Tax Guide for Timber Yield Tax

Tax Guide for Timber Yield Tax

Helping your business succeed is important to the California Department of Tax and Fee Administration (CDTFA). The taxes you collect and pay to the state help fund state and local services and programs that are important to you and your community.

Understanding the tax issues specific to the timber industry can be time-consuming and complicated, so it is important that you get the information you need in a timely and understandable way, helping you focus on starting and growing your business.

This guide is provided to help you better understand the tax obligations specific to the timber industry and provides detailed information on property tax implications on harvest trees in California.

How the Revenue is Allocated

Although the tax is administered and collected by the CDTFA, 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.

How to Use This Guide

The Getting Started tab provides key resources related to registration, filing returns, account maintenance, and other important information you need.

The Industry Topics tab contains specific topics important to the timber industry.

The Timber Advisory Committee tab contains information related to Timber Advisory Committee, including public notices, meeting minutes & agenda, proposed and adopted Harvest Values Schedules, Timber Tax Statistics, and Timber and Production Zone Values.

The Resources tab provides links to useful information, including special notices, other relevant industry guides, publications, statutory and regulatory information.

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See the How to Contact Us page for contact information. If you have suggestions for improving this guide, please contact us via email.

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The Timber Yield Tax is a property tax paid by timber owners when they harvest trees, or timber. The California Department of Tax and Fee Administration (CDTFA) administers and collects the Timber Yield Tax, which, after state administrative costs, is allocated to the counties where the timber was harvested. The CDTFA also determines the harvest values of timber and timberland production zone values.

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.

The CDTFA receives notice of timber harvest permits filed with the California Department of Forestry and Fire Protection (CAL FIRE) and the 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 U.S. Forest Service (USFS) or the U.S. Department of the Interior Bureau of Land Management (BLM), the CDTFA will establish a timber yield tax account for you and assign an account number. Your registration will remain in effect until you notify the CDTFA that you will no longer harvest timber. Exception: The CDTFA will not register the owners of timber harvests that appear to have, in total, an immediate harvest value of $3,000 or less within a quarter.

If you own and harvest timber without authorization from CAL FIRE or the federal government, use a timber harvest plan approved for someone else, or sell Christmas trees from a Christmas tree farm, it is your responsibility to register with the CDTFA for the timber yield tax.

Whether you are automatically registered or register yourself with the CDTFA, you will be asked to furnish:

  • The name(s) of the legal timber owner(s)
  • Your driver license number
  • Your Social Security number
  • Your phone number
  • Your mailing address (and county name)
  • The type of ownership (individual, partnership, corporation, husband and wife, domestic partner, other)
  • Type of harvest products (logs, fuelwood, Christmas trees, other)
  • First date of harvesting (cutting the trees)

The CDTFA may request additional information necessary to fully complete your registration.

To register for your timber yield tax account, a seller's permit, any other permit, license (cigarette, tobacco, or fuel), or account with the CDTFA, visit our online registration system (beginning 8/12/2019). Online registration is the convenient way to register and is available 24 hours a day. If you have questions, please contact our Customer Service Center at 1-800-400-7115 (CRS:711), Monday through Friday, 8:00 a.m. to 5:00p.m., (Pacific time), except state holidays.

Go to www.cdtfa.ca.gov, login with your username and password to update your account information including, but not limited to, selling your business, changing your mailing address, email address, or telephone number, or closing your business. If you prefer, you may use form CDTFA-345-SP, Notice of Business Change, Special Taxes and Fees Accounts to notify CDTFA of changes. It is important to notify us so we can update our records to ensure you receive information, email reminders to electronically file, and other updates timely.

You may also contact CDTFA Customer Service Center at 1-800-400-7115 (CRS: 711) and select the option for Special Taxes and Fees or send a message through our website at Email Your Tax Questions.

The CDTFA determines the Timber Yield Tax rate each December to be effective January of the following calendar year. The current and historical yield tax rates are available on our Tax & Fee Rates page.

The amount of tax due is dependent upon the volume of timber harvested, the CDTFA established value for the species harvested (see harvest value schedules above), and the tax rate. To compute your tax liability, simply multiply the net volume, by the species harvest value, and by the yield tax rate.

File a Return Online (beginning 8/12/19) – CDTFA's online filing service is easy, fast, and free! The CDTFA encourages all businesses to file online. Timber Tax Harvest Report and Timber Yield Tax return are eligible to file online.

For most accounts, timber yield tax returns must be filed for each calendar quarter. However, if Christmas trees are the only forest product you harvest, and if the Christmas trees are harvested only in the fourth quarter of each year, you will file a return only for the fourth quarter of each year. The filing date is the last day of the month following the end of the quarter.

You must file your timber yield tax return as long as you remain registered with the CDTFA, even if you do not harvest any timber during a reporting period or if all of your harvests for the reporting period qualify for the low-value exemption. Check boxes on the return allow you to indicate that you did not harvest timber during the period or all of your harvests qualify for the low-value exemption.

When filing online, you are able to file your timber yield tax return and pay the timber tax due in one transaction. You may also visit our website to conveniently make a payment or learn about our various payment options.

Payments must be submitted by the due date to be considered timely. If you use the ACH Debit payment method and initiate your payment on the filing due date, you must complete your transaction by 3:00 p.m. (Pacific time) and select the next banking day as your debit date. Otherwise, your payment will not be initiated until the next banking day and will be late.

You must maintain adequate and complete records that will back up your timber yield tax returns, and make them available to the CDTFA upon request. Your records need to show all of the following:

  • The contractual or financial agreements related to the ownership and logging of your trees
  • The locations of the trees cut
  • Wood product volumes
  • The basis for computing harvest values

The timber industry customarily uses a variety of items to record this information. Your records may include the following:

  • Financial books (ledgers and journals)
  • Income tax returns
  • Complete harvest plans
  • Timber sale contracts
  • Bills, receipts, invoices, statements, worksheets, and summaries
  • Check stubs
  • Scale tickets
  • Appraisal notes
  • Property maps
  • Any other document used in preparing your timber tax return or that can substantiate your return

You must generally maintain records for a period of four years from the due date of your quarterly tax return, or the date the return was filed, whichever is later.

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"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" 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" 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.

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.

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

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

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.

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.

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.

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.

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.

COLLECTING THE 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

Yes. Timber yield tax applies to trading timber for services rendered with or without consideration.

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

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

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.

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.

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.

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.

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

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.

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

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.

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.

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.

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

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, 8:00 a.m. to 5:00 p.m., (Pacific time), except state holidays.

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The Timber Advisory Committee (TAC) is a standing committee appointed by the CDTFA's Director, composed of:

  • One representative of the California Department of Tax and Fee Administration
  • One representative of the State Board of Forestry and Fire Protection
  • Five assessors from the rate adjustment counties
  • One member representing small-scale timber owners
  • One member representing large-scale timber owners

The TAC has a vital role in the adoption of the biannual harvest values and schedules. The TAC's duties are to provide consultation to the CDTFA on the timber tax program areas and are advisory in nature.

Need to know more? Follow the links below for more information about the topics covered in this guide, as well as other information you might find helpful:

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  • Contact Us

    If you have questions regarding this program, please contact Timber Tax Program at the following address or telephone number:

    Timber Tax Program, MIC: 88
    California Department of Tax and Fee Administration
    450 N Street
    PO Box 942879
    Sacramento, CA 94279-0088

    Telephone 800-400-7115 (CRS:711)

  • Timber Tax Notices – Subscribe to receive the Timber Tax Notices via email.
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  • Special Notices – CDTFA special notices are issued whenever there is a change in law, tax rates, or CDTFA procedures.
  • CDTFA Online Services – Learn about the online services the CDTFA offers.
  • CDTFA Field Offices – A comprehensive listing of all CDTFA offices and contact information.
  • Get It In Writing! – Tax and Fee Laws can be complex, and you are encouraged to put your tax questions in writing. You may also send your request in a letter to: Program Administration Branch, MIC; 31, California Department of Tax and Fee Administration, P.O. Box 942879, Sacramento, CA 94279-0031.
  • Taxpayers' Rights Advocate (TRA) – The TRA Office helps taxpayers when they are unable to resolve a matter through normal channels, when they want information regarding procedures, or when there are apparent rights violations.