California passes new lumber tax

A proposed 1% additional sales tax on selected lumber products was signed into California law by Gov. Gerry Brown on Sept. 11, resulting in a transfer of fees from the timber industry to retail lumber sellers. 

The new tax will be used to fund the regulatory activities of four state agencies involved in reviewing and monitoring timber harvest plans that are required for all private and public timber cutting. Currently, those costs are paid by the landowners and from state general fund expenditures.

The new tax originated with legislation supported by the California timber industry, which wanted the fees to be passed on to the end user to help level the playing field with timber producers outside California. These timber producers are not subject to California’s heavy regulations, it argued, and thus enjoy a competitive advantage. The new California law will also lessen wildfire liability for landowners, another cost saving. 

Those who opposed the legislation -- a group that included Home Depot, the National Lumber & Building Material Dealers Association (NLBMDA), and the West Coast Lumber & Building Materials Association (formerly the Lumber Association of California and Nevada or LACN) -- believed that the timber industry should not shift the fees to its own customers. 

“Those who are being regulated should pay their own fees and build that into the cost of production,” said Ken Dunham, executive director of the West Coast Lumber & Building Materials Association. Dunham also wondered how lumber retailers build a framework to collect taxes on lumber and engineered wood products by Jan. 1, 2013. “Sales tax in California does not break out lumber,” Dunham told Home Channel News. “The [independent lumberyards] say there is no way they can have the software in place in time.” 

Lastly, there is the issue of exactly what “lumber products” and “engineered wood products” will be taxed. The California Board of Forestry & Fire Protection is scheduled to discuss this issue at a Sept. 12 hearing.

The new law does contain an unusual provision that promises to reimburse the retailer for costs associated with the costs of collection of the assessment. The amount and process will be determined by the State Board of Equalization. Dunham remained skeptical. “When is the check coming?” he asked.