Are Oregon highway use taxes dischargeable in bankruptcy? Yes, if certain conditions are met, a debtor in bankruptcy can discharge taxes incurred in Oregon for use of the highways. Claims for state and federal highway use taxes levied against truckers based on the weights of vehicles turn up frequently in Oregon bankruptcy cases. The state is aggressive in enforcing the tax required by ORS Chapter 825.
I recently had a new client bring in collection notices for nearly $250,000 in tax assessed by the Oregon Department of Transportation as the result of a an audit of the company books. The client had failed to properly respond to the audit notices and to pursue all of his administrative remedies. He later spent over $25,000 in attorney fees to no avail when he tried to get a new hearing. It is unable to continue operating trucks and has had to close his business.
I was unable to fully answer his questions and did a little research on the discharge issue. It seems that the Oregon bankruptcy court has determined the highway use tax to be in the nature of an excise tax. See my article on this subject posted at Bankruptcy Law Network.
Because the tax is considered and excise tax it can be discharged in a bankruptcy proceeding if it meets certain requirements. The returns must have been filed, there can have been no fraud, it must be at least three years after the returns were supposed to have been filed. If the returns are filed late, it also must be two years after the returns were actually filed.