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lumber buyer

Started by 4430jd, January 18, 2013, 05:16:52 PM

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4430jd

I had a lumber buyer call about buying lumber from mountain ground I own. Says he can pay without any taxes to be payed on my part. Is this possible or should I tell him to go jump in the nearest lake.

beenthere

Can you explain a little more about it?

Would have to guess and try to read between the lines the way you have described it so briefly.

What does "mountain ground I own" mean?
And do you have lumber to sell? If so, what is the problem with selling it? Or do the trees need to be harvested first?

What's up?
south central Wisconsin
It may be that my sole purpose in life is simply to serve as a warning to others

saxon0364

I figure you mean he wants to buy your timber, not lumber.  If that's the case what he offered is unusual to say the least.   Shady at best.   If you want to sell your timber get at least three bids from reputable company's.  Your county extension office can help with that.   
Nothing wrong with quiet.

mesquite buckeye

Sounds like one of them thar cash deals. Good luck ever see'in the cash. :snowball:


:)
Manage 80 acre tree farm in central Missouri and Mesquite timber and about a gozillion saguaros in Arizona.

Ron Wenrich

Sure like to know who this is.  That way I can steer other clients away. 

Stay away from deals like this.  If you sell timber, you owe tax money.  The only way you won't be paying any taxes is if he doesn't pay you.  Do you really want someone in your woodlot that advises you to skirt the law?  There's plenty of honest timber buyers out there that can do decent work and pay you for the value of your timber.
Never under estimate the power of stupid people in large groups.

Okrafarmer

Yep, you caught a hot one there, I reckon!
He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. Psalm 91:1

Operating a 2020 Woodmizer LT35 hydraulic for Upcountry Sawmill, Dacusville, SC

Now selling Logrite tools!

Writing fiction and nonfiction! Check my website.

PAFaller

This is a post related to the timber buyer thread because I am not real good with tax rules. The deal in that thread sounds a bit shady but thats begs the question who is responsible for paying taxes? Only reason I ask is that timber is sold so differently than many other goods we buy on a daily basis. PA I know has sales taxes; I buy a cup of coffee at the local Sheetz store they charge the price plus tax. But I have never seen a landowner offer timber for sale at 'x' price plus tax. Nor do any mills bid on timber and offer the bid with sales tax figured in. And in some instances we buy timber on a price per thousand for each species straight through, or a price per ton on  pulp jobs, sometimes paid before we cut but many times paid in increments. So if I am willing to pay 500 per thousand for red oak, should the landowner actually be keeping only 470 and paying the 6% or 30$ per thousand to the state as sales tax? Timber that has gained value is charged for capital gains correct? But that gets confusing because if you dont have a baseline how do you know what it has 'gained' in value. I know when housing markets were good renovating and flipping was all the rage, but you at least have a baseline of initial cost, money spent to renovate, and then final resale price. If my landowner client inherits grandads farm that was bought 60 years ago and its got nice cherry on it, what percentage of stumpage value is whacked with capital gains taxes? And am I responsible to make sure the landowner I buy timber from pays the appropriate taxes on it?   Sorry to post so many questions, but its something I get asked about from time to time and dont know much about. Im also going to cut a few loads of aspen pulp off my own ground, wont bring money like hard maple veneer but a local shaving mill is paying pretty good so I wont be giving it away either. Not sure how much I can cut of my own before taxes come in to play.
It ain't easy...

PAFaller

Sorry about the long above  post, I was going to set it up as a new thread to not get off topic but wasnt paying attention. Sorry guys.
It ain't easy...

Jeff

Timber tax is not a sales tax, it is an income tax. If the landowner sells timber, the revenue from that timber is income.
Just call me the midget doctor.
Forestry Forum Founder and Chief Cook and Bottle Washer.

Commercial circle sawmill sawyer in a past life for 25yrs.
Ezekiel 22:30

Okrafarmer

PAFaller, I think you need to realize the differences between sales tax, income tax, capital gains taxes, and other taxes that may or may not be relevant.

Sales tax, like when you buy your cup of coffee, is only on consumer goods. Things that you buy at a store, or in a similar situation. That does not apply to things like timber sales, which is a business type of transaction, not a consumer purchase. The timber purchaser is a business, not a consumer. Therefore, the seller does not pay sales tax, but rather some sort of capital gains tax or income tax on the sale. The way this works may vary some from state to state, I'll let someone who knows more about it explain farther.

Quote from: Jeff on January 19, 2013, 09:20:35 PM
Timber tax is not a sales tax, it is an income tax. If the landowner sells timber, the revenue from that timber is income.

You beat me to it, and so much more succinctly.
He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. Psalm 91:1

Operating a 2020 Woodmizer LT35 hydraulic for Upcountry Sawmill, Dacusville, SC

Now selling Logrite tools!

Writing fiction and nonfiction! Check my website.

WDH

Timber is an investment, like stock.  If you can't prove a cost basis, you have to pay tax on the entire proceeds from the sale.  It pays to establish a cost basis when land with timber is either purchased or inherited.  A Forester can do that for you, and it will save you a good deal of taxes.   
Woodmizer LT40HDD35, John Deere 2155, Kubota M5-111, Kubota L2501, Nyle L53 Dehumidification Kiln, and a passion for all things with leafs, twigs, and bark.  hamsleyhardwood.com

Ron Wenrich

Depends on how long you own it.  If its been owned for a long time, the amount of growth in capital might not be enough to offset the taxes and added expenses.  I tried that on a few that the sawtimber was all ingrowth, and the value of pulp 40 years ago just wasn't worth too much. 

PA Faller:  You don't charge sales tax for the logs you sell to the mill.  Neither does the landowner.  We don't have a severance tax in PA, but some states have that tax.  There is the income tax at the federal, state and local level.  Just the local and state tax is worth 4.5% and there isn't a depletion allowance.  Expenses can be deducted, but that's it.  Depletion allowance is on the federal tax.  The point is, there's a lot of tax.

Its a pretty shady business deal. 
Never under estimate the power of stupid people in large groups.

WDH

In GA, you pay Federal and State Income tax on a timber sale, and you pay the county a severance tax equal to the value of the sale times the going millage rate.  So, it is taxed by three governmental agencies  :).
Woodmizer LT40HDD35, John Deere 2155, Kubota M5-111, Kubota L2501, Nyle L53 Dehumidification Kiln, and a passion for all things with leafs, twigs, and bark.  hamsleyhardwood.com

PAFaller

Ok thanks for the input, I was pretty sure there was no sales tax on timber because I had never seen it, but then again with so many rules it seems easier to be doing something wrong despite trying to do it right. Im not arguing for a tax, but how is it that a log doesnt get sales tax, but if its sawn into boards those are taxable? Same goes for firewood, should it be taxed. I've never seen sales tax collected, but is it a commodity that should be taxed?
It ain't easy...

Ron Wenrich

Sales tax is on the retail sale of goods.  You're not an end user.  The board user is an end user, unless he is a secondary producer.  Sales tax is not charged to secondary producers, as that flows out to the product side.  Residential heating sources aren't charged a sales tax.  Firewood is a residential heating source. 
Never under estimate the power of stupid people in large groups.

Kansas

Years ago we had a woman in from the south that did a tax seminar on timber in Kansas. It struck me as being complicated. There were some tax strategies, I can't remember them anymore. The first thing I would do is talk to who does your taxes and see if he understands timber taxes when it is sold.

As others have said, be very leery. I don't know your situation, and what you have for sale. There could be some obscure rule concerning biofuel and landowner taxes, but I never heard of it. There may be some rules on timber loss due to storms. But you need a professional tax person in on this one.

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