Updated at 12:59 p.m.

Terry Wiesner stared down at his Safeway grocery store receipt in confusion in mid-September after he noticed being charged an extra 3 cents for buying a package of $2.99 napkins. The 3 cent charge was listed as a tax.

He called over a store attendant while still in the self-checkout line at the Southeast Woodstock Boulevard branch and asked about the charge. The worker pointed to a laminated sign nearby.

Portland instituted a voter-approved clean energy surcharge in January, imposing a 1 percent tax on paper products, wine, beer, household items and other products, the sign said. The surcharge began appearing on Safeway customers’ receipts on Sept. 9 and people should contact the City of Portland if they had any concerns, according to the notice.

“I didn’t remember voting for any kind of tax,” said Wiesner, 74. “I later learned that this was meant to be a tax on businesses, not the people. Frankly, it just made me angry. It wasn’t about the 3 cents, it’s about the spirit of this charge and how it’d been passed off to me.”

Portland city officials said both Safeway and Wiesner got it partly right. The tax is on the business, not the customer. But large retailers that are subject to the tax are free to raise prices or pass along surcharges of their own that appear on receipts as a cost of doing business.

In the 10 months since the business surcharge went into effect, some Portland residents have been finding extra charges on a few of their bills in the name of the clean energy surcharge – including at least one of which was imposed improperly.

Voters approved what was formally titled the Portland Clean Energy Community Benefits Initiative in November 2018 to help raise funds for clean energy projects, energy-saving retrofits for low-income homeowners and renters, green infrastructure and the creation of living-wage green energy jobs. Funds raised are meant to be prioritized to help under-served Portland populations, communities of color and low-income residents.

From Jan. 1, all large retailers have to pay a 1 percent surcharge on revenue from retail sales in Portland. Under the terms of the voter-approved measure, those are businesses with at least $1 billion in annual national revenue and at least $500,000 in yearly Portland sales.

Exempt are utilities, credit unions, co-ops and the sales of health care services, most groceries, medicine and drugs.

Despite the exemption for utilities, AT&T has been charging Portland customers since at least the spring, listing it on bills as a “Portland Clean Energy Surcharge.”

The AT&T surcharge was first reported by Willamette Week in August.

Tyler Wallace, Portland’s tax division manager, said city officials told AT&T representatives in September that as a utility company, they are exempt to the Portland tax. He didn’t know what recourse the city has if AT&T continues to charge customers.

“We have no information on if they’re going to continue to do that,” Wallace said. “But we have communicated to them that they aren’t subject to it.”

AT&T confirmed Friday that they were told the company is exempt from the tax and would be issuing refunds to customers. The company declined to provide anymore information, including when the refunds would be given or how much money was collected from customers.

Overall, the city estimates the surcharge could generate $54 million to $71 million a year. The proceeds will be deposited into the Portland Clean Energy Community Benefits Fund and distributed as grants to nonprofit groups. The first round of grant funding — $7 million —is estimated to begin in summer 2020. A nine-person committee of community members, five of whom were appointed by the Portland City Council on Sept. 25, will be in charge of recommending which projects get funded.

On Sept. 10, the city adopted new business tax administrative rules that emphasize that paying the clean energy surcharge is the legal obligation of qualifying businesses, but they can pass along surcharges of their own to customers.

“A large retailer may separately itemize its [clean energy surcharge] obligations on its invoices to its customers to whatever extent it chooses,” the rule said. “A large retailer may describe [clean energy surcharge] on its invoices in whatever manner it chooses.”

It’s not immediately clear which businesses are subject to the surcharge, although Safeway, WinCo and other mega-retailers clearly are. Nor has anyone deduced or all the ways it is impacting sales to customers.

A representative from Albertsons’, which owns Safeway, did not respond to requests for comment. Safeway customers still appear to be getting charged extra for certain products, but it’s now listed on receipts as a surcharge, not a tax.

Josh Lehner, a senior economist with the Oregon Office of Economic Analysis, compared the city’s clean energy tax to Measure 97, a state business tax initiative that went before voters in 2016 that would have established a 2.5 percent tax on gross business sales that exceed $25 million. It was voted down by Oregonians.

“There’s always the question of who ultimately pays the tax,” he said. “The business has to pay, but do they ultimately bear the burden, or do they raise prices or is the tax passed on to consumers? Anytime there is a new business tax that’s always something that is weighed.”

Oregon, Alaska, Delaware, Montana and New Hampshire are the only states with no general sales tax. Oregonians have voted no nine times since the 1930s on instituting a sales tax.

Wallace said the city can’t provide a list of companies required to pay the tax or of which ones have paid so far, saying whether tax returns have been filed or how much in sales they reflect is protected financial information. He said the city estimates 500 to 1,000 companies are subject to the surcharge and the city has collected about $11 million thus far.

“If they do itemize the surcharge on the receipt, that amount is included in retail sales,” Wallace said. “Meaning, that its treated as a price increase rather than as a tax being passed on to the customer. Some companies are doing this and some say they are absorbing the cost of the surcharge.”

He said the city attorney’s office was consulted when the administrative rule was drafted regarding a surcharge appearing on sale receipts. Tracy Reeve, the Portland city attorney, said she couldn’t disclose any advice given because it’s attorney-client privilege information.

Wallace said companies can list a surcharge however they wish on customer receipts, “but there shouldn’t be an implication that the onus of the clean energy tax is on the customer. It’s on the business.”

For most businesses required to pay the tax on their 2019 sales, the first year’s payment is due April 15, 2020, Wallace said. But many of them make estimated quarterly payments, so the city Revenue Division began collecting those in April. Most large businesses seek an extension, Wallace said, so their liability won’t be known until they file their return in October of 2020.

He said the city doesn’t yet have a solid system in place to determine which taxable businesses have retail sales.

“We have never had a reason to ask companies to separately report retail sales from non-retail sales,” he said. The most common examples of non-retail sales he said would be if an item was manufactured or bought by one business and then resold to another.

“We have done a lot of analysis in order to make revenue estimates,” Wallace said, “but we’ll have much better information once we start getting tax returns from companies, which will separate out retail sales from non-retail sales.”

The self-reported numbers would then be subject to audit, he said.

Wallace said he didn’t know if any other exempt companies in addition to AT&T have billed customers in the name of the surcharge.

Wiesner, who didn’t vote for clean energy community benefits initiative, said he’s considering not shopping at Safeway altogether. He’s been shopping at Fred Meyer, QFC and Bi-Mart for non-food items to avoid paying the surcharge.

*Note*: This story has been updated to reflect new information from AT&T.

-- Everton Bailey Jr.

ebailey@oregonian.com | 503-221-8343 |@EvertonBailey

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