Oregon: Use Tax Applies to Purchase of Vehicles used by Rental Car Company

The Oregon Tax Court recently held that the state’s relatively new motor vehicle use tax applied to purchases of vehicles by a rental car company. Oregon is one of five states that does not impose a state-level sales and use tax. However, in 2017, legislation was enacted to impose a 0.5 percent tax “on each vehicle dealer for the privilege of engaging in the business of selling taxable motor vehicles at retail. The tax is collected from the purchaser.  A corresponding use tax is imposed on the “storage, use or other consumption in this state of taxable motor vehicles purchased at retail from any seller.” The taxpayer at issue, a rental car company, purchased vehicles from out-of-state dealers that were shipped to its Oregon location. No taxes were paid on the transactions. The issue before the Tax Court was whether Oregon’s motor vehicle use tax applied to the taxpayer’s purchases.

To answer this question, the Tax Court engaged in a lengthy discussion as to what the phase “vehicles purchases at retail” was intended to mean. Ultimately, the Tax Court rejected the taxpayer’s position that a sale “at retail” should be interpreted to apply to only to a small quantity of purchases. In other words, the taxpayer argued that it did not purchase the vehicles “at retail” because it purchased a large quantity of cars. The court concluded that the plain meaning of a purchase “at retail” could refer either to a purchase of a small number of vehicles or to a purchase of any number of vehicles if the purchaser buys them for the purpose of consumption and not for resale. In the court’s view, the legislature intended the phrase “vehicles purchased at retail” to mean vehicles purchased by a purchaser other than for resale. In this instance, the taxpayer’s purchases were not for resale; the taxpayer purchased the vehicles to rent to customers. Accordingly, the court upheld the use tax assessment. Please contact Vinh Tran at 503-820-6803 with questions on EAN Holdings, LLC. v. Dep’t of Rev.