Oregon Contractor Taxes and Licensing Guide

No, Oregon contractors don't charge sales tax. The state has no general sales or use tax, so contractors don't charge sales tax on labor or materials. The state taxes income instead. Larger businesses may owe the corporate activity tax on Oregon receipts over $1 million, and Portland-area shops can owe local business income taxes.

Does Oregon tax contractor labor or materials?

Neither. The Oregon Department of Revenue (DOR) puts it plainly: "Oregon doesn't have a general sales or use/transaction tax." There's no seller's permit to apply for, no sales tax line on your invoice and no tax on the lumber you pick up in Salem. That makes Oregon one of the simplest states for job pricing, as long as all the work stays inside the state.

The catch is that the state collects in other ways. You'll pay income tax on profit, bigger shops may owe the CAT on gross receipts, and the Portland area adds its own business taxes. If you cross the Columbia for work, Washington charges sales tax on the full contract price for most construction, labor included. Our labor vs. materials guide explains how other states split the job.

What about materials bought out of state, and is there use tax?

Oregon has no general use tax either, so there's no Oregon return for tools ordered online. DOR does list a few exceptions that aren't general taxes, such as a vehicle use tax on new vehicles bought outside the state. Two points matter when you shop across the border:

• Sales tax paid elsewhere stays paid. DOR says "Oregon law doesn't allow you to reduce your Oregon taxes because you paid sales tax in another state."
• Resale certificate. DOR offers the Oregon Business Registry Resale Certificate for Oregon buyers who buy goods out of state to resell in Oregon. The out-of-state seller "may accept" it but isn't required to, and DOR notes some states, including Washington, may want their own form.
• Equipment rentals. Oregon's heavy equipment rental tax is 2% of the rental price when you rent from a qualified heavy equipment rental provider, which charges it to you. Delivery, damage waivers and operator services aren't part of the taxed price.

If you work in states that do have sales tax, read use tax for contractors before you buy materials for those jobs.

Which Oregon licenses do contractors need?

The Construction Contractors Board (CCB) says "Oregon law requires anyone who works for compensation in any construction activity involving improvements to real property to be licensed." To get licensed, you complete at least 16 hours of pre-license training and pass the Oregon exam. You pick endorsements for residential or commercial work, and each sets its own bond and insurance. Electrical and plumbing need a Building Codes Division (BCD) license on top. The contractor license guide compares this with other states.

How does Oregon tax a contractor's income?

Income is where Oregon makes up for the missing sales tax. The Secretary of State's Blue Book lists personal income tax rates from 4.75% to 9.9% of taxable income. Sole proprietors and most LLC owners report business profit on their personal return. DOR says "you must make estimated tax payments if you expect your tax after credits and withholding will be $1,000 or more." Use the quarterly estimated tax calculator for the federal side, then check DOR for the state due dates.

The corporate activity tax (CAT) is a separate tax on gross receipts, and it isn't only for corporations. DOR's CAT rules, applicable to tax years beginning on or after January 1, 2020:

• Register within 30 days of reaching $750,000 in Oregon commercial activity for the year.
• File and pay once taxable Oregon commercial activity tops $1 million. The tax is "$250 plus 0.57 percent of taxable Oregon commercial activity of more than $1 million."
• Subtraction. You can subtract 35% of the greater of cost inputs or labor costs from Oregon commercial activity.
• Estimates. If you expect $5,000 or more of CAT liability, DOR requires estimated payments.

Is workers' comp required for Oregon contractors?

If you have employees, yes. The Department of Consumer and Business Services (DCBS) says "Oregon law requires that every employer provide workers' compensation coverage for its employees." Unlike Washington, Oregon lets you choose: a private insurer, SAIF Corporation (which calls itself "Oregon's state-chartered, not-for-profit workers' compensation carrier"), the assigned risk pool, or self-insurance.

The CCB adds its own rules. Commercial contractors must have workers' comp. Residential contractors with no employees can license as exempt, and the CCB says some family-owned businesses are exempt even with several family members working. Leased workers are usually covered through the leasing company. See workers' compensation for how premiums are figured.

Portland-area taxes and other local items

• City of Portland Business License Tax: 2.6%. The Revenue Division lists a gross receipts exemption of $75,000 for tax years beginning in 2026 and $100,000 from 2027.
• Multnomah County Business Income Tax: 2%. Exempt if gross receipts from all business are less than $100,000.
• Metro SHS Business Income Tax: 1%, for businesses in Metro's area with gross receipts over $5 million. Sole proprietors owe the Metro SHS personal income tax instead.
• Registration. Businesses operating in Portland or Multnomah County must register for a Revenue Division tax account within 60 days.
• Liens and neighbors. Know your mechanics lien deadlines, and read the California and Idaho pages before bidding there.