Oregon’s New Corporate Activity Tax (CAT)
Published on by Barnes Dennig in State Local Tax, Tax Services
UPDATE, December 2019: New Oregon Tax – Be prepared to file a new gross receipts tax return in 2020!
On May 16, 2019, Oregon Governor Brown signed House Bill 3427, which adopts a new Corporate Activity Tax (CAT) imposed on all types of business entities. The CAT will be in addition to Oregon’s current corporate income tax. The US Supreme court ruling in South Dakota v. Wayfair opened the doors for states to require companies who exceed an economic nexus threshold (vs a physical presence test) to be required to register, collect, and remit sales tax. Similarly, Oregon’s Corporate Activity Tax sets economic thresholds for companies doing business in Oregon. No physical presence is required to be subject to the CAT.
The CAT will be imposed on businesses for the privilege of doing business in Oregon and is measured on the total amount a business realizes from transactions and activity in Oregon. Doing business in Oregon means being engaged in any profit seeking activity in Oregon including a stock of goods, an office, employees, or economic presence through which the taxpayer regularly takes advantage of Oregon’s economy to produce income.
The CAT sets four thresholds to determine whether a business has CAT responsibilities:
- Threshold less than $750,000 – the business is excluded and has no requirement
- Threshold more than $750,000 but less than $1 million – the business must register for the CAT
- Threshold is $1 million – the business must file a return
- Threshold is more than $1 million – the business must file a return and pay tax on the amount in excess of $1 million
Oregon will allow excluded items from the CAT and a 35% subtraction for certain business expenses including labor costs or costs inputs. The CAT tax is computed as $250 plus 0.57% of Oregon commercial activity greater than $1 million. The CAT will be applicable to tax years beginning January 1, 2020 and will be a calendar year only tax. The return will be due on April 15th of each year and will require quarterly estimated payments throughout the year. Registration for the CAT is due within 30 days of when a business meets the $750,000 registration requirement. A penalty of $100 per month may be assessed for failing to register (up to $1,000 per year). If your business has sales in Oregon, please review your tax filing requirements.
Other states currently with Gross Receipts tax include Delaware (Gross Receipts Tax), Ohio (Commercial Activity Tax), Texas (Franchise Tax), Nevada (Commerce Tax), and Washington (Business & Occupation Tax). The tax base and expenditures vary depending on the design of the tax for each state.
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