Oregon Raises Taxes to Fund $5 Billion Transportation Investment Plan

On August 18, 2017, Governor Kate Brown signed into law an eight-year transportation tax increase to raise $5 billion for roads, bridges, mass transit, electric vehicles, and other transit options.

House Bill (HB) 2017 affects casual and professional drivers, bicyclists, and payroll employees by increasing the gas tax, weight-mile tax, and other transportation-related fees; imposing an excise tax on the sale of new bicycles; levying excise and use taxes on new vehicles; and instituting a payroll tax. Purchasers of freight transportation may also see their freight rates increase.

Gas Tax

The bill increases the weight-mile tax through 2024, with specific increases varying based on a vehicle’s weight (GVWR). The Table A weight-mile tax for an 80,000 GVWR tractor-trailer combination, for example, will increase from the current 16.38 cents per mile to 25.12 cents per mile beginning January 1, 2024.

Road Use Assessment

By 2022, the road use assessment fee for extraordinary loads will increase by 3.4 cents per mile.

Bicycle Excise Tax

Beginning January 1, 2018, Oregon retailers must collect a $15 bicycle excise tax on the sale of new adult bicycles with wheels at least 26 inches in diameter and a retail sales price of $200 or more.

Payroll Tax

All Oregon residents, and nonresidents who work in Oregon, will see a reduction on their paychecks equal to 0.1%, or $10 per $10,000. Because this 0.1% payroll tax is withheld from wages, employees of businesses operating in Oregon won’t be required to make cash payments or file returns. Oregon residents who work outside Oregon for employers that don’t do business in Oregon will need to pay the tax directly.

Employers must file an annual report of the payroll tax paid by employees to the Oregon Department of Revenue (DOR). This tax applies to payroll tax periods beginning on or after July 1, 2018.

Retail Taxes on New Motor Vehicle Sales

Excise Tax

HB 2017 creates a 0.5%, or $50 per $10,000, tax on retail sales of taxable motor vehicles beginning January 1, 2018. Taxable motor vehicles are new motor vehicles with a GVWR of 26,000 pounds or less, including passenger automobiles, campers, commercial buses, commercial motor vehicles, mopeds, motor homes, and truck tractors and trailers.

Constructed as an excise tax rather than a sales tax, the tax is imposed on retailers that engage in the business of selling taxable motor vehicles. Retailers may absorb the tax or pass it on to the purchaser.

Certain sales of taxable vehicles are exempt:

  • Purchaser isn’t an Oregon resident
  • Purchaser is a business that will use the vehicle primarily outside of Oregon
  • Sale is for resale, when the purchaser provides a resale certificate to the dealer

Dealers must file returns with the DOR by the 20th of the month following the month in which the tax is due.

Use Tax

The bill contains a corresponding use tax for new vehicles purchased outside Oregon that are used within Oregon, which means individuals purchasing vehicles outside Oregon may be required to pay the use tax directly to the state. This tax may be reduced by the amount of tax paid to another state on the purchase of the vehicle.

We’re Here to Help

If you have questions about how HB 2017 may affect you or your business—or you wish to estimate your exposure to better prepare for new payment and reporting requirements—contact your Moss Adams professional or email statetax@mossadams.com.