An Oregon law enacts a privilege tax, a use tax, and an excise tax on motor vehicle sales and increases payroll, motor fuel, and motor vehicle taxes. Revenues from the new taxes and tax increases will fund transportation projects. The legislation refers to the three new taxes as transportation project taxes.
Privilege Tax for Selling Motor Vehicles
A new tax is imposed on dealers for the privilege of engaging in the business of selling motor vehicles (vehicles) at retail. The tax rate is 0.5% of the retail sales price of vehicles. While dealers may collect the tax from customers, the dealer owes the tax.
A dealer does not owe the tax if the customer is::
- not a resident of the state; or
- a business if the vehicle will be stored, used or consumed primarily outside the state.
In addition, a dealer does not owe the tax on sales of motor vehicles at auctions if:
- the event lasts less than seven consecutive days, and
- the public pays admission for the event.
Finally, a seller does not have to collect tax when it receives a resale certificate from a purchaser ordinarily engaged in the business of selling motor vehicles.
The legislation states the intent that the privilege tax does not violate the state constitution regarding authorized uses of revenues from motor vehicle taxes. The state supreme court has original jurisdiction to determine whether the privilege tax violates the constitution.
Use Tax on Vehicles Purchased at Retail
A new tax also is imposed on the storage, use or other consumption of motor vehicles (vehicle) purchased at retail from any seller. The tax rate is 0.5% of the retail sales price of the vehicle. Purchasers are liable for the use tax. However, the tax will be reduced by the amount of any privilege, excise, sales, or use tax imposed by any jurisdiction.
A seller must collect the tax and give the purchaser a receipt if:
- the seller is engaged in business in the state or required or authorized to collect the tax; or
- the seller sells motor vehicles for storage, use, or other consumption in the state that are subject to the use tax.
The seller collects the tax at the time:
- of sale; or
- the storage, use, or other consumption of the vehicle becomes taxable.
Excise Tax on Retail Sale of Bicycles
A new excise tax of $15 is imposed on retail sales of “taxable bicycles.” Buyers are liable for the tax. Sellers collect the tax at the time of the sale. “Taxable bicycle” means:
- a new bicycle that has wheels of at least 26 inches in diameter; and
- a retail sale price of $200 or more.
On July 1, 2018, the law imposes a payroll tax at the rate of 0.1% on the wages of employees who are:
- residents of Oregon; or
- nonresidents performing services in Oregon.
If an employer fails to deduct and withhold the tax, the employer will be responsible for paying the tax. Further, the law imposes a penalty of $250 per employee, if an employer fails to deduct and withhold the tax. The maximum penalty is $25,000. Residents of Oregon subject to the tax who earn wages outside Oregon will be responsible for paying the tax. The Department of Revenue will determine how residents will pay the tax on such wages.
Motor Fuel Tax
Applicable to motor vehicle fuel (i.e., gasoline) and aircraft fuel (not sold by a dealer) sold, used, distributed or withdrawn on or after January 1, 2018, the rate of excise license tax per gallon will increase from 30¢ to 34¢. The same increase will apply to the use of fuel (generally, diesel fuel) in a motor vehicle. An additional 2¢ per gallon may be added to each of the increased rates for calendar years beginning after 2019. Additional increases depend on the results of state agency studies.
Mileage Tax Rate
For 2018 and 2019, the mileage tax rate in table “A”, each of the 27 different rates (depending on vehicle weight) will be increased at each level. Increases will include from 49.8 mills to 62.3 mills at the lowest weight and from 163.8 mills to 204.8 mills at the highest weight. Additionally, the axle-weight mileage tax imposed in rate table “B” will be increased at each of its 13 different rates. Increases will include from 169.2 mills to 211.5 mills at the lowest rate for five axles and from 157.2 mills to 196.6 mills at the highest rate for nine or more axles.
The mileage tax rate in table “A”, the rate would increase to 65.4 mills for calendar years 2020 and 2021 and to 72 mills for 2022 and 2023 at the lowest weight. For those same periods, the rate at the highest weight would increase to 215 mills then to 237 mills. Also for those same periods, the axle-weight mileage tax imposed in rate table “B” will increase to 222.1 mills and to 244.7 at the lowest rate for five axles and to 206.4 mills and to 227.4 at the highest rate for nine or more axles.
“Transportation Project” Taxes
The term “transportation project taxes” refers to the new privilege, use, and excise taxes. Several administrative provisions refer to two or all three of the taxes. Most provisions relating to the transportation project taxes apply to:
- sales of “taxable vehicles” (i.e., taxable motor vehicles and taxable bicycles) that become final; and
- the storage, use or other consumption in the state of taxable vehicles that becomes taxable.
Also, most provisions apply as of January 1, 2018.
Payment and Filing Returns
Collection of the use tax and the excise tax should be done at the point of sale. The seller then remits the tax. However, if the seller does not charge the use or excise tax, the customer must remit the tax. Customers pay the tax when filing a report on or before the 20th day of the month following the close of the month in which the tax became due.
Each seller of vehicles that is liable for transportation project taxes must file a return on or before the last day of January, April, July, and October for the previous calendar quarter. The taxes must be paid no later than the date set for submitting each quarterly return without regard to any extensions for filing the returns. Interest will be added to delinquent payments. Sellers of vehicles also must keep records of reports and returns filed with the state, along with other records, for at least five years.
Enforcing the Taxes
The Department of Revenue (DOR) is authorized to administer and enforce the transportation project taxes. The DOR shall enter into an agreement with the Department of Transportation (DOT) concerning the DOT’s enforcement of provisions in the law concerning, among other things, a requirement that customers pay the tax before registering their vehicles. That requirement applies to vehicles purchased on or after January 1, 2018.
Local governments cannot impose any tax on any privilege, excise, sales, or use tax on vehicles that was not in effect before the effective date of this new law.
H.B. 2017, Laws 2017, effective on the 91st day after adjournment sine die and applicable as noted