06 Jan What You Need to Know About the New Oregon CAT Tax in 2020
Oregon has enacted a new gross receipts tax on any commercial entity with gross receipts in excess of $1 million from Oregon specific sources and is expected to raise $1 billion per year for Oregon schools. The Corporate Activity Tax, referred to as the Oregon CAT, was enacted on May 16, 2019, with H.B. 3427 and will begin on receipts starting January 1, 2020. Contrary to what the name implies, all business entities, regardless of their business structure, are subject to this new tax. Also, any entity with at least $750,000 in gross receipts must register yearly within 30 days of reaching that threshold with the Oregon Department of Revenue.
Businesses excluded from this tax are those identified as a tax-exempt organization, wholesale and retail sales of groceries, transportation fuel sales, governmental entities, and certain hospitals. Income made from sales to another state, dividends, interest and distributive income received from a pass-through entity are excluded as well. They will not be considered because they do not reflect receipts from the sale of goods or services in Oregon.
The Oregon CAT will be imposed at a rate of $250 plus 0.57 percent of the entity’s gross receipts in excess of $1 million from Oregon sourced income less a subtraction of 35 percent of the greater of “cost inputs” or “labor costs” apportioned to Oregon. The Oregon CAT will also be imposed on any entity with “substantial nexus” in Oregon. In order to have “substantial nexus,” you must have either (a) $50,000 in property in Oregon, (b) $50,000 in payroll in Oregon, (c) $750,000 of commercial activity sourced to Oregon, or (d) at least 25 percent of the entities total property, total payroll, or total commercial activity is in Oregon.
The Oregon CAT will need to be paid quarterly to Oregon beginning April 2020 and the filing deadline will be April 15, 2021, plus extensions. Quarterly payments will only need to be made once the entity’s gross receipts are in excess of $1 million.
As of now, the forms have not been created and many of the more intricate rules will not be made until February or March of 2020. If you plan on making at least $750K in sales during the next year, please discuss this new tax with your tax preparer as it will be very important that you comply with the new tax reporting requirements. To receive more information on the Oregon CAT, look at frequently asked questions, or to contact Oregon with additional questions, please go to the following link: https://www.oregon.gov/DOR/programs/businesses/Pages/corporate-activity-tax.aspx.
If you would like to ask additional questions or line up an appointment to discuss this or any other tax issues, please call or email me from the contact information above.
Wes Elliott, EA, LTC
La Pine Tax Service
16460 William Foss Rd.
PO Box 1645
La Pine, OR 97739