Manufacturing timber or wood products

Manufacturing

Businesses that manufacture or process for hire timber products, wood products, or mass timber products are taxable under either the Manufacturing of Timber or Wood Products or Processing for Hire Wood Products business and occupation (B&O) tax classification at a preferential rate.

Note: The preferential tax rates expire June 30, 2045. The activities will then be taxable under the standard manufacturing or processing for hire B&O tax rates.

Selling

Manufacturers of timber products, wood products, or mass timber products are also taxable on the wholesale sales of their products under the preferential Wholesaling of Timber or Wood Products B&O tax classification.

Note: The preferential tax rates expire June 30, 2045. The activity will then be taxable under the standard wholesaling B&O tax rate.

Manufacturers of timber products, wood products, or mass timber products are taxable under the Retailing B&O and Retail Sales tax classifications on retail sales.

Businesses that deliver timber products, wood products, or mass timber products to customers outside of Washington may take an Interstate and Foreign Sales deduction from the following classifications:

• Wholesaling of Timber or Wood Products.
• Retailing.
• Retail Sales.

Multiple Activities Tax Credit (MATC)

Businesses that perform more than one taxable activity for the same product will report each activity under the proper classification and then take the MATC so that B&O tax is only paid once.

For more information, please see the MATC section of this guide.

Reporting/documentation requirements

Businesses that report under the preferential tax rates must file an Annual Tax Performance Report by May 31st of each year following a year when they claim the preferential rate. This requirement will not apply when the preferential rates expire.

Definitions

Timber product means:

• Logs, wood chips, sawdust, wood waste, and similar products obtained wholly from the processing of timber, short-rotation hardwoods, or both.
• Pulp, including market pulp and pulp derived from recovered paper products.
• Recycled paper, but only when used to manufacture biocomposite surface products.

Wood products means paper and paper products; dimensional lumber; engineered wood products such as particle board, oriented strand board, medium density fiberboard, and plywood; wood doors; wood windows; and biocomposite surface products.

Paper and paper products mean products made of interwoven cellulosic fibers held together largely by hydrogen bonding (paper and paper products does not include printed material).

Additional resources

Extracting & timber manufacturing incentives