Pump it up: 3 ways technology and automation can simplify oil and gas property taxes

Innovation is a big part of oil and gas company success. When it comes to discovering, pumping or mining, and distributing energy, the top companies are incredibly savvy about implementing new technologies.

However, as with nearly everything, technology adoption was largely impacted by COVID-19. Three years later, many companies are still feeling the effects of acute global disruption. But abandoning or procrastinating plans for digital transformation can create long-term productivity gaps.

And it isn’t just pumping, mining, and logistical operations. Adopting technology solutions can create efficiencies at corporate offices as well. For example, property tax and valuation processes are tedious, complex, and error prone. Although human judgment plays a key role in compliance and valuation, many of the tasks are largely math and data driven, making them prime candidates for automation.

So, what can you do with a technology solution? Here are a few examples:

  1. Automate property tax data management
  2. File and pay oil and gas tax bills more easily
  3. Track and file property tax returns on time

1. Automate property tax data management

The right property tax solution serves as a central place to store and track data points, like aging asset values and pipeline data such as throughput, volume, status, quantity, and material. With Avalara Property Tax, you can easily manage well data and lease data with the click of a button, and auto-fill return forms with this information too.

But what about getting your data into the system in the first place? After all, entering tax data from valuation and appeal notices and tax bills is time-consuming, especially for large, multistate corporations that are inundated with property tax documentation.

Automation software can quickly scan the relevant documents and extract key data points, significantly reducing the time your team needs to spend on data entry. With Avalara Property Tax, extraction occurs across three layers:

  • Optical character recognition (OCR) 
    Software uses robust OCR technology to convert scanned images to readable text.
  • Machine learning
    Advanced machine learning identifies and extracts strategic content from converted text.
  • Crowdsourcing
    Data that requires additional interpretation and validation is completed with trained, trusted crowd workers to ensure a high degree of accuracy.

2. File and pay oil and gas tax bills more easily

Allocating taxes and royalties
Oil and gas taxation usually involves multiple parties, including the working interest owners (operators) and the royalty owners, or land owners. Everyone who has an interest in the land being worked must be tracked, along with their portions of interest. In some cases, these groups can number in the hundreds. 

Working interest owners are responsible for maintaining the proportional ownership information, and must send tax bills, statements, and other information to owners. When companies have both a working interest and royalty interests, managing property tax documents quickly becomes overwhelming.

Automation allows you to more easily monitor the correct royalty allocations, network interest, and royalty interest for wells, making it easy to allocate tax amounts for financial accounting. Avalara Property Tax tracks the various oil and gas interests to simplify assessment and tax bill management.

Mergers and acquisitions
When one oil and gas company acquires or merges with another, it takes time to update mailing addresses and company names. These administrative delays can impact the timely receipt of tax documents.

A sound technology solution makes it easy to find missing tax bills and pay them on time.

Making tax payments
The more properties you have, the more difficult it becomes to pay tax bills on time. Even if you do manage to hit your deadlines, you may not have the resources to implement a payment strategy that takes advantage of payment discounts.

Avalara Property Tax integrates with your accounts payable system to automate bill paying so you never miss a payment. It can also help you determine when to pay which bills so you can qualify for early and on-time payment discounts. 

Once your bills are paid, they can be linked to the relevant supporting documents stored in the system for future reference.

Track and file property tax returns on time

Tracking tax data
Each oil and gas property is required to have an assessor account for filing personal property tax returns, receiving assessments, or protesting valuation. In addition, properties must have a collector account for managing bills. 

An assessor’s valuation of a well may be $10 million, but you could receive a tax bill on that valuation from a collector in a different county. Keeping track of the information associated with one well is manageable. As the number of wells adds up, it’s easy to see how data can be mismanaged, resulting in tax filing errors.

A solution like Avalara Property Tax can track all your lease numbers, well numbers, cost centers, and general ledgers, as well as production data. 

Completing return forms
Locating and completing the appropriate return forms is a challenge that grows exponentially with the expansion of your business. Every state operates differently, and some have hundreds of jurisdictions. Tax rates vary widely and because each jurisdiction has its own unique requirements and forms, it takes time to track down the latest forms and fill them out, especially when you have numerous accounts.

Avalara Property Tax includes updated versions of oil and gas well and pipeline return forms and well equipment forms for both the United States and Canada. And thanks to automation, it’s capable of quickly creating thousands of return packages based on the unique tax data you have in the system.

Ready to make property tax technology work for your oil and gas business?

If you’re looking for a way to improve your current property tax process, contact us or schedule a demo of Avalara Property Tax

We’ll help you take advantage of automation, machine learning, and our property tax expertise so you can spend less time on taxes and more time on growing your business.

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