Forest Products Tax law goes into effect July 1

When it was first initiated, the Forest Products Tax in Virginia was paid by the lumber mills or other large forest products companies – entities that have a fixed place of business.  But industry practices have changed over the years, and more timber is being chipped or otherwise processed in the forests by logging companies before being transferred to manufacturers for use or further processing.  These industry practice changes have led to more loggers becoming responsible for paying the Forest Products Tax.

During the 2015 session of the Virginia General Assembly, Delegates C. Matthew Fariss and Mark D. Sickles introduced legislation (known as House Bill 1724) that would shift the imposition of the Forest Products Tax from logging companies to the “first manufacturer operating from a fixed place of business.”  The bill was championed by the Virginia Forestry Association, the Virginia Loggers Association, Virginia Agribusiness Council, Virginia Farm Bureau and the Virginia Forest Products Association and supported by the Virginia Department of Forestry and the Virginia Department of Taxation.  The bill, which was approved unanimously by the General Assembly and signed into law by Gov. Terry McAuliffe, goes into effect July 1, 2015.

State Forester Bettina Ring said, “The intent of the new law is to align current forest industry practices with the tax law so that taxpayers can more easily comply.”

Paul Howe of the Virginia Forestry Association said, “This new law is a win-win for everyone in the forestry community and for the citizens of the Commonwealth.  It removes the taxation compliance from loggers who are processing forest products ‘in-woods’ and shifts it to the commercial taxpayers with fixed places of business.”

Ron Jenkins of the Virginia Loggers Association said, “It was really great to have everyone come together in support of this legislation.  So often that is not the case as various stakeholders may have competing interests that could put the stakeholders at odds with each other.  The unity of purpose in this case led to unanimous passage of the bill in both bodies of the General Assembly.”

There is one exception to the new law.  If there isn’t a manufacturer, or the manufacturer is outside of the Commonwealth and is not registered for the tax, the person or company harvesting the wood must pay the tax.  Manufacturers based outside of Virginia can register for the tax, but they are not required to do so.

Jenkins said, “We’re working with the Department of Taxation to develop a list of manufacturers who are registered to pay the tax so that we can share that information with the logging community to avoid situations where the tax could be paid twice (once by the logger and once by the registered out-of-state manufacturer).”

If you have any questions regarding the implementation or application of the new law, please contact the Department of Taxation’s Miscellaneous Tax Unit at (804) 786-2450.