Lumber assessment a bad deal for Galifornia dealers

If ftrs CeI-rponNr.q's coNrRovERV Y stel "lumber assessment" now being assessed on most lumber products sold in the state under so-called

"emergency" regulations from the state's tax collection agency, the State Board of Equalization (BOE), the next process for the state agency is to

One Dealerts Take on the Lumber Tax

By fohn Canahl, Ganahl lumber

What's there to like about it? It cost us a lot of time and expense to program the Lumber Assessment Fee (LAF) billing and collection process and then when it kicked in on Jan. 1, our customers blamed as for their added cost. Other than that, everything was a piece of cake.

At Ganahl Lumber, we do all our own programming, so when the LAF was passed at the end of the legislative session, we started as soon as we received some general guidance from the West Coast Lumber & Building Material Association to weave the LAF into our computer system. It took our very experienced programmer about 350 hours-nearly all of November and Decemberto modify and test approximately 90 programs that the LAF affected.

We also had to coordinate the LAF with the outside vendor that supports our cash registers. Then key individuals in the purchasing department got to spend considerable time identifying and flagging the products in our 50,000 product SKU file that the LAF affected.

Added to this were the considerable complications of handling the estimates and sales orders that were entered into our system before Jan. 1 but not actually picked up or shipped to our customer until after

Jan. 1. And, of course, all of this was at the end of the year when there were only a few other matters that needed attentionno t !

After explaning the LAF to all our salespeople shortly before Jan. 1, we rolled it out. As expected, our customers were thrilled. We received comments, with assorted X-rated variations, such as: develop permanent rules, including a permanent retailer set-up reimbursement.

"Why are you g\ys charging me another tax?"

"How come I never saw this in the voting booth since I'm the one paying for it?"

"Why, I'm thrilled to help the state balance its budget." (I added that one.)

Our true LAF installation costs exceeded $20,000, made up primarily of skilled Ganahl employees' time. We have l0 locations, so that equals a little over $2,000 per location. But if we only had one or two locations (or 20), the total cost would have been nearly the same.

The biggest potential cost to Ganahl Lumber and to the State's economy will be if this becomes yet another barrier to do business in California. We'll see.

- John Ganahl is chieffinancial officer of Ganahl Lumber, Anaheim, Ca. Reach him at johnganahl@ ganahl.com.

The reimbursement language was contained in the legislation but the '6emergency" rules passed by the BOE in October 2102 provided a token $250 per retail location. The BOE voted 3-2 on political party lines to approve the $250, with the two Republicans on the board voting against the low reimbursement.

The West Coast Lumber & Building Material Association (WCLBMA) testified at the hearing that their research and survey data showed lumber retailers had an average set-up cost of more than $4,500 per location. The association also requested an ongoing $1,500 per year to cover the costs of new products being added or deleted from the list of lumber items.

The BOE is expected to vote on a permanent reimbursement amount in May 2O13. WCLBMA has re-submitted updated data and survey results showing the average cost is closer to $5,400 per retail location.

The legislation providing for the l70 assessment on a wide range of lumber products was pushed by Democratic Governor Jerry Brown and agreed to by California timber producers who claimed they were at a competitive disadvantage to out-ofstate timber producers who have lower costs and fees paid to state agencies for timber management oversight and regulation in producing "timber harvest plans."

The controversial legislation also contained language that claimed to limit legal damages to timber companies and others for "wildfire liability," a contention disagreed with by many,

The challenge for California lumber retailers is that this assessment is significantly more complicated than increasing a sales tax in that it is imposed on only certain lumber and building products and not on others. This means lumber retailers have to reconfigure their computer systems to add the assessment to only the covered wood products.

An additional challenge is that the new law requires that this l7o assessment be shown separately on the invoice, not shown with state or local sales taxes.

The manner in which the legislation was passed has been criticized by many involved in the process. In my view, as executive director of the West Coast Lumber & Building Material Association, representing independent lumber retailers, it was passed in the last hour of the 2Ol2 legislature, using a so-called "emergency" rule that meant the bill could be rushed through with no public hearings and no chance of discussion. Closed door meetings and vote deals to get exactly the number needed to meet the two-thirds vote requirement were part of the final deal.

Jon Coupal, president of the California-based Howard Jarvis Taxpayers Association, called the legislation "one of the sleaziest legislative deals I've ever seen, and I've seen a lot."

While I certainly agree that the timber industry is overregulated and there are valid issues that need resolution, simply giving the state more money from the general public and making the lumber retailers collect it is not the answer. This is a bad deal the timber producers made with the governor, to pass on regulation costs to the general public.

Every Democratic member of the state assembly and senate voted for the bill, under pressure from Democratic

CALIFORNIA DEALERS have bristled over the new 1% lumber assessment fee. due to imolementation costs, confusion over which products are subject to the fee, and a less-than-warm reaction by their customers.

Governor Jerry Brown. They were joined by three Republicans, all of whom were out of their current positions at the end of the legislative session because of term limits, and were joined by a Republican-turnedIndependent assembly member who had already lost an earlier 2Ol2 primary election for San Diego mayor.

The concept of an additional assessment on timber producers to cover the cost of regulation by the State of California has been discussed by state government for several years. Private landowners in California are subject to some of the most difficult, expensive and over-reaching environmental rules in the nation. Nearby states have far less restrictive land use laws, putting the California producers at a competitive disadvantage.

In the past, the costs of the state regulation have been part of state agency budgets and fees imposed on the timber producers.

By fames Olsen