Oregon Department of Revenue's Corporate Activity Tax Educational Tour

Oregon Department of Revenue's Corporate Activity Tax Educational Tour

The Oregon Department of Revenue scheduled a series of meetings around the state to update businesses and their accountants on the implementation of the Corporate Activity Tax. Unfortunately, the Department of Revenue canceled their meetings in Coos Bay, Lincoln City, Portland, and Salem due to the social distancing restrictions for coronavirus. The following is a summary of the meetings held in Eugene, Gresham, and Klamath Falls.

The prepared comments from the Department of Revenue were largely an overview of the definitions, registration and filing procedures, and general mechanics of the tax. The Department dedicated roughly two-thirds of the meeting time to its temporary administrative rules released on January 1, February 1, and March 1. Below are the key takeaways from the discussions.

  • The Department of Revenue believes some statutory exclusions, such as the exclusion for property resold outside the state, are only allowable if the seller receives a certificate from the purchaser at the time of sale.
  • The Department of Justice and the Department of Revenue believe the agent exclusion must follow the common law definition of agency, requiring an analysis of the taxpayer’s facts and circumstances. The Department of Revenue is advising every taxpayer who believes they may be able to claim the exclusion to consult with an attorney.
  • The Department of Revenue is advising taxpayers without any cost of goods sold for federal income taxes to compute amounts for the cost of goods sold as if they were filing the federal return.
  • The Department of Revenue believes the subtraction for labor cost does not include federal withholding, such as federal insurance contributions and other payroll taxes, but does include state-specific contributions for workers’ compensation and transit taxes.
  • Taxpayers regularly raise concerns about invoicing an amount for the tax. The Department of Revenue said nothing in the law prevents a seller from raising their prices or telling their customers the amount the prices are increasing. However, taxpayers should know the amount cannot be itemized as a sales tax.
  • The Department of Revenue intends to release a rule outlining the method for attributing sales, cost inputs, and labor costs for the transportation sector. The rule is expected to follow a similar methodology as the special apportionment method for the income tax (comparing the number of miles traveled in and outside the state).
  • The department intends to begin releasing the permanent administrative rules on April 1 and hold a public hearing in mid-to-late May. The timing of the hearing may change, however, due to the coronavirus outbreak and the limitations on public gatherings. We expect to learn more over the next several weeks.

    You can find a link to slides and a video from their tour on their website.