California lumber assessment

By Ken Dunham, Executive Director, West Coast Lumber & Building Material Association

With California’s controversial “lumber assessment” now being assessed on most lumber products sold in the state under so-called “emergency” regulations from the state’s tax collection agency, the State Board of Equalization (BOE), the next process for the state agency is to develop permanent rules including a permanent retailer set-up reimbursement.

The reimbursement language was contained in the legislation but the “emergency” rules passed by the BOE in October 2102 provided a token $250 per retail location. The BOE voted 3-2 on political party lines to approve the $250, with the two Republicans on the board voting against the low reimbursement.

The West Coast Lumber & Building Materials Association (WCLBMA) testified at the hearing that their research and survey data showed lumber retailers had an average set-up cost of more than $4,500 per location.  The association also requested an ongoing $1,500 per year to cover the costs of new products being added or deleted from the list of lumber items.

The BOE is expected to vote on a permanent reimbursement amount in May 2013.  WCLBMA has re-submitted updated data and survey results showing the average cost is closer to $5,400 per retail location.

The legislation providing for the one per cent assessment on a wide range of lumber products was pushed by Democratic Governor Jerry Brown and agreed to by California timber producers who claimed they were at a competitive disadvantage to out-of-state timber producers who have lower costs and fees paid to state agencies for timber management oversight and regulation in producing “timber harvest plans.”

The controversial legislation also contained language that claimed to limit legal damages to timber companies and others for “wildfire liability,” a contention disagreed with by many, including the U.S. Attorney’s office in Sacramento

The challenge for California lumber retailers is that this “assessment is significantly more complicated than increasing a sales tax in that it is imposed on only certain lumber and building products and not on others. This means lumber retailers have to reconfigure their computer systems to add the assessment to only the covered wood products.

An additional challenge is that the new law requires that this one per cent assessment be shown separately on the invoice, not shown with state or local sales taxes.

The manner in which the legislation was passed has been criticized by many involved in the process. Ken Dunham, Executive Director of the West Coast Lumber & Building Material Association, which represent independent lumber retailers,  said,  “This was passed in the last hour of the 2012 legislature, using a so-called ‘emergency’ rule that meant the bill could be rushed through with no public hearings and no chance of discussion.“

He also noted,” Closed door meetings and vote deals to get exactly the number needed to meet the two-thirds vote requirement were part of the final deal.”

Jon Coupal, president of the California-based Howard Jarvis Taxpayers Association, called the legislation “one of the sleaziest legislative deals I’ve ever seen, and I’ve seen a lot”.

Dunham noted, “While we certainly agree that the timber industry is over-regulated and there are valid issues that need resolution, simply giving the state more money from the general public and making the lumber retailers collect it is not the answer.”

“This is a bad deal the timber producers made with the governor to pass on regulation costs to the general public,” he added.

Dunham noted that every Democratic member of the state assembly and senate voted for the bill, under pressure from Democratic Governor Jerry Brown. They were joined by three Republicans, all of whom were out of their current positions at the end of the legislative session because of term limits, and were joined by a Republican-turned-Independent assembly member who had already lost an earlier 2012 primary election for San Diego mayor.

The concept of an additional assessment on timber producers to cover the cost of regulation by the State of California has been discussed by state government for several years. Private land owners in California are subject to some of the most difficult, expensive and over-reaching environmental rules in the nation. Nearby states have far less restrictive land use laws putting the California producers at a competitive disadvantage.

In the past, the costs of the state regulation have been part of state agency budgets and fees imposed on the timber producers.

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