How it works
- 1Calculate commercial activity sourced to Oregon — broadly, receipts from Oregon sales and services.
- 2Registration is required once Oregon commercial activity exceeds the registration threshold.
- 3Tax applies to taxable commercial activity above $1 million.
- 4A subtraction is available for a percentage of cost inputs or labor costs, apportioned to Oregon.
- 5The tax is a flat base amount plus a percentage of the taxable commercial activity above $1 million.
Sourcing is the whole game
Only Oregon-sourced commercial activity counts. Broadly, receipts are sourced where the customer receives the benefit — the delivery location for goods, and the location where the service is delivered for services. For a business straddling the Columbia, that means Vancouver customers are generally not Oregon commercial activity, which can be the difference between being over and under the threshold.
- Sales delivered to Washington customers are generally not Oregon commercial activity — but may create Washington B&O exposure instead
- Certain receipts are excluded by statute, including some wholesale groceries and specified transactions
- Receipts between certain related entities may be excluded where a unitary group is involved
- Your books need to be able to produce sourcing without a reconstruction — see QuickBooks setup
Planning around the threshold
The $1 million line is a genuine cliff in terms of administrative burden, and a business approaching it should know in October rather than March. Options are limited but real: verifying your sourcing is correct before assuming you are over, confirming which receipts are excluded, timing where legitimately flexible, and ensuring the cost input subtraction is being claimed in full.
Can I pass CAT on to customers?
Oregon restricts how CAT may be presented to customers — it cannot be itemized as a separately stated tax line in the way sales tax is. Pricing decisions are yours; the presentation rules are not.
Does it apply to a sole proprietor?
Yes. CAT applies to persons doing business in Oregon regardless of entity type, so a large-revenue Schedule C business is within scope.
Are there estimated payments?
Quarterly estimated CAT payments are required once liability exceeds a set amount. Missing them creates penalties independent of the annual return.
Does an S-corp election reduce CAT?
No. CAT is levied on commercial activity irrespective of federal entity classification. Anyone selling an S election as an Oregon tax fix is describing federal self-employment tax only — see entity selection.
Not sure which of these apply to you?
Most Portland-area households owe at least two of these and know about one. An appointment sorts out which returns you actually need to file.
Written by
Enrolled Agent, Oregon Licensed Tax Consultant
License number: Enrolled Agent 00160070-EA · Oregon Licensed Tax Consultant 35746-C
Heather has spent more than a decade preparing individual and business returns across the Portland metro and the Columbia Gorge, and holds unlimited rights to represent taxpayers before the IRS.
Last reviewed
This page is general information about Oregon, Washington and federal tax rules, not advice about your own return. Thresholds and rates change every year. Figures were verified as of August 2026 — check the linked official sources, or talk to us about your situation.