WVFA Seeks Elimination of the Severance Tax on Wood

A study completed in 2006, concluded that the West Virginia Severance Tax is a major anti-competitive factor for the wood products industry. The Business and Occupation tax, which was eliminated for most businesses in 1985, remained in place as a "severance" tax for natural resource producers. Because natural resources businesses would continue to pay the renamed gross proceeds tax and also be subject to the new Business Franchise Tax and Corporation Net Income Tax, legislation authorized credits against the new taxes for severance tax paid. The relief from that tax hardship was only temporary. The credit allowed for severance tax against Franchise was repealed as of March 1989. The credit allowed for severance tax against Corporation Net was repealed as of October 1990.

 

The Report of the West Virginia Tax Modernization Project states that, "West Virginia imposes the highest timber Severance Tax per 1,000 board feet of production of any state east of the Mississippi River...The severance tax stands as an inequitable burden imposed on the business of growing and harvesting timber. The Severance Tax is uniquely imposed on natural resource producers, in addition to the Franchise Tax and Corporation Net Income Tax, which are paid by other business enterprises in West Virginia. 

 

In the study by Moss and Arano cited above, the authors noted that the total tax burden on sawtimber production as calculated in the study is somewhat conservative. "Excluded from our analysis are income taxes paid by the timber seller as well as income, business, and property taxes paid by the harvesting contractor and trucker. Finally, this study only considered taxes on the production of sawtimber from seedling though delivery of logs to a processing mill. Conversion of logs into wood products incurs additional taxes (income, business, and property) paid by the processor." Total timber taxes in West Virginia are significantly higher than in neighboring states.