Winter 2012      |      Stephen P. Sands, Registrar      |      Edmund G. Brown Jr., Governor


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One Percent Tax on Lumber and Engineered Wood Products Begins January 1, 2013


Retailers and construction contractors who make retail sales will start collecting a 1 percent tax from California consumers who buy lumber and engineered wood products beginning January 1, 2013. A new law (AB 1492, Chapter 289, Statutes of 2012) requires the state Board of Equalization (BOE) to collect the assessment from retailers for various state agencies including the Department of Forestry and Fire Protection. BOE estimates the new lumber products tax will generate $35 million in fiscal year 2013-14 for the Timber Regulation and Forest Restoration Fund.

Under the new law, receipts given to customers must clearly state the 1 percent lumber products assessment. The assessment is not subject to sales or use tax.

How does the new law affect construction contractors?

Contractors may be either consumers or retailers of lumber products or engineered wood products.

Contractors that hold a seller's permit and sell lumber products or engineered wood products to consumers in this state may offset their reported lumber products assessment amounts against start-up costs of $250 per business location. For more information about construction contractors, click here (BOE's publication 9, Construction and Building Contractors).

What products are subject to the lumber assessment?

In general, lumber products and engineered wood products subject to the 1 percent assessment are defined as "primary" wood products in which wood is a principal component (at least 10 percent of total content).

However, wood products that have been manufactured, assembled, processed, or produced from primary wood products are not subject to the 1 percent tax. These include "secondary" wood products where there has been additional labor that adds significant value to the product. See the examples below of products subject to the assessment and products not subject to the assessment:

Subject to Lumber AssessmentNot Subject to Lumber Assessment
Lumber Furniture
Plywood particle board Firewood
FiberboardPaper products
PolesIndoor finished flooring
PostsWainscoting (facing or paneling applied to walls)
Structural panelsPaneling
Fencing (poles, solid board)Frames
Roofing (shakes and wooden shingles)Windows
Oriented strandboardMolding
Glue-laminated timberMillwork (for example, baseboards)
Laminated veneer lumberTrusses
Lath (for example, a thin, narrow strip of wood used for support)Pre-constructed railing sections
Carvings and craft products

For more information

Contact BOE's Taxpayer Information Section at (800) 400-7115 (TTY: 711), or visit BOE's website for Frequently Asked Questions and their lumber products assessment page.