Oregon Corporate Activity Tax Update
What we learned about the Corporate Activities Tax (CAT) at the Oregon Town Hall meetings
The Department of Revenue (DOR) wants to hear from taxpayers about their particular situations that may be problematic with the new Oregon Corporate Activities Tax. We encourage taxpayers with unique situations to be as specific as possible and provide examples of the impacts of the tax. The DOR is requesting additional information on situations where this tax may cause a significant detriment to your business. Please contact them at cat.help.dor@oregon.gov or call your Aldrich advisor to talk through the potential impacts of to your business.
To learn more about how Oregon Corporate Activities could affect your business, read our Corporate Activity Tax FAQ.
Rules
The DOR will be posting three rounds of temporary rules on January 1, February 1 and March 1 of 2020. Taxpayers will have 180 days to provide feedback from those temporary rules, as the Department anticipates providing final rules after the temporary rules expire. Final rules will be posted on July 1, August 1 and September 1. They also noted that they will do their best to get guidance information delivered sooner than January 1. The tax goes into effect January 1, 2020.
Registration
As soon as a taxpayer reaches $750,000 in Oregon commercial activity, they are required to register with the state within 30 days. The DOR is expecting this to be online and taxpayers will need to register annually. There is a $100/month penalty (with a maximum of $1,000 per year) for failing to register within 30 days. There is no fee to register.
Estimates and Return Due Dates
Estimates of at least 80% of the amount due will be required to be paid quarterly at the end of April, July, October and January and the return will be due April 15 for the preceding year. There will be strict penalties for not paying sufficient estimates timely. The DOR anticipate having an opportunity to extend the return, but don’t have any details about that yet. The extension wouldn’t extend the due date for the payment of taxes.
All filings will be on the calendar year, regardless of the taxpayer’s year end. The DOR is developing rules to deal with apportionment and cost input calculations for those fiscal year filers.
The DOR clarified that the $250 minimum tax will only be due if you have taxable gross receipts (i.e. taxable commercial activity net of subtractions) above $1 million.
Compensation Clarification
When asked what will be included in compensation, the DOR panel stated that it will include fringe benefits. When asked specifically about the employer portion of payroll taxes, health insurance and retirement plan contributions, they confirmed that those items would be included in compensation. We anticipate further clarification on what’s included. As a reminder, it’s only up to $500,000 per employee. The deduction for cost inputs, which is 35% of federal cost of goods sold, is not yet well defined.
Will the tax be listed on the bill or receipt?
The DOR confirmed that we cannot call out the tax on the bill, as it is not a sales tax but a tax imposed on the seller.
What’s next for the Oregon Corporate Activities Tax?
The DOR will be holding phone conferences for out-of-state taxpayers to provide this town hall format to remote taxpayers. The department noted that they will provide information on when those are happening, but the details are not yet available. If you would like more information on the phone conferences, please email the DOR at cat.help.dor@oregon.gov. You can also subscribe to their update service on their website. The site also lists additional details about the tax.
If you’d like to calculate what your estimated tax will be, download our free calculator.
Our advisors are here to help guide you through any changes in tax policy that may come into effect. As these changes come to light, we will continue to send updates on what to expect.
Diana joined the firm in 2018 with almost two decades of experience serving members of various industries including construction, engineering and architecture, manufacturing and distribution, and government contracting. An expert on conducting overhead audits, Diana works closely with government contracting industry clients to offer clarity on how overhead rates work and help them maximize compensation.... Read more Diana Strassmaier, CPA, CCIFP®
Diana's EXPERTISE
- Indirect cost rate (overhead) audits and consulting
- Financial audits, reviews and compilations
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