A state with no sales tax imposes tax on bike and vehicle sales – Wacky Tax Wednesday

Update 10.26.2017: The bicycle excise tax takes effect Jan. 1, 2018.

Despite the drizzle, Oregon is a bike-friendly state. Three Oregon cities made Bicycling Magazine’s 2016 list of the 50 most bike-friendly cities — Portland (#3), Eugene (#18), and Salem (#47) — and they’re not the only ones embracing two-wheel travel. Bicycling and other modes of “active transportation” are also encouraged by city planners in smaller cities like Baker City, Corvallis, and Roseburg.

The benefits are obvious: When more people hop on person-powered two-wheelers, fewer cars clog the roads. Biking is good exercise, leading to a fitter populace, and it has a light carbon footprint. In fact, aside from the chafing (and, arguably, the outfits), there are few downsides to biking. That’s why many people, particularly cyclists, were confused when Oregon recently revealed its intention to tax bikes.

In mid-July, the Oregon Legislature approved a $15 excise tax on the retail sale of bikes with “wheels of at least 26 inches in diameter and a retail sales price of $200 or more” (HB 2017). In a state that lacks and has consistently opposed a general sales tax, this is big news.

The Oregon bike tax is part of a $5.3 billion transportation package. Revenue generated by the $15 tax will help fund infrastructure favored by bicyclists, such as bike lanes, as well as pedestrian projects.

Some bike proponents are outraged, calling this more evidence of the ongoing battle between cyclists and drivers. Jonathan Maus of Bike Portland says the tax could be motivated by a desire on the part of some motorists to “get back at those damn bicyclists.” It is, he said, “like a culture war kind of thing.”

Representative Earl Blumenauer has a different interpretation: “The tax is a sign that biking has grown up.” It will “neutralize the complaint that bicyclists ‘don’t have skin in the game’ — i.e., a stake (and thus a voice) in making decisions about transportation policy.” Drivers in Oregon have a stake through the fuel taxes they pay.

Furthermore, bikes are not being singled out. The transportation measure also calls for a 0.5 percent tax on “the privilege of engaging in the business of selling taxable motor vehicles at retail,” as well as a 0.5 percent use tax on the “storage, use or other consumption of the taxable motor vehicle” if tax wasn’t collected at the time of sale. Taxable motor vehicles have “a gross vehicle weight rating of 26,000 pounds or less” and include automobiles, campers, commercial vehicles, mopeds, motor homes, pickup trucks, sport utility vehicles, vans — and electric assisted bicycles.

HB 2017 also imposes additional registration fees for automobiles: $16 annually for cars registered between January 1, 2018 and December 31, 2019; and varying rates for those registered between January 1, 2020 and December 31, 2021, from $21 for nonmotorized vehicles and vehicles with a rating of 0–19 miles per gallon, to $110 for electric vehicles. Registration fees are higher for vehicles with better fuel economy because their owners pay fewer fuel taxes.

The $15 bike tax and 0.5 percent vehicle tax are to be collected by sellers “at the time of the taxable sale.” The measure defines “seller” as “a person engaged in whole or in part in the business of selling bicycles,” and “a vehicle dealer.”

Since Oregon does not have a general sales tax, retailers are not set up to collect and remit tax. All sellers of taxable bicycles and vehicles will therefore have to adjust their point of sale systems to account for the tax, set up filing and reporting systems as well as schedules, and train staff. Bicycle sellers will have to ensure systems and staff only apply tax to taxable transactions, not to sales of helmets, gear, clothing, or nontaxable bikes — those with a wheel diameter of less than 26 inches, or those costing less than $200. Sellers can expect a bit of a bumpy ride during the transition period.

Although the Oregon bike tax hasn’t yet taken effect (it’s still waiting for Governor Kate Brown’s signature), it’s already inspired one Colorado lawmaker to consider a similar tax.

Like Oregon, Colorado also made Bicycling Magazine’s list of bike-friendly cities three times, with Boulder at #10, Denver at #11, and Fort Collins at #12. Governor John Hickenlooper has pledged more than $100 million toward bike and pedestrian trail improvements in his quest to make Colorado “the best state for biking.” And yet, as in Oregon, there is tension between bicyclists and drivers; some Coloradans see bike lanes and walking trails as “automobile-hostile improvements.” Some accuse cyclists of not helping to pay for the roads and trails they use.

When State Senator Ray Scott loosely floated the idea of a bike tax in a recent Facebook post, it unleashed a maelstrom. He has expressed shock at “the raw nerve I struck with my comments about leveling the playing field between cyclists, ATVs, snowmobiles and watercraft, when it comes to how we treat, and tax, these machines.” While Sen. Scott isn’t rushing forward to write up legislation, he also isn’t abandoning the idea; in the time leading up to the 2018 legislative session, he says he will “weigh the wide variety of responses I’ve received and consider next steps.”

Colorado already has at least one local model for a bike tax in Colorado Springs, which is a training destination for elite cyclists. The city situated more than 6,000 feet high imposed an excise tax of $4 per adult bicycle almost 30 years ago, and it has raised more than $2 million to date. According to the Denver Post, the tax “has been a great thing for city.” Perhaps Oregon’s bike tax will receive similar laudations someday.

Read more about Oregon’s new taxes in HB 2017. Learn how tax automation software can simplify sales and use tax compliance for sellers in all states here.