What is Business and Occupation (B&O) tax?
B&O tax is a tax on gross receipts and is calculated on gross income with only certain deductions or credits permitted by law.
What are B&O tax responsibilities for timber owners?
All timber owners who harvest timber from their own land or from the land of another for commercial or industrial use must report their gross income for B&O tax purposes.
Timber owners may engage in business activities that require them to report B&O taxes under several categories such as extracting, manufacturing, and/or wholesaling.
What is Extracting?
Extracting is felling, cutting (severing from land), or taking of trees. The extracting B&O tax applies to felled trees before any manufacturing activity.
What is Manufacturing?
Manufacturing is cutting of trees into logs (bucking), delimbing, skidding, yarding, and loading of the logs. The manufacturing B&O tax applies to the value of the logs.
What is Wholesaling?
Wholesaling is the sale of the logs to a buyer or mill. The wholesaling B&O tax applies to the price received for the logs without deducting hauling charges.
Who qualifies as a small harvester?
Every person who from his or her own land or from the land of another who takes title to or ownership of timber from privately or publicly owned forest land and harvests less than 2 million board feet of timber for sale or for commercial or industrial use in a calendar year.
What are the benefits of qualifying as a small harvester?
Small harvesters are allowed to use a lower B&O tax rate and may be eligible for the $100,000 B&O Small Harvester Deduction and do not have to file the Department of Revenue (DOR) Annual Tax Incentive Survey.
Do logging contractors qualify as small harvesters for B&O taxes?
No, logging contractors operate as extractors for hire and/or processors for hire. They are not considered the harvester because they never take title to or ownership of the timber.
- Should report their B&O taxes as Extracting Timber for Hire and/or Processing for Hire Timber Products.
- Only qualify for the lower B&O tax rate if they file their tax return electronically and complete the DOR Annual Tax Incentive Survey.
- May owe Public Utility Tax on income received for the hauling of logs.
How do I report my timber harvest activities for B&O tax?
B&O tax for timber harvesting is due on the gross income received for the logs from a buyer or the mill(s).
When a small harvester hires a logging contractor gross income is reported under three B&O tax classifications:
- Extracting Timber,
- Manufacturing of Timber Products, and
- Wholesaling of Timber or Wood Products.
Am I being taxed multiple times as a small harvester?
As a timber harvester, B&O tax must be reported for each business activity. A Multiple Activities Tax Credit (MATC) is allowed to ensure B&O tax is paid only once.
How do I file my B&O tax return electronically?
File your return electronically using E-file, the Department's online filing tool. To use E-file, you must create an online account. You will need your Tax Registration/UBI Number and Pre-assigned Access Code (PAC).
To see a preview of the registration process, go to Preview of My Account and E-file.
Once you create your account, click on File return next to the period you wish to report. For help in the E-file program, click on the Tutorial icon in the upper right of most pages or call 1-877-345-3353.
When do I file my B&O tax return?
Most small harvesters file their B&O tax annually by January 31st; a few may be required to file quarterly. For help filing your B&O return call Forest Tax at 1-800-548-8829.
Do I need to file an Annual Tax Incentive Survey?
Qualifying small harvesters are not required to file the Annual Tax Incentive Survey.
Logging contractors must file the Annual Tax Incentive Survey electronically to receive the lower B&O tax rates under Extracting Timber for Hire and/or Processing for Hire of Timber Products.
What if I only sell the standing timber?
If selling standing timber that will be harvested within 30 months of the sale date, the seller owes B&O tax on the sale value to the Department of Revenue.
If selling standing timber that is to be harvested after 30 months of the date of the sale agreement, the seller owes Real Estate Excise Tax (REET) payable to the county treasurer where the sale took place.
B&O tax or REET resulting from the sale of standing timber are due at the date of sale, not at the time of harvest.
How do I qualify for the lower B&O standing timber tax rate?
- Have a tax registration number from the DOR. If you do not have one, call 1-800-548-8829.
- Electronically file your B&O tax using the Sale of Standing Timber classification. The taxable value is the total amount paid for the timber in cash or other consideration.
- Electronically file the Annual Tax Incentive Survey. It is due by April 30th of the next year. If this is your first time taking this incentive, you must file two surveys – one for the current year and one for the previous year.
When do I owe REET?
If the timber is harvested after 30 months from the date of sale, REET is due.
- If you are delinquent in filing your taxes, REET is due at the higher rate plus penalty and interest.
- If the annual survey is not electronically file by the April 30th deadline.
- If you do not e-file your return.
If I don't owe B&O tax on my standing timber sale, do I still have to file the return?
Still have questions or need additional information?
- For B&O questions for small harvester and standing timber sales, call 1-800-548-8829.
- For E-file questions or assistance, call 1-877-345-3353.
- For questions about the Annual Tax Incentive Survey, call (360) 902-7167.