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First Estimated Payment for New Oregon CAT Due April 30th

Sikich

Apr 27 2020

3 min read

Effective January 1, 2020, Oregon enacted a Commercial Activity Tax (CAT) with the goal to raise $1 billion of annual revenue to be used for educational purposes. This tax combines features of the gross receipt Ohio Commercial Activity Tax (CAT) and the margins-based Texas Franchise tax. The Oregon Department of Revenue has created a webpage that provides information and FAQs regarding this new tax.

Basics of the Tax Calculation

The tax is imposed on Oregon commercial activity in excess of $1 million at a 0.57% tax rate, plus a $250 minimum fee. To arrive at Oregon commercial activity, a taxpayer starts with Oregon sales and then deducts the 35% of the higher amount – either apportioned labor expense or cost of goods sold. The CAT also requires business entities that have common ownership and operate a unitary business to file on a combined basis. For a more in-depth explanation and some examples, please refer here.

Registration Requirements

The registration requirements can take taxpayers by surprise. While a tax liability is not owed until $1 million of Oregon commercial activity is reached, the registration threshold is imposed at just $750,000 of Oregon commercial activity. Thus, it is possible to have a filing requirement despite having no tax liability. Registration is due within 30 days of reaching the $750,000 threshold and can be done via this link.

Filing Frequency

The estimated tax for Oregon CAT is filed and paid quarterly based on a calendar year reporting period with the first quarter due April 30, the second quarter due July 31, the third quarter due October 31 and the fourth quarter due January 31. Due to the complications caused by the coronavirus, Oregon has stated that they will not impose underpayment of estimated tax penalties as long as taxpayers make a good faith effort in determining their estimated tax liability. The first annual CAT return is due April 15, 2021.

Taxpayer Action Items

Companies that have sales to Oregon customers and/or deliver goods to Oregon destinations should:

Review their Oregon sales from January 1, 2020 through March 31, 2020 to determine if the amount exceeds $750,000;
- If the threshold is met, make an estimate of what the net amount would be after taking the deduction described above. If the net amount is estimated to exceed $750,000, then an OR CAT registration should be made. If the net amount is over $1 million, then a first quarter Oregon CAT payment should also be made by the end of this month.
If Oregon activity is approaching the registration requirement, monitor the sales in case the $750,000 threshold is exceeded, or anticipate when that will occur, and register and begin paying the CAT as applicable.

If you have any further questions, please contact your Sikich tax professional.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

About the Author

Sikich

Sikich is a global company specializing in technology-enabled professional services. With more than 1,900 employees, Sikich draws on a diverse portfolio of technology solutions to deliver transformative digital strategies and is comprised of one of the largest CPA firms in the United States. From corporations and not-for-profits to state and local governments and federal agencies, Sikich clients utilize a broad spectrum of services* and products to help them improve performance and achieve long-term, strategic goals. *Securities offered through Sikich Corporate Finance LLC, member FINRA/SIPC. Investment advisory services offered through Sikich Financial, an SEC Registered Investment Advisor. 