Oregon LLC Taxes

Navigating the tax landscape for a limited liability company (LLC) in Oregon can be challenging. In this Oregon LLC Taxes guide, we cover everything you’ll need to know to file your local, state, and federal taxes — providing essential information to ensure your LLC's compliance and financial well-being.

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

How Is an LLC Taxed in Oregon?

Taxation in Oregon isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.

While LLCs typically benefit from pass-through taxation by default, they can elect to be taxed as one of the following:

• C Corporations: The LLC is treated as a separate entity to its owners, paying corporate income tax rates on its total profit while the owners also pay personal income taxes on any distributions they take.
• S Corporations: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay FICA or self-employment taxes on them.

The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Oregon to help you ensure your LLC navigates them effectively.

Oregon Local Taxes

Below, we have prepared a list of the most prevalent local taxes that typically impact LLCs in Oregon:

Property Tax

In Oregon, LLCs face property taxes on both real estate and business-used personal property, with these taxes being assessed by county taxation offices. LLCs are required to file a detailed return of their taxable properties annually by March 15. The tax rate on these properties, while set by local taxing districts, is subject to state-imposed limits.

Oregon permits the establishment of special districts that can levy additional property taxes for services such as transportation and fire protection. Consequently, LLCs operating within these districts might encounter additional tax burdens depending on the district's specific tax rates.

Note: Oregon's constitution limits property tax rate increases to a maximum of 1.5% and caps assessment increases at 3% each year.

Metro Supportive Housing Services (SHS) Tax

LLCs in the Portland metro area, encompassing Multnomah, Clackamas, and Washington counties, are subject to the SHS Tax from May 2020. This tax specifically targets LLCs with annual gross receipts over $5 million, imposing a 1% tax on their profits. The revenue from this tax is designated for supporting housing services and regional infrastructure development.

Portland Public School District Debt Millage

Introduced in 2014, this tax impacts LLCs that own property in the Portland Public School District. The millage rate is $2.50 per $1,000 of assessed property value. This means an LLC owning a property assessed at $1 million would pay $2,500 annually towards this tax, which funds capital improvements in local schools.

Pay Ratio Surtax

Effective from January 1, 2017, the Pay Ratio Surtax applies to publicly traded companies in Portland, which may include LLCs subject to Portland’s Business License Tax. The surtax rate is 10% of the company’s Business License Tax liability if the CEO-to-median worker pay ratio is 100:1 or more, and 25% for ratios of 250:1 or more. This tax is aimed at addressing wage disparity within organizations.

Clean Energy Surcharge

Starting on January 1, 2019, this surcharge applies a 1.0% gross receipts tax on large retailers in Portland, affecting LLCs meeting specific income thresholds. Specifically, it targets those with a total gross income of at least $1 billion nationally and a Portland-based gross income of at least $500,000. The revenue is allocated to support clean energy and community initiatives.

Multnomah County Business Income Tax Rate Increase

LLCs in Multnomah County are subject to an increased business income tax rate of 2.0%, up from the previous rate of 1.45%. This tax is calculated on the net income of the LLC and contributes to county revenue for public services.

Preschool for All Tax

Implemented on January 1, 2021, this tax affects LLCs operating in Multnomah County. The tax rate is 1.5% on incomes over $125,000 for single filers and $200,000 for joint filers, and it increases to 3.0% for incomes above $250,000 (single) and $400,000 (joint). This tax is dedicated to funding preschool education programs.

TriMet Payroll and Self-Employment Tax

LLCs within the TriMet District face a tax rate of 0.8037% on wages and self-employment earnings. This tax is crucial for funding TriMet, the region's mass transit system, and is collected by the Oregon Department of Revenue. For an LLC with $1 million in payroll, the annual TriMet tax would be $8,037.

Recommended Service: Schedule a free consultation with 1-800Accountant to ensure your business remains legally compliant. 

Oregon State Taxes

Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level taxes for LLCs in Oregon. 

Note: There is no Oregon sales tax (unlike most states).

Vehicle Use Tax

Oregon imposes a Vehicle Use Tax on new vehicles bought within the state, including those bought for business purposes. The tax rate is 0.5% on the retail price of any taxable vehicle and must be paid before the vehicle can be titled and registered in Oregon.

Vehicle Privilege Tax

In addition to the Vehicle Use Tax, Oregon also imposes a Vehicle Privilege Tax on new vehicles purchased by Oregon residents from outside the state. This applies to LLCs acquiring vehicles from out-of-state sources. The tax rate is also one-half of 1 percent (0.5%) on the retail price of the vehicle. Payment of this tax is required for titling and registering the vehicle in Oregon.

Individual Income Tax Rate

Oregon's individual income tax system (applied to LLCs with pass-through taxation) operates on a progressive scale, meaning tax rates increase with higher income levels. 

For instance, single filers and those married filing separately face an 8.75% tax rate for incomes up to $125,000, and incomes above this threshold are taxed at 9.9%. Similarly, for joint filers, heads of household, and qualifying surviving spouses, income up to $250,000 is taxed at 8.75%, with the rate rising to 9.9% for amounts exceeding this limit. 

These tiered tax rates mean that as the taxable income increases within these brackets, the amount of Oregon income tax owed also increases.

Corporate Excise Tax

Corporations operating in Oregon are subject to corporation excise tax, which is an income-based tax. For Oregon taxable income up to $1 million, the Oregon corporate excise tax rate is 6.6%. For income exceeding $1 million, the tax rate is 7.6% on the amount over $1 million, plus a flat amount of $66,000.

Corporate Activity Tax (CAT)

The CAT, effective since January 1, 2020, is a tax imposed on businesses, including LLCs, for the privilege of doing business in Oregon. It's calculated on a business's total commercial activity in Oregon, with the tax applying to taxable commercial activities exceeding $1 million. The CAT is computed as $250 plus 0.57% of the commercial activity exceeding the $1 million threshold.

Heavy Equipment Rental Tax (HERT)

The HERT is a 2% tax on the rental price of heavy equipment and tools when rented from a qualified heavy equipment (QHE) rental provider. This tax replaced the personal property tax on heavy equipment and tools held primarily for rent.  

Note: Equipment and tools rented for a single defined term of 365 or more consecutive days are not subject to the rental tax.  

Minimum Corporate Tax

Oregon imposes a minimum tax on LLCs classified as corporations based on their Oregon sales. The tax starts at $150 for sales under $500,000 and increases with higher sales brackets, aligning the tax amount with the scale of business operations. This structure ensures that every corporate entity contributes a baseline tax, with the maximum tax applied to those with the highest sales figures.

State Lodging Tax

The state lodging tax in Oregon funds Oregon Tourism Commission programs. The current tax rate is 1.5% of the amount charged for occupancy of transient lodging. This tax is critical for businesses in the hospitality sector, including hotels, motels, bed and breakfasts, resorts, and other lodging facilities.

Insurance Excise Tax

Insurance companies operating in Oregon must file an insurance excise tax return. This tax is calculated based on the company's business activities in Oregon, including income from policy premiums and other Oregon-based sources.

Statewide Transit Tax

The Statewide Transit Tax, set at 0.01%, is withheld from:

• Wages of Oregon residents, irrespective of their work location.
• Wages of nonresidents who perform services in Oregon.

It applies to employees' wages as defined in ORS 316.162 and is the responsibility of the employer to withhold, report, and remit. The definition of 'wages' has specific exclusions, such as self-employment income.

For more details on Oregon state taxes, take a look at the Oregon Business Guide.

Federal Taxes

Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below are some of the main types your LLC may be required to pay for federal tax purposes:

Income Tax

By default, the Internal Revenue Service (IRS) will not treat single and multi-member LLCs as a separate entity from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your individual tax returns and pay federal income taxes on them at the personal rate of your tax bracket.

Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these taxes are levied and how you’ll need to submit your federal income tax return.

Self-Employment Tax

In addition to income tax, members of single- and multi-member LLCs will need to pay self-employment tax on the share of the business’s profits that they report on their personal tax return at the end of the year.

This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.

Employment Tax

If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.

Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.

Excise Tax

If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.

Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.

How to File LLC Taxes in Oregon

Below, we’ve outlined the general process an LLC in Oregon will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in. 

Step 1: Gather Your Documentation

To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:

• You and your partner’s Social Security number, date of birth, and residential address
• The previous year’s tax returns
• Your LLC’s Employer Identification Number (EIN)

Then, you’ll need to gather all documentation related to your business’s income, such as:

• Invoices you’ve issued
• Sales transaction logs
• Electronic payment reports from services like PayPal or Stripe

Lastly, assemble all records pertaining to your business expenses, which should cover:

• Lease receipts for your business premises
• Bills for utilities
• Records of office supplies purchases
• Documentation of business-related travel
• Payroll records for employees

Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return. 

Step 2: Find The Right Tax Forms

Once you've gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:

• Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
• Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
• C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it's a weekend or holiday.
• S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline for filing taxes using 1120-S is March 15 or the following business day.

Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.

With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.

Step 3: File Your Taxes

The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:

• Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
• State Tax Returns: LLCs in Oregon can file their state tax returns electronically via the Oregon Department of Revenue's online system, Revenue Online. This service provides a secure and efficient way to submit tax documents and payments.
• Local Tax Returns: Oregon LLCs should contact their respective city or county tax offices to access the required platforms and receive guidance on submitting local taxes specific to each municipality.

Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form. 

For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings. 

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

Keep Your Oregon LLC Compliant

While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant. 

Oregon LLC Annual Report

LLCs in Oregon are required to file an annual report with the Secretary of State. This report is key to maintaining your LLC's active status and ensuring that your business information is current with state records and serves as an opportunity to update any significant changes in your LLC, such as address modifications or shifts in management structure.

The deadline for filing the annual report is set approximately 50 days before your LLC’s anniversary date. The cost for filing is $100, and it's recommended to file directly through the Oregon Secretary of State's official website to avoid extra charges. Late submissions can lead to financial penalties.

Licensure and Tax Requirements

In Oregon, almost all businesses are required to obtain various licenses and permits at the local, state, and federal levels. Below, we’ve broken down three of the most common types your LLC may need:

• Local Business Licenses: In Oregon, local jurisdictions often require LLCs to secure business licenses or permits. The specific requirements depend on the city or county where your LLC is based.
• Professional Licenses: Specialized sectors such as healthcare, engineering, or real estate demand relevant professional licenses for LLCs. These are regulated by various state boards and agencies, like the Oregon Medical Board for healthcare-related LLCs.
• Environmental Permits: LLCs with operations impacting the environment, including waste disposal and emissions, need specific environmental permits. These are issued by the Oregon Department of Environmental Quality, covering areas such as air and water quality and waste management.

Note: For a comprehensive list of licenses and permits required for your LLC in Oregon, visit the Oregon Business Xpress Licensing Directory. 

Oregon LLC Taxes FAQs