals can vary greatly so if you have production, my advice is that you check with a tax professional and follow their advice. For more FAQs about minerals and taxes, visit Western Mineral Consultants.