No sales tax in Oregon: the CAT and construction taxes

Oregon has no general sales or use/transaction tax, on goods or on services, so there’s no sales tax line on your invoice and no Oregon sales tax exempt certificate. What your business may meet instead is the Corporate Activity Tax (CAT), once its Oregon commercial activity is large enough, and local construction taxes, paid when a building permit is issued.

Corporate Activity Tax: your business’s tax, not your customer’s

ORS Chapter 317A imposes the CAT on businesses of every type, sole proprietorships and partnerships included, for the privilege of doing business in Oregon. It’s measured on commercial activity, the total a business realizes from transactions and activity in Oregon, and it isn’t a transactional tax like a retail sales tax. What the CAT asks of you depends on your Oregon commercial activity for the year:

• $750,000 or less: you’re excluded from all CAT requirements.
• $750,000: register for the CAT within 30 days of reaching it. You register once, not every year, and failing to register can bring a penalty of $100 a month, up to $1,000 a calendar year.
• More than $1 million: file a CAT return.
• More than $1 million of taxable commercial activity: pay $250 plus 0.57% of the amount over $1 million. The CAT allows a 35% subtraction for certain business expenses.

For example, on $1,500,000 of taxable Oregon commercial activity (an illustrative figure), the CAT is $250 plus 0.57% of $500,000, or $3,100.

Pricing: the CAT is a cost of doing business

Oregon’s CAT is an annual tax on the business, not a tax on any particular sale. You may include it with your other business expenses when you set your prices, but whatever you charge, including any amount meant to cover the CAT, counts as commercial activity for the CAT. The Oregon Department of Revenue gives no guidance on estimating the CAT on a specific transaction, and notes that non-tax laws may regulate pricing and advertising.

Local construction taxes: paid when the permit is issued

Under ORS 320.189, whoever undertakes the construction pays a construction tax when the permit for the construction, or for expanding a building’s square footage, is issued. ORS Chapter 320 limits what school districts, cities and counties may tax, though a local tax in effect on May 1, 2007 can continue if its rate hasn’t gone up, and some projects are exempt, such as public improvements, hospitals, religious facilities and agricultural buildings:

• School districts: only on improvements that create a new structure or additional square footage in an existing structure, within statutory limits adjusted for changes in construction costs. The government or agency that issues the building permit collects it.
• Cities and counties: by ordinance or resolution, on residential improvements that create a new residential structure or added square footage, including remodeling that adds living space, at no more than 1% of the permit valuation. They may also tax commercial and industrial improvements that create a new structure or added square footage, at the rate and base their ordinance sets.

Buying goods out of state to resell in Oregon

If you buy goods outside Oregon to resell in Oregon, you can give the out-of-state seller the Oregon Business Registry Resale Certificate. The seller may accept it but doesn’t have to, and some states, including Washington, may require their own form.