Welcome to the wonderful world of Oregon CAT Tax!
What is commercial activity?
Commercial activity is the total amount realized by a company from the transactions and activity in the regular course of their business in Oregon, without deduction for expenses incurred by the business. Commercial activity is realized according to the method of accounting used for federal income tax purposes.
While commercial activity includes most business receipts, receipts from certain items are excluded and are not subject to the CAT. For example, the following items are excluded:
Receipts from the sale of motor vehicle fuel.
Receipts from the wholesale and retail sales of groceries.
Sales of items or services that are delivered outside of Oregon.
Receipts from a farmer’s sales to an agricultural cooperative described in Section 1381 of the Internal Revenue Code.
Property, money, or other amounts received by an agent on behalf of another in excess of the agent’s fee or commission.
Receipts from transactions between members of the same unitary group.
Distributive income received from a pass-through entity.
These are only a few of the items not subject to CAT. The CAT legislation has a list of items that are excluded. See Section 50 of HB 2164 (2019).
What does this mean for bookkeeping?
Ideally you do the following in QuickBooks:
- Create two Classes: Oregon and Non-Oregon.
If you are already using Classes for something else and it is not feasible to make any changes, you can use Customer Type. Make sure you tie out the sales on the P&L to the sales on the P&Ls filtered for each Customer Type.
P&L = Oregon P&L + Non-Oregon P&L
- Ensure that your COGS are assigned to Customer:Jobs and Classes.
- The accounting basis must be the same as your federal income tax return. This means you may need to run special cash basis reports if the tax return is cash basis.
Todd D. Yee, CPA of STOVER NEYHART YEE & CO. is allowing us to share his information sheet for the CAT Tax shown below.
You can contact Todd at:
806 NW Buchanan Ave., Corvallis, OR 97330
P 541.754.1144 x114
Register as a CAT taxpayer:
You will need:
- Date on which you exceeded $750k in “Oregon commercial activity” – effectively gross receipts from Oregon sales. If you’ve exceeded that level already just use 1/1/20.
- Valid email or current Revenue Online login. An Oregon “Revenue Online” account is useful to have anyway so consider establishing this.
- Your business activity code – a six-digit industry code on: Line 2a of Schedule K, Form 1120 – C corp, Box B page 1 of Form 1120S – S corp, Box C page 1 of Form 1065 – Partnership, Box B of Schedule C Individual Form 1040
- 1/31/20 – date by which you should register above if your annual gross Oregon receipts exceed $750,000
- 4/30/20 – due date of first estimated CAT tax payment. Followed quarterly thereafter in July, October and January. Estimated payments are required if the estimated annual tax exceeds $5,000.
- 4/15/21- due date of first annual CAT return. The return will constitute a reconciliation of Corporate Activity Tax for the calendar year (regardless of your actual tax year). Tax due or refundable will be actual Corporate Activity Tax less any estimates paid during the year. These forms have not been released by ODR to date.
Definitions and bookkeeping considerations:
- Oregon Commercial Activity: Gross Oregon receipts should be separately identifiable from overall gross receipts sourced outside of Oregon.
- Cost Subtraction: Labor and Cost of Sales should also be separately identifiable as Oregon sourced. 35%of either labor apportioned to Oregon or Cost of Sales apportioned to Oregon may be subtracted from “Oregon Commercial Activity” to arrive at “Taxable Oregon Commercial Activity”.
Rough calculation of tax:
Oregon Commercial Activity (i.e. Oregon sourced gross receipts unless excludable)
Cost Subtraction (35% of either Oregon labor or Oregon cost of sales)
Taxable Oregon Commercial Activity
Taxable Oregon Commercial Activity
$250 minimum tax
Total Corporate Activity Tax
$5 million of Oregon sourced gross revenue, $500,000 of Oregon apportioned labor
5,000,000 -(0.35 x 500,000) -1,000,000 = 3,825,000 Taxable Oregon Commercial Activity
3,825,000 x .0057 + 250 = 22,053 Corporate Activity Tax