DEFINITION of 'Gross Production Tax'
A state tax imposed on companies that generate revenues by depleting non-renewable resources. Such companies include producers of oil and gas, coal miners and miners of metals and minerals. Gross production taxes are normally introduced as a means of compensating the state for the pollution that miners emit.
Also known as severance tax.
BREAKING DOWN 'Gross Production Tax'
One method of calculating the gross production tax is as a percentage of gross value based on the average monthly product price. This tax is generally deductible from the company's federal tax. Some states may also charge an extraction tax on top of the gross production tax.