Oregon's New Vehicle and Bike Taxes

Famously opposed to a “sales” tax (except on marijuana), Oregon will soon add a half-percent “privilege” tax on new car dealers to its growing list of excise taxes, including car rentals and transient lodging, not to mention alcoholic beverages and tobacco. The new tax with respect to new car sales will become applicable January 1, 2018. The revenue, estimated at $25 million per year, will be dedicated to provide incentives for zero-emission vehicles and to air, rail, marine, transit, and bicycle/pedestrian infrastructure projects, but not necessarily road projects.

The bill expressly anticipates a court challenge based on Article IX, section 3a of the Oregon Constitution, which requires revenue from any tax on the “ownership, operation or use of motor vehicles” to be used exclusively for road construction and maintenance.

Presumably for that reason:

• House Bill 2017 defines the new tax as imposed on vehicle dealers “for the privilege of engaging in the business of selling” new cars in Oregon.
• The bill allows, but does not require, a dealer to collect the tax from the buyer.
• The bill declares that the buyer is “not considered a taxpayer” for purposes of the privilege tax. The privilege tax does not apply with respect to a sale to a nonresident or to a business that will use the vehicle primarily outside Oregon.

The privilege tax applies only with respect to retail sales. If the purchaser is in the business of selling vehicles and provides the seller a resale certificate, the privilege tax does not apply.

House Bill 2017 generally prohibits local governments from imposing privilege taxes on dealers or sales or use taxes on vehicles.

The bill includes a use tax that complements the privilege tax and is imposed at the same rate (0.5%). The use tax is imposed on the purchaser of a new vehicle who uses, stores or otherwise “consumes” the vehicle in Oregon. The purchaser’s use tax is reduced by the amount of privilege tax or use tax imposed by Oregon or any other jurisdiction. Any seller (including a non-dealer other than an auctioneer) is required to collect the use tax if the seller is engaged in business in Oregon. In contrast to the privilege tax, all revenue from the use tax is dedicated to the State Highway Fund.

House Bill 2017 also imposes a $15 excise tax on the sale at retail of a new bicycle with a price of $200 or more and a wheel diameter of at least 26 inches. The tax is imposed on the purchaser, but a seller engaged in the business of selling bicycles is required to collect and remit the tax. Revenues, estimated at $1 million annually, are dedicated to grants for bicycle and pedestrian transportation projects.