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Oregon Supreme Court asked to halt proposed car tax


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SALEM — A group that includes the AAA Oregon/Idaho and the Oregon Trucking Association is asking the state Supreme Court to block a portion of a pending state law they say improperly imposes what amounts to a sales tax worth up to $60 million on new car sales.

The tax was part of a package of taxes and fees in the $5.3 billion highway and transit bill that passed the Legislature in July 2017 with bipartisan support and was signed into law by Gov. Kate Brown. The law is scheduled to go into effect Jan. 1. Among the projects is a renovation of the U.S. Highway 97 and Cooley Road traffic choke-points and funding for Central Oregon transit.

The petition filed Nov. 3 takes aim at a 0.5 percent “privilege” tax on dealers for every new car sold in Oregon. Under the tax, dealers can pass along the privilege tax through the final sales price of the vehicle. For example, a 2018 Subaru Outback 25i with a retail price of $24,000 would be subject to a $120 privilege tax.

Dealers could either include the tax in the price or bump it up to cover their cost. Critics say that is just a sales tax collected by the dealer.

“If the dealer doesn’t pay the tax, the buyer has to pay the tax as a condition of registering, and, thus, using the vehicle,” said Gregory Chaimov, the Portland-based lawyer representing the group.

The group says the tax is barred by a voter-approved 1980 law that all vehicle taxes go to a fund to build and maintain state roads and highways.

“Instead of going to improve or maintain ‘public highways,’ revenues from the tax subsidize individuals’ purchases of zero-emission vehicles and projects for … transportation, such as air and rail,” Chaimov said.

The petitioners are not against providing rebates to buyers of electrical vehicles, Chaimov said.

“They are concerned about this tax violating the Oregon Constitution,” he said.

The Department of Revenue is listed as the defendant and Attorney General Ellen Rosenblum as its lawyer. Lawmakers were worried that the privilege tax might derail the whole legislation, so they inserted language calling for an expedited review if the tax was challenged. Chaimov said the state has until Jan. 3 to submit an opposition to the petition and the case will likely be heard March 24.

The petition is unlikely to be heard prior to the law going into effect Jan. 1.

In addition to the automobile club and trucking group, the petitioners include AAA Oregon/Idaho Auto Source, a car sales operation.

Besides the “privilege tax,” the transportation plan includes a 4-cent hike in the gas tax, a 0.1 percent statewide payroll tax, and a $15 fee on the sale of bicycles costing more than $200.

The state Transportation Commission meets Friday to discuss setting up the process for spending the money, which includes projects throughout the state. Commission chair Tammy Baney, who is also a Deschutes County commissioner, has said construction takes time and voters will see the drawbacks (taxes and fees) of the plan before the benefits (improved roads and bus service).

“If the dealer doesn’t pay the tax, the buyer has to pay the tax as a condition of registering, and, thus, using the vehicle.”

— Portland Attorney Gregory Chaimov