Oregon CAT: The DOR Issues Draft Rules Regarding the Sourcing of Motor Carrier Transportation Services and Farming Operations

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On September 23, 2020, the Oregon Department of Revenue (“DOR”) issued two new draft rules regarding the Oregon Corporate Activity Tax (“CAT”).

Sourcing of Motor Carrier Transportation Services (OAR 150-317-1070)

This draft rule provides guidance for sourcing commercial activity from motor carrier transportation services. Under this rule, amounts realized from motor carrier transportation services are sourced to Oregon if the service is delivered to a location within Oregon. Moreover, the total commercial activity sourced to Oregon during the tax period from motor carrier transportation services include:

  • All receipts from any transportation service that both starts and ends in Oregon;
  • That portion of receipts from transportation services, other than hauling freight, mail, and express, passing through, into, or out of Oregon, as determined by the ratio of miles traveled in Oregon to total miles traveled from the points of origin to destination; and
  • That portion of receipts from hauling freight, mail, and express from movements or shipments passing through, into, or out of Oregon as determined by the ratio of the mobile property miles traveled by such movements or shipments in Oregon to the total mobile property miles traveled by movements or shipments from points of origin to destination.

The rule, however, clarifies that receipts sourced to Oregon may not include receipts from transportation services to the extent sourcing such receipts to Oregon is prohibited by the Constitution or laws of the United States. 

Farming Operations: Clarifying Definitions for Agricultural Commodities, Farming Operations, Out of State Sales Based on Industry Averages (OAR 150-317-1170)

This draft rule provides additional guidance to taxpayers with farming operations to determine their percentage of in-state to out-of-state sales of agricultural commodities, details broker or wholesaler certificate requirements, and clarifies which agricultural commodity statistics may be used. Under this rule, a taxpayer that is engaged in a farming operation as defined in Oregon Laws 2020, chapter 2, section 6(1)(c) that sells agricultural commodities to a broker or wholesaler may demonstrate the amount of the taxpayer’s goods sold in Oregon versus outside of Oregon for purposes of determining commercial activity by: 

  • Obtaining an out-of-state resale certificate as provided in OAR 150-317-1400;
  • Obtaining a certificate that states the percentage of the taxpayer’s goods sold in Oregon versus outside of Oregon from the broker or wholesaler receiving an agricultural commodity from the taxpayer; or
  • Using an industry average percentage, for sales of the agricultural commodity made the previous tax year, based on the most recent information from the U.S. Department of Agriculture National Agricultural Statistics Services and other sources of sales information.

If the taxpayer seeks to demonstrate its percentage of goods sold in Oregon by obtaining a certificate from a broker or wholesaler, the taxpayer must obtain the certificate by the return due date (including extensions), and the certificate must contain:

  • The broker or wholesaler’s legal name and Oregon address;
  • The broker or wholesaler’s federal tax identification number;
  • The date of purchase;
  • The total amount of purchased property;
  • The purchase price paid by the broker or wholesaler;
  • The percentage of purchased property that the broker or wholesaler will resell outside of Oregon; and
  • The signature of the broker or wholesaler, their authorized representative, or employee, certifying that the person is a broker as that term is defined in Oregon Laws 2020, chapter 2, section 6(1)(b) or a wholesaler as that term is defined in ORS 317A.100(20).

Lastly, the rule provides that if a taxpayer seeks to demonstrate the percentage of the taxpayer’s goods sold in Oregon via the industry average statistics, the taxpayer must rely on statistics for the specific sub-type of agricultural commodity sold, where available, or may rely on statistics for the general type of agricultural commodity where sub-type statistics are unavailable for the specific agricultural commodity.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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