Oregon Department of Revenue March educational tour on the CAT

March 3, 2020

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We’re working hard to protect and represent healthy business legislation, and to keep you informed and engaged along the way. Please find the Springfield Area Chamber of Commerce legislative priorities, staff contact, and helpful links HERE.

Here’s latest update from our Oregon State Chamber of Commerce (OSCC) legislative counsel. Any opinions expressed or implied are those of OSCC and do not necessarily reflect those of the Springfield Chamber or its representatives.

The 2020 Short Session isn’t officially over, but the Department of Revenue (DOR) will be meeting with constituents across the state, beginning March 2, to learn more about issues with the temporary rules and implementation of the commercial activity tax (CAT).

Oregon’s new commercial activity tax is imposed only after a taxpayer exceeds $1 million of taxable Oregon sales. Once they pass that threshold, the tax is $250 plus 0.57% on gross receipts greater than $1 million after subtractions. The Department of Revenue’s website includes a list of frequently asked questions (FAQs) for taxpayers to better understand mechanics of the tax.

The Oregon legislature is currently considering passage of HB 4009A, which makes technical fixes to the CAT to help with administration. Due to the boycott over cap-and-trade, OSCC is unsure if this bill will cross the finish line by March 8. However, businesses have an opportunity to provide feedback to the DOR before final CAT rules are released in April, May and June 2020.

If you’re able to attend one of the educational stops (below), here are some concerns that have been expressed by business and agriculture:

(1) Revise the definition of ‘grocery.‘ DOR’s temporary rules unnecessarily restrict the exclusion for the wholesale sale of groceries beyond what is required by law. To qualify as an excluded wholesale sale, the temporary rule requires that a ‘grocery’ be sold in the form intended for sale to the final retail customer without further processing, which significantly narrows the scope of the exemption. It also potentially imposes CAT at every step of grocery sales-from farm production until the final-packaged food enters the distribution process. Food commodities that require packing, washing, or pasteurization before consumption are considered taxable sales under the CAT temporary rules. DOR should revise the narrow definition of ‘grocery’ to avoid unintended pyramiding of the CAT on local food producers.

(2) Create a workable definition for ‘cost inputs’ so that farmers can access the 35% subtraction. The 2019 commercial activities tax law allows taxpayers the option to subtract 35% of ‘labor’ or ‘cost inputs’ from their tax liability for gross sales in Oregon.’Cost inputs’ are defined in statute as the “cost of goods sold as calculated in arriving at federal taxable income under the Internal Revenue Code.” DOR should look at other IRS forms (such as Schedule F) and develop a ‘cost inputs’ definition that works for ag.

(3) Provide a simple process to certify out-of-state sales for comingled commodities. In order to qualify for the out-of-state sales exemption from the CAT, a taxpayer must obtain certification from the wholesaler at the time of sale to show that the product is leaving the state. However, the ultimate destination of the product at the time of sale is often unknown. DOR should provide taxpayers with a clear process to certify out-of-state sales of commodities.

Dates for the DOR educational tour:

Tuesday, March 3 – 6 to 7:30 p.m., Weese Building, Room 110, Treasure Valley Community College, 650 College Blvd in Ontario.
Wednesday, March 4 – 10 to 11:30 a.m., Zabel Hall, Eastern Oregon University, 1 University Blvd in La Grande.
Wednesday, March 4 – 6 to 7:30 p.m., Lecture Hall, Building 2, Columbia Gorge Community College, 400 Scenic Drive in The Dalles.
Monday, March 9 – 6 to 7:30 p.m., Klamath Community College, Conference Center, Room 7, 7390 S Sixth St in Klamath Falls.
Tuesday, March 10 – 6 to 7:30 p.m., Stevenson Union, Room 323, Southern Oregon University, 1250 Siskiyou Blvd in Ashland.
Wednesday, March 11 – 6 to 7:30 p.m., Center for Meeting and Learning, Room 102, Lane Community College, 4000 E 30th Ave in Eugene.
Thursday, March 12 – 6 to 7:30 p.m., Visual Arts Theater, Mt. Hood Community College, 26000 SE Stark St in Gresham.
Monday, March 16 – 11 to 12:30 p.m., Lakeview Rooms E and F in Empire Hall, Southwestern Oregon Community College, 1988 Newmark Ave in Coos Bay.
Monday, March 16 – 6 to 7:30 p.m., Lincoln City Cultural Center, 540 NE Hwy 101 in Lincoln City.
Tuesday, March 17 – 6 to 7:30 p.m., Auditorium, Portland Community College Rock Creek campus, 17705 NW Springville Road in Portland.
Wednesday, March 18 – 7 to 8:30 a.m., Riverside Room B, Seaside Convention Center, 415 First Ave in Seaside.
Thursday, March 19 – 6 to 7:30 p.m., Iris Room, Keizer Community Center, 930 Chemawa Road NE in Keizer.