Oregon LLC Taxes
LLCs in Oregon are classified by default as pass-through entities, with LLC members paying federal income tax through their own individual returns. Members pay the state’s graduated personal income tax rate ranging from 4.75% to 9.90%. Members are also taxed at the 15.3% federal self-employment tax rate (12.4% for social security and 2.9% for Medicare). You can, however, have your LLC taxed as a corporation.
In this article, we’ll cover:
How Are Oregon LLCs Taxed?
If your LLC is only you, you’re a single-member LLC (SMLLC) and will be taxed as a sole proprietorship—or “disregarded entity”—by default. On the other hand, if your LLC has two or more members, you’re part of a multi-member LLC and will be taxed as a partnership by default. The federal tax forms you’ll need to file as a single- or multi-member LLC are:
- Single-member LLC—Form 1040 (usually Schedule C, but some SMLLCs file C-EZ, E, or F)
- Multi-member LLC—Form 1065
Oregon LLCs taxed as S-corp
S-Corporation or S-corp status is a federal tax election available to both corporations and LLCs who meet the IRS requirements. LLCs with S-corp status can make distributions without having to pay the 15.3% self-employment tax on the LLC’s dividends. You will still have to pay for it on salaries, though. You also won’t pay the federal corporate income tax, but you do have to pay the state’s corporate excise or activity tax.
To apply to have your LLC taxed as an S-corp, you will file Form 2553 with the IRS. Note that your LLC must meet the IRS S-corp requirements, like having no more than 100 shareholders. S-corps file Form 1120-S to report their income to the IRS. Before making a big decision like changing your LLC’s tax status, consult with a CPA to see if the move will benefit your business.
Learn more about the S-Corp tax election.
LLCs taxed as C-corp
In very rare cases, some LLCs elect to be taxed as C-corps—the default tax status for corporations. The reason some LLCs choose C-corp status is often because of the plethora of tax breaks offered to C-corps over LLCs and S-corps. They are also more attractive to investors. C-corps, however, pay double the taxes by paying 21% federal corporate income tax and shareholders paying 15.3% self-employment tax on dividends.
On top of the federal taxes, you’ll also pay Oregon’s graduated corporate income tax, excise, or activity tax. To file your taxes with the IRS as a C-corp, you’ll need to submit Form 1120.
Oregon State Income Tax
Oregon has a graduated personal income tax based on earnings ranging from 4.75% to 9.90%. How much you or your LLC’s members will have to pay is broken down in $100 increments and by joint or single filing. The Oregon Secretary of State provides a very comprehensive income tax table chart to see where you land on the tax breakdown and how much you’ll owe in taxes.
For LLC’s that file as corporations (S-corps or C-corps) and don’t do business in Oregon but have income from the state, will pay the state’s corporate income tax rates of either 6.60% or 7.60%. If your corporation’s gross taxable income is less than $250,000, you pay the 6.60% tax rate, and any earnings above are taxed at the 7.60% rate.
Corporate Excise and Activity Tax
The Oregon Corporate Excise Tax (CET) and Corporate Activity Tax (CAT) is similar to a franchise or sales and use tax and is collected for the privilege of doing business in Oregon. Only LLCs with C-corp status must pay the Oregon corporate excise tax. Most Oregon LLC’s don’t pay the Oregon corporate income tax rate and instead pay the CET.
You pay your CET on top of your corporate income tax only if you are based in Oregon and doing business in the state. If you’re just a foreign LLC doing business in the state without a physical location in the state, you only have to pay the corporate excise tax. If your LLC brought in $1 million or less, you’re taxed at a 6.6% rate—anything above $1 million is taxed at the 7.6% rate. CAT is only applied to businesses that make more than $1 million and is collected as $250 plus 0.57% of all income above $1 million.
Local Oregon Taxes
Oregon allows local cities and towns to levy their own local taxes on businesses, but not every town has a local business tax. For example, Medford, requires marijuana retailers to pay a 3% marijuana tax. Oregon does not have a local sales and use tax.
Other Taxes in Oregon
Here are some other taxes you may encounter while doing business in Oregon.
Oregon State Employer Taxes
Oregon employers must pay unemployment insurance and workers’ compensation taxes:
- Unemployment (UI) Tax—Unemployment insurance pays employees during hardships when they have lost their job. Employers pay into the fund for employees to use. In Oregon, employers pay between 0.9% to 5.4%, and all new employers pay 2.4%. For 2022, the taxable wage base is $47,700.
- Workers’ Compensation—Oregon Workers’ Compensation Insurance protects workers who are injured on the job for lost wages, medical bills, funeral costs, and more. Though most businesses in Oregon do require you to have workers’ compensation, there are a few instances that would allow a business to forgo it, such as domestic servants, like home health workers, gardeners, home maintenance repair, etc. You don’t have to insure independent contractors.
Oregon also taxes certain industries and services,including:
- Amusement Device tax
- Combined Payroll tax
- Corporate Income and Excise tax
- Emergency Communications (E911) tax
- Estate tax
- Fiduciary tax
- Hazardous Substance fee
- Lane Transit Payroll tax
- Marijuana tax
- OAA (Other Agency Accounts) tax
- State Lodging tax
- Timber taxes
- Tobacco Consumer Products and Cigarette Consumer tax
- TriMet Transit Payroll tax
Find more information on industry taxes on the Oregon Business Taxes page.
Do foreign LLCs in Oregon need to pay Oregon taxes?
Yes. If you have an Oregon foreign LLC, you will have to pay the same taxes as domestic LLCs. You will also have to pay Oregon’s corporate excise tax for the ability to do business in the state. Your LLC is viewed as a foreign LLC if it was originally formed in another state and registered with the Oregon Secretary of State to do business in the state. Most foreign LLCs will have to pay the state’s corporate income tax for the privilege of doing business in Oregon.