Portland Clean Energy Surcharge: Filing, Penalties, and Exemptions

The Portland Clean Energy Surcharge is a 1% tax on Portland retail revenue owed by large retailers doing business in the city. It applies to companies with at least $1 billion in total retail sales and at least $500,000 in Portland retail sales during the tax year, and it has been in effect for tax years beginning on or after January 1, 2019.¹ The surcharge is filed on Form CES at the same time as the Combined Tax Return.²

Who Owes the Surcharge

Portland City Code Section 7.02.100(N) uses a two-part test, and a business has to meet both parts in the same tax year:³

Total retail sales of $1 billion or more, measured worldwide rather than just in Portland.
Portland retail sales of $500,000 or more, counting only revenue from transactions delivered or provided within city limits.

Both figures are measured against retail sales specifically, not total company revenue. A business with $2 billion in wholesale revenue and only $400,000 in Portland retail sales does not qualify. Meeting both numbers is also the filing trigger: once you cross them, you must file a Clean Energy Surcharge form alongside the Combined Tax Return.²

What Counts as a Retail Sale

Portland’s definition of a retail sale reaches well past the everyday meaning. Under the administrative rules, all business activity falls into either goods-producing or service-providing categories, and both are treated as retail sales unless the good or service is sold for resale by another entity.⁴ Consulting revenue, software licensing fees, and professional services all count as retail sales under this framework unless they fit a specific exclusion.

True wholesale transactions are exempt, but only when the city’s resale criteria are met: goods bought by one business and resold as new merchandise to another, services resold the same way, or goods and services bundled and resold together.⁴ Without resale documentation, the city treats the transaction as a taxable retail sale.

Exempt Categories

The code allows deductions from retail gross revenue for several categories:⁵

Qualified groceries intended for home consumption, including breads and cereals, fruits and vegetables, meats, fish and poultry, and dairy. Alcohol, tobacco, pet food, prepared food for immediate consumption, paper products, and household supplies do not qualify.
Qualified medicine or drugs meeting the city’s classification criteria.
Qualified health care services, including doctor visits, medical clinic and hospital services, health insurance regulated by Oregon’s Division of Financial Regulation, and senior care or rehabilitation facilities regulated by the Oregon Department of Human Services.⁶
Qualified residential garbage and recycling services.
Qualified retirement plan administration.
The portion of the Portland Business License Tax attributable to revenue subject to the surcharge.

Retirement communities where residency is a personal choice rather than a medical necessity do not fall within the health care exemption. For large retailers that sell both taxable merchandise and qualifying food, the grocery line requires systems that can separate categories at the transaction level. Hot bar items and deli meals sold for immediate consumption are taxable even when sold inside a grocery store.

How to Calculate the Surcharge

Take total Portland retail sales, subtract qualifying exempt categories, and multiply by 1%.¹ Because this is a gross receipts tax rather than an income tax, deductions for operating costs, wages, or overhead do not apply. The 1% hits top-line Portland retail revenue after the exempt-category deductions only.

Isolating Portland revenue means identifying transactions where the product or service was delivered or provided to a customer inside city limits. For physical goods, that generally tracks the delivery address. For services, it tracks where the service was provided. Accounting systems have to tag each transaction by location and category and roll those totals up for the CES form.

Passing the Cost to Customers

The surcharge is imposed on the retailer, not the consumer. Some large retailers have itemized it on receipts anyway. When a retailer passes the surcharge through as a line item, Portland treats that payment as an additional retail sale subject to the 1%.⁵ A retailer that passes the cost along has to account for that compounding when calculating the liability.

Filing and Deadlines

Large retailers use Form CES, which the Revenue Division posts on its forms page.⁷ It’s filed with the Combined Tax Return. The return is due by the fifteenth day of the fourth month following the end of the tax year, which is April 15 for calendar-year filers.⁸

Filing runs through Portland Revenue Online, the city’s digital portal that also handles the Portland Business License Tax, Multnomah County Business Income Tax, and Metro Supportive Housing Services Tax. You’ll need a Portland Revenue Online account and your federal and Oregon tax pages to complete the filing.⁹

Extensions and Payment Timing

You can request a six-month extension by submitting Form EXT by the original due date, and a timely IRS extension also satisfies Portland’s requirement. The extension covers only the filing deadline. The full tax owed must still be paid by the original due date.⁹ A business that expects a large CES liability should plan for the payment regardless of whether the return itself is going to be filed later. Paying less than 90% of total tax liability by the due date, or less than 100% of the prior year’s liability, triggers a separate underpayment penalty.¹⁰

Penalties

Section 7.02.700 penalties apply to the surcharge the same way they apply to the business license tax:¹⁰

Late filing or payment under four months: 5% of total tax liability, with a minimum of $5.
Late filing or payment of four months or more: an additional 20% of total tax liability on top of the initial 5%.
Three or more consecutive years unfiled: an additional 100% of total tax liability across all unfiled years.
Underpayment: 5% of the underpaid amount (minimum $5) when less than 90% of total liability is paid by the original due date.

Penalties for filing after an extended deadline follow the same structure: 5% for delays under four months past the extended date, plus 20% at the four-month mark. The penalties stack, and interest accrues on unpaid balances, so a business that is three years behind on a significant balance can end up owing more in penalties than in original tax.

Nonprofits and Utilities

Portland’s general business tax exemptions under Section 7.02.400 cover corporations exempt from the Oregon Corporation Excise Tax and trusts exempt under Internal Revenue Code Section 501.¹¹ An exempt organization that earns unrelated business income still pays business tax on that income, and nonprofits with substantial retail revenue should verify whether their activities actually fall within the exemption. Utilities are handled under a separate administrative rule, BTAR 500.19-1, that addresses how the surcharge applies given the different regulatory structure utility revenue runs through.¹

P.L. 86-272 Does Not Protect Against This Tax

Out-of-state businesses sometimes assume Public Law 86-272 shields them from local taxation when their only in-state activity is soliciting sales of tangible goods shipped from elsewhere. That federal law only prohibits taxes imposed on or measured by net income.¹² The Clean Energy Surcharge is a gross receipts tax, so the federal protection does not apply. A company with no Oregon office that delivers $500,000 or more in retail goods or services to Portland customers can still owe the surcharge if it also crosses the $1 billion total sales threshold. P.L. 86-272 also only reaches sales of tangible personal property, so companies selling software, consulting, or other services into Portland fall outside its scope regardless.

1
City of Portland. Clean Energy Surcharge
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Portland.gov. Portland City Code 7.02.500 – Tax Rate
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Portland.gov. Portland City Code Chapter 7.02 – Business License Law
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City of Portland. LIC-5.06 – Clean Energy Surcharge (CES) – Retail Sale
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Portland.gov. Portland City Code Chapter 7.02 Business License Law – Proposed Code
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City of Portland. Clean Energy Surcharge (CES) – Qualified Health Care Services
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City of Portland. Revenue Division Forms
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Portland.gov. Tax Return Due Dates
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City of Portland. File Your Business Tax Returns
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Portland.gov. Portland City Code 7.02.700 – Penalties
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Portland.gov. Portland City Code 7.02.400 – Exemptions
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Multistate Tax Commission. Statement of Information Concerning Practices of Multistate Tax Commission and Supporting States Under Public Law 86-272