Favored for its diverse landscapes and beautiful beachside towns, Oregon is a place for cozy adventures. Apart from its inviting nature, the distinctive rules for sales tax in Oregon will leave you curious about how it works.
This guide breaks down everything you need to know about Oregon, one of the five
states without sales tax. By the end of this comprehensive guide, you’ll understand Oregon’s unique tax regulations with confidence and ease.
Is There Sales Tax in Oregon?
Throughout its tariff history, Oregon has never levied a sales tax. Currently, the state does not have plans to change its tax system anytime soon. For now, Ashland City is the only jurisdiction in the state that imposes a sales tax on food and beverages.
This leads to the question: Why is there no sales tax in Oregon?
The Beaver State aims to promote a business-friendly economy, finding the idea of sales tax nothing but a detrimental burden. After all, low-income individuals or small businesses are most likely to be affected negatively if Oregon had a sales tax.
Oregon also attracts more consumers to the state by charging no sales tax, creating more revenue and opportunities for its local market. This is part of Oregon’s economic strategy to keep its trade flourishing.
Attempts have been made to change this system. However, the Oregon legislature and its voters continuously oppose the idea of imposing a sales tax. With this setup, how does the state manage to fund its projects?
The main source of revenue for Oregon comes from its personal income tax. From 2025 to 2027, Oregon estimates that its earnings from the said tariff could cover 86%
of the state’s General Fund Revenue.
To ensure the state collects its revenue from all eligible individuals or corporations, Oregon has introduced a rule called “Substantial Nexus.”
What is a Substantial Nexus?
Before diving into the other taxes in Oregon, every business owner must be aware of the state’s economic laws. In most states, a business is determined liable for sales tax when it creates a sales tax nexus.
Since Oregon has no sales tax, it only has a substantial nexus instead. With this regulation, the Beaver State obtains the right to levy taxes on qualified individuals or corporations. This applies whether you are an out-of-state seller or not.
Establishing an Oregon substantial nexus means you meet the following qualifications:
- Physical Location: Having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business in the state of Oregon.
- Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
- Employees, independent contractors, agents, or other representatives operating in Oregon on your behalf or under your business name.
- Having a sufficient economic presence, meaning you regularly conduct business and produce income within the state of Oregon.
To stay informed about the current criteria for establishing a substantial nexus in Oregon, take a look at the official regulations available right here!
Beyond Oregon Sales Tax: Other Taxes You Should Know
Now that you’ve learned how a substantial nexus works, it’s time to find out which taxes in Oregon can be applied to you. Practically,
other taxes in Oregon can still affect your business’s operations.
Aside from personal income tax, here are the different Oregon taxes you should know.
Each one follows unique measures; thus, only specific businesses can be directly affected by these tariffs.
Vehicle Taxes
Though Oregon has no general sales tax, its closest alternative would be its Vehicle Taxes. On January 1, 2018, two types of Vehicle Taxes were imposed.
- Vehicle Privilege Tax: applies to any vehicle seller with a physical presence in Oregon.
- Vehicle Use Tax: applies to out-of-state vendors who sell taxable vehicles to customers in Oregon.
To easily differentiate between the two, see Oregon’s official diagram for guidance.
Vehicle Privilege Tax
Oregon imposes a 0.005% Vehicle Privilege Tax on the sales of every taxable vehicle within the state. A taxable motor vehicle must meet all of the following conditions:
- Have a 7,500-mileage or less
- Sold with an MSO/MCO if there’s no odometer
- Purchased on January 1, 2018, or at a later date
- Weighing 26,000 pounds or less in gross vehicle weight rating (GVWR)
- Never registered or titled in the state of Oregon (exceptions apply to dealer demonstrators)
Vehicle Use Tax
If you are an out-of-state vehicle merchant, collecting the 0.005% Vehicle Tax is optional when selling to customers in Oregon. After all, some businesses offer to handle the tax as part of their service or simply out of consideration for their buyer.
If you choose to collect the tax, it must be labelled as “Oregon Vehicle Use Tax” in the receipt. This would also mean you will have to file and remit the vehicle use tax on behalf of your Oregon customers.
However, once you create a substantial nexus in Oregon, you will be considered to have a physical presence within the state. When this occurs, collecting the Vehicle Use Tax is no longer optional but rather a legal obligation you must comply with.
Note that filing and remitting vehicle taxes in Oregon follows a specific process. It is different from other general taxes within the state. To simplify your operations, you can let TaxHero handle the procedure for you.
Business Taxes
Oregon’s corporate taxes are its 2nd largest source of revenue. These business taxes are classified into 2 types:
- Corporate Income Tax – applies to remote sellers with a substantial nexus in Oregon
- Corporate Excise Tax – imposed on Oregon-based businesses, has a minimum of $150
The rate for corporate excise or income tax starts at 6.60%
for businesses with a taxable income worth $1,000,000
or less. This rate increases to 7.60%
if the total net revenue exceeds $1 million.
For a summary of Oregon’s corporate excise or income taxes, access the state’s official guidelines here.
Corporate Activity Tax (CAT)
On May 16, 2019, Oregon approved House Bill 3427—also known as the Student Success Act. Under this law, a 0.57% corporate activity tax
(CAT) is imposed on all businesses earning more than $1,000,000 in total income.
The Corporate Activity Tax is
computed as $250 plus 0.57% of the business’s commercial activity exceeding the $1 million threshold. Moreover, companies are allowed to deduct about 35%
of the Cost-of-Goods Sold (COGS) or the cost of employee labor.
If you are a remote seller, know that Corporate Activity Tax also follows the standard guidelines of Oregon’s substantial nexus. Thus, you can still be liable for this tariff if you have a substantial nexus in the state.
Aside from these factors, here are more details about the Corporate Activity Tax in Oregon:
- Revenue from Corporate Activity Tax: Used for funding schools, learning programs, and the K-12 agenda.
- Businesses are allowed to recover the expenses for Corporate Activity Tax: The total price charged must be disclosed in the business’s commercial activity.
- A business with a total income of $750,000 must register for the Corporate Activity Tax within 30 days of achieving this threshold. Failure to register leads to a penalty fee of $100 monthly or $1,000 yearly.
Have more questions about Corporate Activity Tax in Oregon? View the state’s list of FAQS here.
Local Sales Tax
As previously mentioned, there is only 1 place in Oregon that imposes a local sales tax—that would be Ashland City, located in Jackson County.
Since 1993, the residents of Ashland have approved the imposition of the Food and Beverage Tax (F&B).
The rate is set at 5.00% and is levied on all sales of prepared food and beverages (excluding alcoholic drinks) in restaurants.
The Food and Beverage Tax is also applicable to:
- Takeouts and
- Food deliveries
Moreover, Ashland also imposes a 10.00% Transient Lodging Tax (TLT). If you are planning to sell food or start a lodging business in this city, it’s good to be aware of these specific local taxes in Oregon.
Oregon and Remote Sellers
Though Oregon has no general sales tax, remote sellers from Oregon may still be liable for sales and use tax obligations in other states. This happens when the remote seller establishes a physical
or an economic nexus
in another state that has a sales tax.
Physical Nexus
A physical nexus means having a significant physical presence or engaging in enough activities within a state to require the collection and payment of sales tax.
The primary factors that determine a physical nexus in other states are identical to Oregon’s substantial nexus, with only a few additions:
- Affiliate Nexus: You could trigger a physical nexus if you have affiliates in a state. This applies whether they operate online or in-person, and have collectively sold a total amount of sales or delivered transactions that may meet a state’s nexus threshold.
- Presence at Trade Shows: In some states, such as Wyoming or Hawaii, for example, presence at trade shows and making a specific amount of sales during such events can also trigger a physical nexus.
Economic Nexus
States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as economic nexus.
In general, the thresholds in most states are set at:
- 200 total transactions within the state and/or
- $100,000 in gross revenue in the previous or current calendar year’s sales or the prior 12 months.
However, this is only a common standard. Other states may have different amounts set for their economic nexus thresholds. For example,
California has a higher requirement of
$500,000 in total sales in the previous or current calendar year.
Once you meet these thresholds in other states, Oregon remote sellers can still have the responsibility of collecting and remitting sales tax.
To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.
Business Compliance Obligations in Oregon
Oregon does not have a general business license or a
seller’s permit, unlike other states with sales taxes. However, local municipalities in Oregon may
require a business license or permit to stay compliant with the state’s regulations.
Depending on your business, your obligations may also vary. In that case, let us summarize everything you might need to do to set up your business in Oregon.
- Check the state’s license directory – With over 1,100 license types, it’s best to directly identify which one your business needs.
- Reach out to local municipalities – Verify if the city requires any business permits or licenses. For instance, Adams City requires a local business license. Meanwhile, Adair City only requires building permits.
- Sign up for the state’s tax programs – You must register your business if you are liable for Oregon taxes, such as the Corporate Activity Tax, business taxes, vehicle taxes, and more.
- Collect, file, and remit the appropriate taxes – Knowing the different taxes in Oregon, you must fulfill your legal obligations to avoid tax-related penalties.
- Register your business in other states – Oregon remote sellers with a sales tax nexus in other states must follow the sales and use tax regulations of the states where they are engaged in business.
For additional directions on starting a business in Oregon, visit the state’s official guide here.
Please be advised that different licenses and taxes also involve different registration steps, requirements, and collection processes. To simplify your experience, you can let experts at TaxHero take care of the complicated work.
Conclusion
Despite having no sales tax, understanding relevant tax obligations in Oregon is always crucial to keep your business running smoothly. Remote sellers from Oregon could also face the burden of handling sales tax responsibilities in other states. Failure to comply may lead to
penalties that could harm your business.
To ensure your business stays tax compliant even in a no-sales-tax state, you can make things easier by consulting tax professionals like TaxHero.
Schedule a call with our CEO, who will personally walk you through the intricacies of sales tax compliance in every state.
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