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Oregon CAT: Oregon Department of Revenue Adds Two New Draft Rules to Website That Will Be Filed as Permanent Rules

June 1, 2020

Overview

(Updated 06/03/2020)

On May 28, 2020, the Oregon Department of Revenue (“DOR”) added two new Oregon Corporate Activity Tax (“CAT”) draft rules, OAR 150-317-1050 (Sourcing of Commercial Activity for Financial Institutions) and OAR 150-317-1160 (Farmer’s Sales to Agricultural Cooperatives), to their website. The DOR indicated both of those rules will be filed as permanent rules alongside two other temporary rules, OAR 150-317-1140 (Wholesale Sale of Groceries Exclusion) and OAR 150-317-1400 (Determining Property Resold Out of State and Methods of Determining), that were filed with Oregon Secretary of State on February 1, 2020. 

We previously discussed OAR 150-317-1050 (Sourcing of Commercial Activity for Financial Institutions) in our May 5, 2020 article, and OAR 150-317-1140 (Wholesale Sale of Groceries Exclusion) and OAR 150-317-1400 (Determining Property Resold Out of State and Methods of Determining) in our January 30, 2020 article.

This is our first time seeing OAR 150-317-1160 (Farmer’s Sales to Agricultural Cooperatives). The rule provides guidance to taxpayers regarding the exclusion for a farmer’s sales to agricultural cooperatives under ORS 317A.100(1)(b)(TT). It sets forth the definition of “farmer’s sales” and provides two examples applying the definition. 

  • OAR 150-317-1160 defines “farmer’s sales” as: 

[A] taxpayer’s receipts from the sale of agricultural commodities, livestock, poultry, dairy products, and similar products or by-products produced through agricultural activity, to an agricultural cooperative in Oregon, provided it is a cooperative organization described in section 1381(a)(1) of the Internal Revenue Code.

  • The definition of “farmer’s sales” does not include:

[The] receipts of a taxpayer who is not in the trade or business of growing or raising agricultural commodities, livestock, poultry, dairy products, and similar products or by-products produced through agricultural activity, or receipts from the sale of any items that were not produced through activities [described in the definition above].

In addition, the DOR has issued an updated version of OAR 150-317-1140 that contains a new example as well as minor modifications to the regulation, including to Examples 1 and 4. The new example, Example 5, illustrates the “facts and circumstances” scenario laid out in OAR 150-317-1140(2). In that example, an LLC that manufacturers cereal enters into a sales agreement that states the wholesaler will resell boxes of cereal, without further processing. The example concludes that the receipts from the transaction are excludible under ORS 317A.100(1)(b)(EE) because, in addition to the sales agreement, the LLC and the wholesaler reasonably expect the cereal will ultimately be sold to the final consumer.

The official comment period for all four of these rules will begin on June 1, 2020. The DOR indicates public comments may be sent to the DOR via email to catrules.dor@oregon.gov, and via mail to 955 Center St. NE, Salem, OR 97301.

The Oregon Department of Revenue (“DOR”) has announced the June 23, 2020 hearing will be a call-in hearing, scheduled to begin at 9:00 a.m. and end at 11:00 a.m. The call-in number is 541-465-2805; PIN 234470. If you wish to testify at the hearing, you will need to register prior to the hearing. Registration will begin at 8:45 a.m. on June 23, 2020, on the conference call line.

As always, we will continue to follow any developments related to the CAT. In the meantime, if you have any questions or comments about the CAT, please do not hesitate to contact Dan Eller or Alee Soleimanpour.

Please visit Schwabe’s COVID-19 resource page for additional information.

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