Tax Guide for Timber Yield Tax
Industry Topics
Definitions
Timber
"Timber" means trees of any species maintained for eventual harvest for forest products purposes, whether planted or of natural growth, standing or down, including Christmas trees, on privately or publicly owned hand, but does not mean nursery stock.
Timber Owner
"Timber owner" means any person who owns timber immediately prior to felling or the first person who 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 under the Constitution or laws of the United States or under the Constitution or laws of the State of California.
"Timber owner" includes any person who owns or acquires legal title or beneficial title to downed timber in this state. It also includes the seller of timber located on land owned by that seller if the timber sales agreement, contract, or other document provides for the payment of the purchase price on the basis of actual timber volume scaled and does not contain a passage of title clause.
Simply put, the timber owner is responsible for 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.
Immediate Harvest Value
"Immediate harvest value" means the amount that each species or sub-classification of timber would sell for on the stump at a voluntary sale made in the ordinary course of business for purposes of immediate harvest.
Industry terms and meanings
Timber Harvest Operation or Operation
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.
Stumpage Value
The value of the trees standing in the woods with access and all permits in place.
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 CDTFA.
Size Quality or Size Code
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.
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.
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.
Harvest Values in Tables G and S of the CDTFA Harvest Values Schedule
The harvest values by species in each timber value area in Tables G (Green Timber) and S (Salvage Timber) are determined by analysis of market transactions in your area by CDTFA 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 thousand board feet (MBF)/, more than 5 MBF/acre, and an all tractor logging system.
General Tax Application
The timber yield tax applies to the harvest of forest trees, whether standing or down, for wood products. As a timber owner, you generally owe the timber yield tax when your trees are harvested:
- Regardless of the number of trees removed.
- Whether you sell, give away, trade, or use the trees yourself.
- Whether you have received any money for the trees.
- Whether the trees were diseased, dead, dying, or down.
- Whether the trees were harvested on public or private land (except for Indian tribal lands).
- Whether the land is designated as a Timberland Production Zone or zoned for some other use.
Please note: 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.
The timber yield 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 tax based on the amount you receive for your trees or wood products.
General Exceptions
You do not owe the timber yield tax if:
- The trees are left lying on the ground, unused.
- You transfer ownership of the timber to a logger or to another person before the trees were cut and are, therefore, not the timber owner of the transferred timber. 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.
- You remove trees from Indian tribal lands.
- You are a tax-exempt organization that does not pay property taxes on the land where the trees are growing.
- Your timber harvest has an immediate harvest value of $3,000 or less within a quarter.
Timber Yield Tax – Frequently Asked Questions (FAQs)
COLLECTING THE TAX
Who must pay the timber 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 CDTFA 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 CDTFA-401-1PT, Timber Tax Return for as long as they remain registered with the CDTFA. 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 remain registered with the CDTFA 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 CDTFA 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 CDTFA 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 for four years that will back up your timber yield tax returns, and make them available to the CDTFA 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 CDTFA value schedules, of $3,000 or less within a quarter.
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 haven't done any harvesting yet. Do I still need to file my timber tax return?
You must file quarterly timber tax returns as long as you remain registered with the CDTFA, even if you do not harvest any timber during a reporting period. A check box on 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 remain registered with the CDTFA and will be required to file timber tax returns until you notify us that you no longer intend to harvest timber. A check box on the Timber Tax Return allows you to indicate when you have no further timber harvesting to report and you want to close your account. You can re-register 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. Timber yield tax applies to trading timber for services rendered with or without consideration.
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. Please visit the Sales & Use Tax in California for more information on the application of sales and use tax. You should contact a tax professional 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 CDTFA Publication 87, Guide to the California Timber Yield Tax and in California Timber Yield Tax Law.
HARVEST REPORT AND TAX RETURN
How do I calculate Average Volume per Log on my 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)] × 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 during the reporting period on my 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 Deduction.
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 between 25 MBF AND 99 MBF, deduct $100/MBF from the value in the table.
If the volume harvested in the quarter is between 100 MBF AND 299 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 and 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 CDTFA prepares modified schedules for these specific events.
How do I request a refund?
If you have overpaid the tax directly to the CDTFA, you may file a claim for refund online by logging in to our online service system using your User ID and Password. Go to your timber tax account, under the I Want To section, select More, then select Submit a Claim for Refund, or by filing an amended return(s). Claims for refund should specify the period for which you are making the claim and the amount of the refund. For additional refund details, please visit the Special Taxes and Fees refund page.
You can also file a claim for refund by mailing a completed form CDTFA-101, Claim for Refund or Credit to:
California Department of Tax and Fee Administration
Timber Tax Program, MIC:88
P.O. Box 942879
Sacramento, CA 94279-0088
How long do I have to file a refund claim for the yield tax?
Whichever of the following dates occurs last is your filing deadline:
- Three years after the due date of the return on which you overpaid the tax
- Six months after you overpaid the tax
- Six months after the date a determination (billing) became final
Be sure to file your claim for refund by the applicable deadline. If you don't file on time, the CDTFA cannot consider your claim, even if you overpaid the tax. If you have questions about your deadline to file a refund claim, contact our Customer Service Center at 1-800-400-7115 (CRS:711) and select the option for Special Taxes and Fees, Monday through Friday, 7:30 a.m. to 5:00 p.m., (Pacific time), except state holidays.