Timber Yield Tax- Frequently Asked Questions (FAQs)

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ABOUT THE TIMBER YIELD TAX

What is the timber yield tax?

Prior to 1976, timber and timberlands were subject to an annual ad valorem property tax administered by each individual county assessor. The Timber Yield Tax Law, passed in 1976 replaced the ad valorem tax on standing timber with a yield tax on the value of harvested timber. While the timber yield tax is a state tax deferred until the time of harvest, the taxation of timberland is still part of the local annual property tax that is administered by each county assessor.

What is the timber yield tax used for?

Although the tax is administered and collected by the State Board of Equalization (BOE), the revenue, after state administrative costs, is allocated back to the county of harvest, whereby the county auditor distributes the funds among the jurisdictions within the county to replace the property taxes that had previously been collected under the ad valorem tax system.

DEFINITIONS

What does the term Timber Owner mean?

Simply put, the timber owner is who will be paying the yield tax. Generally, this is the timberland owner, but it may also be someone else. You are considered a timber owner if you own the trees immediately prior to their being felled or harvested, or you are the first person or entity (not exempt from property tax) to acquire legal title or beneficial rights to the timber after felling when the trees were owned by a state, federal, or other tax-exempt entity. Examples of such agencies are the U.S. Forest Service (USFS) and Bureau of Land Management (BLM). A timber owner can be an individual, government agency, or legal entity such as a partnership, limited liability company (LLC), or corporation.

What does the term timber harvest operation or operation mean?

Both terms are synonymous with one another and they both refer to the harvesting of timber on private land under the jurisdiction of the California Department of Forestry and Fire Protection (Cal Fire) or, to a timber harvest on public land with a timber sale contract between a public agency and a purchaser.

What does the term Immediate Harvest Value mean?

The amount the timber would sell for on the stump at a voluntary sale made in the ordinary course of business for purposes of immediate harvest.

What is does the term Stumpage Value mean?

The value of the trees standing in the woods with access and all permits in place.

What is a Timber Value Area (TVA)?

A Timber Value Area is a geographic area of the state having common timber growing, harvesting, and marketing conditions, as defined by the BOE.

What does Size Quality or Size Code mean?

The quality of the wood in a log affects its value. Generally, trees that are larger, older, and slower growing yield larger diameter logs that have better quality and therefore, have more value than logs from younger, smaller, faster growing trees. This characteristic is referred to as Size Quality. Size Codes are used to report the size quality of the species being reported. There are three size codes, with Size Code 1 being the highest value and Size Code 3 the lowest value.

Why do some species have Size Codes and some do not?

Not all species have size codes because the value of the wood from every species is not always related to its quality. For example, specialty products which are produced from redwood or pine have value that is directly related to wood quality. Whereas, the value of construction grade lumber produced from fir, hemlock and spruce is not directly related to wood quality. Redwood, Pine, Douglas-fir and Port-Orford Cedar have size codes and Hem/fir and cedar do not.

What are the different types of Logging Systems used to harvest timber?

The logging system is the method used to move the logs from the stump to a truck or storage area. Logging codes and systems are as follows: (T) Tractor – pulling logs behind a tracked, wheeled, or rubber-tired tractor or skidder, or using a winch attached to a tractor. (S) High-lead cable and skyline – dragging logs or lifting logs off the ground with cables attached to poles or trees. (H) Helicopter – lifting and flying logs to a landing for loading on to trucks.

What do the values in Tables G and S in the value schedules represent?

The harvest values by species in each timber value area in Tables G and S are determined by analysis of market transactions in your area by BOE timber appraisers. The values represent the immediate harvest value of standing timber with all permits and access in place. These values are adjusted to the total volume reported in a quarter being greater than 300 MBF/, more than 5 MBF/acre, and an all tractor logging system.

COLLECTING THE TAX

Who must pay the yield tax?

The timber owner has the responsibility for filing timber yield tax returns and paying any tax due. This is true even if you made a verbal or written agreement with another person stating that they will pay the tax. If you transfer ownership of the timber to a logger or to another person before the trees were cut, you are no longer the timber owner. However, for this to apply you must have a written contract that specifically transfers ownership of the trees to the other party before they are cut down.

Why do I have to pay tax on trees that I harvest from land that I already own?

In 1976 when the Timber Yield Tax Law was passed, the value of the timber was removed as a taxable component of the land value. Prior to 1976 both the land and timber were subject to an annual ad valorem property tax. Today, the land value continues to be taxed every year by the county assessor, while timber is taxed only when it is harvested.

I don't understand how to prepare a Timber Tax Return. My county assessor sends me a property tax bill each year that tells me how much my property taxes are. If the yield tax is a property tax, why can't the BOE just send me a bill that tells me how much yield tax I owe?

The timber yield tax is a self-monitoring, self-reporting tax and it is therefore incumbent on each timber owner with an active yield tax account to track the volume harvested from their operation, and to file quarterly Timber Tax Returns for as long as they remain registered with the BOE. You must file quarterly returns even if you do not harvest any timber during a reporting period.

What does self-reporting tax mean?

The timber yield tax is a self-monitoring, self-reporting tax, much like federal and state income taxes. The different timber harvesting permits obtained from either state or federal regulatory agencies are valid for varying periods of time, depending on the type of permit you obtain. The timber owner is therefore the only one that knows when their harvesting operations will begin and end. Due to the nature of the regulatory process in California, it is incumbent on every timber owner in the state to monitor their own timber harvesting and to obtain bi-monthly log scaling summaries from the processing facilities the logs are delivered to in order to complete the tax return. You will automatically be sent timber tax return forms, harvest value schedules, and instructions on how to complete the returns. You will remain registered with the BOE and will be required to file timber tax returns until you notify us, in writing that you no longer intend to harvest timber.

How do I obtain the bi-monthly log scaling summaries that I need to prepare my tax return?

Contact the processing facility (sawmill), your Licensed Timber Operator (LTO), or Registered Professional Forester (RPF) for copies of your log scaling summaries or log load delivery receipts. This may also be referred to as an Owner Yield Tax Summary.

Why do I have to use the BOE timber harvest values? Why can't I just pay the yield tax based on the amount of money I received from the sawmill, or my logger?

The yield tax law requires that the tax you pay is based on values established by the state for various timber products, as determined by analysis of market transactions in your area. You do not pay the yield tax based on the amount of money you received for your trees or wood products. The BOE issues schedules of timber harvest values twice each year.

Am I required to submit my log scaling summaries or any other supporting documentation along with my Harvest Report and Tax Return?

No. However, you must maintain adequate and complete records that will back up your timber yield tax returns, and make them available to the BOE upon request.

I have an exemption harvesting permit with Cal Fire that allows me to harvest my timber. If I am exempt, why do I have to pay yield tax?

You owe the tax even though you may have filed an exemption form with the California Department of Forestry and Fire Protection (Cal Fire). Such "exemptions" refer only to state timber harvest regulations and do not affect your tax liability.

Are any small scale, low value harvests exempt from paying tax?

Yes. You do not owe the timber yield tax if your timber harvest has an immediate harvest value, according to BOE value schedules, of $3,000 or less within a quarter.

How do I get registered with a timber yield tax account from the BOE?

The BOE receives notice of timber harvest permits filed with Cal Fire and of federal government agency timber harvest contracts. If you filed harvest forms with Cal Fire or purchased a timber contract from federal agencies such as the USFS or BLM, the BOE's Timber Tax Section will establish a timber yield tax account for you and assign an account number.

What is the yield tax rate?

The timber yield tax rate is currently 2.9%. The amount of tax due is dependent upon the volume of timber harvested, the BOE established value for the species harvested, and the tax rate. To compute your tax liability, simply multiply the net volume, by the species value, by 0.029.

When does the yield tax apply?

The timber yield tax applies when your trees are cut down and/or moved to any storage or wood processing area, such as a sawmill. If you use the logs yourself, the tax applies when the timber is moved to a storage area somewhere else on your property or when they are put into use, whichever occurs first.

When is the timber yield tax due?

The tax is paid on a quarterly basis and is due on or before the last day of the month following the quarter in which the scaling date for the timber harvested occurs. For example, if the timber was scaled between January 1 and March 31 the taxes would be due on or before April 30.

I keep receiving quarterly tax returns in the mail, but I haven't done any harvesting yet. What should I do?

You must file quarterly timber tax returns as long as you remain registered with the BOE, even if you do not harvest any timber during a reporting period. A check box (Item 13) at the bottom of the Timber Tax Return allows you to indicate that you did not harvest timber during the period.

How long should I keep my timber tax account open?

You will continue to receive quarterly tax returns for as long as your account remains open. A check box on the timber tax return form allows you to indicate when you have no further timber harvests to report. If you check Box Item 12 at the bottom of the Timber Tax Return, your account will be closed and forms will no longer be sent to you. You can reregister at any time.

WHO IS LIABLE FOR THE TAX

Do I owe any tax if I give the trees away and did not receive any money for them?

Yes. The timber yield tax applies to the harvest of trees, regardless of the number of trees removed, even if you give the trees away.

If I trade my timber for services rendered by my logger, such as for site clearing or construction of a house pad, do I still have to pay the tax?

Yes. Trading timber for services rendered constitutes bartering and the timber yield tax applies. You have traded a usable commodity with a value in exchange for work performed.

Am I responsible for the yield tax if I use the trees I harvest from my property for my own personal use?

Yes. The timber yield tax applies to the harvest of trees even if you use them yourself.

Am I responsible for the yield tax if I cut trees down on my property and they are left lying on the ground, unused?

No. You do not owe the timber yield tax if the trees are left lying on the ground, unused.

Am I responsible for the yield tax if I transfer ownership of my timber to a logger or to another person before the trees were cut?

No. If you transfer ownership of the timber to a logger or to another person before the trees were cut, the timber is no longer your property and therefore, you are no longer the timber owner. For this to apply, you must have a written contract that specifically transfers ownership of the trees to the other party before they are cut down. Please note: Most harvest contracts for felling and marketing timber do not transfer ownership of the timber before harvest.

What if I belong to a tax-exempt organization that does not pay property taxes, do I have to pay the yield tax?

No. You do not owe the timber yield tax if you are a tax-exempt organization that does not pay property taxes on the land where the trees are growing.

Who pays the yield tax if I buy logs or standing timber from an organization that does not pay property taxes, or from a tax exempt state or federal agency, such as the USFS or BLM?

The first person or entity who owns timber immediately prior to felling or, that acquires either the legal title or beneficial title to timber after it has been felled from land owned by a federal agency or, any other person or agency or entity exempt from property taxation is the timber owner and is thereby liable for the yield tax. The yield tax is not applicable to timber owned by Indian tribes, nor to any purchasers of that timber or logs derived therefrom.

Am I responsible for paying income tax or any other taxes on the proceeds from my timber harvest?

The timber yield tax is a property tax based on the value of your standing timber. Other taxes, including sales tax and state and federal income tax, may apply to your operation. You should contact a tax specialist for advice on how to comply with other possible tax requirements.

Where can I find more information on the yield tax and how to prepare a Harvest Report and Tax Return?

Detailed information on the timber yield tax and on timber tax reporting is available in BOE Publication 87, "Guide to the California Timber Yield Tax" and in Publication 43, "California Timber Yield Tax Law."

HARVEST REPORT AND TAX RETURN

How do I calculate Average Volume per Log? (Column 14 of the Harvest Report)

You will need your log scaling summary or Owner Yield Tax Summary from the processing facility your logs were delivered to in order to make this calculation. The total lineal feet by species harvested in the quarter, is divided by 16. This is the number of 16 foot logs for the species. The total net species volume (in MBF) harvested in the quarter is then divided by the number of 16 foot logs. This result is then multiplied by 1000 to compute the average board foot volume per 16 foot log (AV/L) for the species. (e.g. [net MBF volume ÷ (net lineal feet ÷ 16)] x 1000 = AV/L.

How do I determine the species Size Code?

A: After calculating the average volume per 16 foot log (AV/L) for the species, use the following AV/L categories to determine the Size Code:

Volume per Log
Size Code
Under 150 B.F. /Log
3
150 – 300 B.F. /Log
2
Over 300 B.F. /Log
1

How do I know how many acres to report that are harvested on my quarterly tax return? (Item 10 of the Harvest Report)

Enter the actual total acres harvested on your operation during the quarter being reported. This may be all, or only a portion of the total number of acres listed on your harvesting permit. You may need to contact your logger or forester to assist you with determining the actual number of acres that logs were removed from during the quarter. The actual number of acres harvested in the quarter is needed in order to determine if the operation qualifies for the Low Volume per Acre Adjustment (Item 11B on the Timber Tax Harvest Report).

How are adjustments to the values in the schedules applied when preparing a tax return?

If the volume harvested in the quarter is < 25 MBF, deduct $150/MBF from the value in the table.
If the volume harvested in the quarter is < 100 MBF, deduct $100/MBF from the value in the table.
If the volume harvested in the quarter is < 300 MBF, deduct $50/MBF from the value in the table.
If the volume harvested in the quarter is < 5 MBF/acre, deduct $30/MBF from the value in the table.
If the timber harvested in the quarter was logged with a yarder/skyline logging system, deduct $60/MBF from the value in the table. If the timber harvested in the quarter was logged with a helicopter logging method, deduct $200/MBF from the value in the table.

When do I use a Modified Value Schedule instead of the regular Green or Salvage Tables?

Modified Value Schedules should only be used when reporting dead & dying timber that is a direct result of a large scale catastrophic event that has caused a significant material change in marketing conditions and timber values. Examples include large catastrophic wildfires, ice storms, blowdown, flood, disease, drought, and insect epidemics. The BOE produces modified schedules for these specific events.