ONTARIO – After the newspaper received a tip from a reader that an Ontario company had levied personal tax on their purchase, the newspaper set out to find out how something like this could happen on an item that did not appear to have any other tax has, such as some merchandise in the state, including marijuana, alcohol, cigarettes, hotel and motel rooms, and new vehicles and bicycles.
It found that corporate income tax now imposed by the state of Oregon is consumer-refundable as tax for companies with gross income of $ 1 million. In addition, the modified gross income tax does not allow companies to deduct the “total labor cost” from their business activities, but they can deduct part of it. Robin Maxey, Public Information Officer for the Oregon Department of Revenue, said in an email on Monday that companies can deduct 35% from “either their total labor costs or their cost of goods sold.” He also stated that unified corporations, such as corporations that own multiple properties in different states, would only be taxed on commercial activities in Oregon.
Pay it “whether you win or lose”
A local restaurateur spoke to the newspaper on condition of anonymity so that his business would not be targeted for doing what many consider illegal.
According to House Bill 3427, passed in 2019, it doesn’t matter whether a company is making a profit or not, it still has to pay the tax.
In 2020, the business owner said he didn’t make a single dollar as he was out of business for several weeks due to the pandemic. Many times he had to take all of the groceries out of the freezer and give it to charities and employees, driving his losses into the thousands for 2020, he said.
“We went through a lot of pain, but on the other hand we have to pay this CAT tax,” he said, emphasizing that no breaks were made even for enduring multiple shutdowns during the pandemic.
For his company, the CAT tax for the 2020 tax year was $ 12,000. He also has to pay back the loan he took out to run the company.
While the state calls the CAT tax a modified gross income tax, the restaurateur says it isn’t.
“It is indirectly a sales tax. They gave it another name because they wanted to put it [the tax collecting] on the company so that the company gets the blame, ”he said.
District 30 Senator Lynn Findley also agrees.
About 4 to 6 weeks ago after paying the state, the restaurateur reached out to his CPA and Treasury Department to see what, if anything, he could do.
And when he called his CPA, he found that “everyone” is now passing the costs on to customers.
Maxey mentioned last week that the way HB 3427 was written enables companies to cover these costs and does not specify how they can do it.
The restaurateur said nothing is withheld from customers in the company’s pockets for CAT tax.
“We collect on behalf of the state,” he said. “And now we have to fight with the customers.”
Restaurants operate on very small margins, he said, which makes it very difficult to work without the CAT tax.
“Then you have to pay for that and not from your income? This is not for profit. It depends on the earnings regardless of whether you win or lose, ”he said.
He said these types of disguised taxes made it incredibly difficult to do business in Oregon.
“That’s basically why a lot of Oregon companies are fleeing,” he said. “You make it so difficult for entrepreneurs. The conditions here are completely unfair. “
Findley is ‘glad’ to hear they put it on receipts.
Findley, a Republican from Vale, called the CAT tax “an incredibly complex system” and said he and his Republican colleagues fought hard against the law.
And while it was designed so that businesses could amortize the cost, he says, “it wasn’t intended that most people would write it down on a receipt.”
“I’m glad you are,” said Findley. “That awakens consciousness.”
He said most consumers are unlikely to realize that the tax doubles or triples easily, and that a restaurant now pays a CAT tax to the person who sells them the bread and pays them again when they eat the food sell to the consumer, resulting in the tax easily doubling and tripling.
Findley said he made two attempts during this term in office to make exemptions from the bill, including for pharmacies, another company that Findley says operates on low margins. He said prescriptions, Medicaid, Medicare, or some other insurance set the cost, and the CAT tax is eating away at profitability.
“If you take a wafer-thin margin and reduce it, it just gets harder to keep up,” said Findley.
In addition, it is almost impossible to abolish a tax once it has been set. Because of this, Findley and GOP colleagues are now focusing on exceptions. And there are a few exceptions, including marijuana. Most of the CAT tax, however, can be levied in addition to other taxes such as luxury tax.
“The majority party in this state does not want to cut taxes in any way, and they will continue to raise taxes even if we have $ 3.56 billion more revenue than expected,” he said. “And we just looked at how we can raise more money by decoupling from federal tax guidelines when there is no valid reason to do so.”
He said the writers of the package made a bet, hoping most consumers wouldn’t find out and see the 5, 10, or 15 cents being deducted.
“But if you take 15 cents repeatedly it piles up pretty quickly,” he said.