Should you use "I thought it was" or "I thought it is" when talking about an eternal fact?

When you're talking about how you were mistaken in the past, but this fact your were mistaken about is not about something in the past. "I thought/I used to think 'red' was called 'orange'" "I thought/I used to think 'red' is called 'orange'"

The confusion is caused by

1) The English subjunctive mood (used for conditions contrary to fact*) is very often identical with the simple past tense.

2) English speakers use the subjunctive less frequently than do speakers of most other languages so we're less comfortable forming and decoding it.

"I thought the sky was green" --> "was" is in subjunctive mood, i.e. condition contrary to fact.

Similarly,

"I always treat you as if you were a nice guy!" means that the equation between the listener and nice guy was contrary to fact. ("As if" often introduces a clause in the subjunctive)