In this example, the pair of shoes is taxed multiple times and the actual tax is much greater than 0.57%. All of the freight costs required to get materials and product from seller to buyer are also subject to CAT. This pair of shoes is then taxed again when the store sells the shoes to the ultimate customer. Then, when the pair of shoes is sold to a store, the manufacturer pays the CAT tax on the pair of shoes if it lands in a store in Oregon. All the leather, rubber, and materials necessary to make the shoe in Oregon are subject to CAT when the manufacturer purchases these items. It’s called pyramiding because there are multiple layers of tax that apply in a product’s life cycle, beginning with all the raw materials that are incorporated into a manufacturer’s finished product. Pyramiding is a known problem with a gross receipts tax. Most are reviewing their contracts with their suppliers and customers to give them flexibility when making the decision to pass on the tax.įor example, car dealers will put a new line on their dealer invoice for an estimated amount of their CAT starting as soon as January 1, 2020.Įxecutive Director Shaun Jillions of the Oregon Manufacturers and Commerce told the Oregonian, “A gross receipts tax (CAT) is very unfair to manufacturers because, at every step in the supply chain, you are applying the tax.” What is pyramiding and why does it cause so much concern to businesses? Can you illustrate how this tax structure affects a specific company? Each industry is scrambling to address this right now. Whether businesses choose to actually do this remains to be seen. However, the law imposing the tax doesn’t prevent these businesses from passing their increased costs that result from this new tax on to their customers. The CAT was sold as a tax on businesses and, technically, it’s imposed on businesses. I think the general public has no idea this is coming. Oregonians will hear the CAT being called a gross receipts tax, but isn’t this really a sales tax? Despite multiple past rejections by statewide voters, does the public know the Oregon Legislature (the Legislature) imposed a sales tax on them in 2019 without a vote of the people? Being in this role has been a great honor, and I think that my deep technical background in state tax made me a good resource for the role at OBI. I care deeply about our state and want to make sure we have a vibrant business community and a fair and evenly distributed state tax structure. I was also born, raised, and went to public high school in Oregon. I’ve been working in state and local tax for over 20 years in Oregon. As the chair, you now have the urgent role of helping businesses navigate Oregon's new $2 billion tax increase, which took effect on January 1, 2020. You’re a partner at Moss Adams and co-chair of the Oregon Business and Industry (OBI) Committee on Tax and Fiscal Policy. The new tax will be imposed on businesses that have “the privilege of doing business in Oregon” at a rate of 0.57% of receipts less deductions on sales over $1 million.įollowing are some of the major questions the CAT introduces and insight Oregon businesses and individuals can apply to navigate the new law. In May 2019, Oregon Governor Kate Brown signed into law House Bill (HB) 3472A, the Oregon Corporate Activity Tax (CAT). Following is an adaptation of his interview, which is republished with permission. Rob O’Neill spoke to Oregon Transformation: Ideas for Growth and Change for their December 2019 Newsletter. Provider Reimbursement Enterprise Services.Operational Improvement & Performance Excellence.Bank Secrecy Act and Antimoney Laundering.Fair Value & Financial Statement Reporting.Quality of Earnings (Buy-Side/Sell-Side).Organizational & Operational Assessments.Tax Incentives Energy Efficient Buildings. Employer credit for family and medical leave.State & Local Tax Controversy & Dispute Resolution.Federal Tax Controversy & Dispute Resolution.Environmental, Social, Governance (ESG).
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