Late Friday January 24, 2020, the Oregon Department of Revenue (DOR) released the three latest rules for the Corporate Activity Tax (CAT). The much-awaited proposed rules related to the exclusions for wholesale sales and groceries are available at the Oregon DOR website. Earlier in the week, the DOR released the proposed rule related to the exclusion for dealer-to-dealer sales of motor vehicles.

150-317-1140 defines the exemption from the CAT for sales or trades of vehicles between dealers. The exclusion applies if the vehicle is being acquired pursuant to a customer's request and the purchasing dealer provides in writing a document that includes the following information:

  • The seller’s name, address, federal identification number, and dealer license number from the appropriate licensing jurisdiction;
  • The purchaser’s name, address, federal identification number, and dealer license number from the appropriate licensing jurisdiction;
  • A description of the vehicle, including the vehicle identification number, serial number, or other identifying number, and the make, model, and year of the vehicle;
  • A statement, signed by the purchaser, their employee, or authorized representative, affirming that the vehicle described in the document is purchased or transferred for resale to meet a specific customer’s preference; and
  • The date ownership of the vehicle is transferred

150-317-1400 Provides guidance for determining when property is eligible for the exclusion available for property to be resold out of state. This rule further defines the requirement for documentation/certification required to be provided to the seller, in order for the seller to exclude the sale as a sale to be resold out of state for purposes of the CAT.

  • Any document provided by the wholesaler to the seller at the time of the sale may serve as an out-of-state resale certificate as long as the following items are included:
    • The wholesaler’s legal name and Oregon address;
    • The wholesaler’s federal tax identification number;
    • The date of the purchase;
    • The total amount of purchased property;
    • The purchase price paid by the wholesaler;
    • The dollar amount of purchased property that the wholesaler will resell outside of Oregon; and
    • The signature of the wholesaler, their authorized representative, or employee, certifying that the person is a wholesaler as that term is defined in Oregon Laws 2019, chapter 122, section 58(20), as amended by Oregon Laws 2019, chapter 579, section 50.
  • A wholesaler may use a reasonable method to determine the amount of property to be sold out of state
    • Must be based on the facts available at the time of the purchase/sale
    • Wholesaler may use the approximation ratio described in the rule to approximate a ratio
    • The approximation ratio is a fraction.
    • The numerator is the amount of commercial activity the wholesaler realized from sales to Oregon customers in the prior year
    • The denominator is the amount of commercial activity the wholesaler realized from all sales during the prior year
    • Wholesalers located in multiple states may only include in the numerator and denominator their commercial activity realized from property delivered from their Oregon locations
    • Sales of property delivered from the wholesaler’s locations outside of Oregon are not included in the ratio

150-317-1140 Provides guidance related to the wholesale sale of groceries exclusion from the CAT. This rule is very specific an only applies to sales of groceries that will be resold in the same form.

  • Wholesale sales of groceries is the sale of goods to a purchaser for the purpose of resale without further processing in the regular course of the purchaser’s trade or business.
  • In order to exclude sales as a wholesale sale the following requirements must be met
    • The transaction is a wholesale sale;
    • The items sold in the transaction are food or food products that meet the definition of groceries, in a form that may be resold to the final consumer for home consumption without processing;
    • The sale is made to a purchaser for the purpose of reselling the groceries to the final consumer for home consumption; and
    • The wholesale seller obtains written verification from the purchaser that the purchased groceries will be resold without processing, by a store that typically sells groceries to the final consumer for home consumption.
    • Any document may serve as verification as long as it contains the following information:
      • The purchaser’s name and address;
      • The date of the purchase, the item(s) purchased, and the amount purchased; and
      • Verification from the purchaser of the amount of the purchase that will be resold, without processing, to the final consumer for home consumption.
    • Safe Harbor - A wholesale seller is not required to obtain separate verification from the purchaser if the purchaser is a qualified SNAP retailer with a current permit to accept SNAP benefits issued by the U.S. Department of Agriculture, and the purchase was made for the purpose of resale of groceries at a store authorized as a retail food store under 7 U.S.C. 2012(o). The wholesale seller must retain sufficient documentation to demonstrate that the sale was made to an authorized retail food store under 7 U.S.C. 2012(o)

150-317-1150 Provides guidance related to the retail sale of groceries exclusion from the CAT.  This rule defines the term store for purposes of the exclusion as the location from which a taxpayer sells goods at retail to the final consumer for home consumption. The term store includes both physical locations and online storefronts. The rule further defines the exclusion for retail sales of groceries as:

  • Groceries sold at retail to the final consumer for home consumption
  • Groceries likely has the same definition as the SNAP definition used for the safe harbor available in Rule 150-317-1140 above.
  • Home consumption is not clearly defined rather the rule is applied on a case by case basis, with the following factors to be considered:
    • Whether the store’s average gross receipts from the sale of hot food is greater than the average gross receipts from the sale of groceries
    • Whether the store offers on-site dining facilities, and if so, whether the percentage of total floor space allotted to dining facilities for customers is greater than the percentage of floor space dedicated to shelves displaying groceries available to customers for retail sale
    • Whether the store advertises itself as being engaged in the sale of hot food or ready-to-eat food

Please stay tuned to our Corporate Activity Tax Blog for updates.