Posted on: August 16, 2017 by Ashley Klaus
Effective January 1, 2018, Oregon joins the nationwide trend to market-sourcing sales. Oregon also made additional changes to its apportionment rules that could impact the amount of income taxable in Oregon.
Why look at this now? Making sure your business has the right data to support this change and planning for potentially drastic year over year changes to Oregon taxable income helps the business be ahead of the game. Also given this is part of a much broader trend among states moving to market-based sourcing and economic nexus, now may be the time for a holistic look at your overall state tax profile.
Market-Based Sourcing (Senate Bill 28)
Previously, for determining Oregon's share of a business' income taxable by the state, receipts from services and intangible property were sourced based on cost of performance. For Oregon-based businesses, this often meant all or nearly all of its income was taxable by the state based on the location of its operations. Likewise, out-of-state businesses often had very little Oregon taxable income if operations were not in-state.
Now, with market-based sourcing, sales of services are Oregon sales if the services are delivered in the state, and receipts from intangible property are Oregon sales to the extent the intangible property is used in the state.
While these rules may seem simple, this is not always true as trying to match sales data produced by a business' sales and operational functions may not necessarily easily line up with the specific state definition, and how that state definition applies to a specific revenue stream is not always so clear.
Oregon joining the trend to market-based sourcing also does not necessarily simplify its multistate tax filings, as different states define a business' market inconsistently. Oregon's new rule is based on the model provisions by the Multistate Tax Commission ("MTC"). However, that only means its definition will be consistent with those states that similarly model their rule. To put it concisely, do not expect that the rules in Oregon will be the same as the rules in other "market-based" states like California.
Receipts Included in the Sales Factor (House Bill 2273)
Oregon not only changed what state sales may be sourced to, it also changed which receipts are included in that determination.
The definition of "sales" for apportioning taxable income to the state now includes all receipts from transactions in the regular course of business. While Oregon always had a specific occasional sale exclusion, this new definition broadens the type of sales that are excluded for apportionment purposes because those are not in the regular course of business.
The new definition of "sales" also excludes all receipts from hedging/securities, even for financial-related businesses, and amounts related to property acquired as an agent or held in trust. Thus, the sales for apportionment purposes may only include net gains from brokered transactions rather than gross receipts.
These exclusions could mean that substantial income items or revenue streams are not included in the apportionment factor and, accordingly, could be sourced to Oregon based on other aspects of a business' Oregon activity.
Time for a State Tax Tune Up
Looking at these Oregon changes is smart for a business to address. Looking at these changes through a broader lens of overall state tax changes is smart business.
Understanding both how these rules have been interpreted in other states, and the practical ways businesses have applied market-based sourcing, we can help you figure out what these changes mean for your business in Oregon and across the country.
Please contact your Geffen Mesher advisor if you have questions or concerns.
Posted on: August 2, 2017
Posted on: May 18, 2017
Unsolicited Telephone Calls/Emails
There have been numerous reports about taxpayers who have received unsolicited telephone calls from individuals demanding payment while fraudulently claiming to be from the Internal Revenue Service (IRS). Recently, the IRS issued a warning:
Posted on: January 24, 2017
To our Clients and Friends:
As we start a new year, there are new payroll and information considerations that apply to 2016 returns filed in 2017, or payroll after December 31, 2016. We have compiled a new memorandum for you to use throughout the new year. We hope that the enclosed memorandum will answer some of the frequently asked questions. Of special note are the following:
Posted on: December 20, 2016
Posted on: August 11, 2016
On May 18th, 2016 the DOL released a final rule that radically increases the thresholds for overtime rules, expanding the number of employees eligible for overtime pay. Under the FLSA, employees who work more than 40 hours in a week are entitled to overtime pay, unless they meet the requirements of certain wage and duties tests. The new rule doubles the minimum salary threshold from $455 per week to $913 per week (which amounts to $23,660 annually to $46,476 annually) and raises the exemption level for those considered to be "highly compensated employees" from $100,000 to $134,004 annual salary.
Posted on: March 29, 2016 by Matthew S. Wright
Many companies choose to lease certain assets, rather than buy them outright. Leasing arrangements are especially common among construction contractors, manufacturers, retailers, health care providers, airlines and trucking companies that rely on expensive equipment or real estate in their day-to-day operations.
Does your company have ANY operating leases? Building leases? Office equipment leases? Vehicle leases? If so, this new guidance will likely affect your financial statements.
Posted on: December 21, 2015
This holiday season, taxpayers are receiving a "gift" from Washington, D.C. It's the Protecting Americans from Tax Hikes Act of 2015 or, simply, the PATH Act. It does more than just extend expired tax provisions for another year. The bipartisan deal makes about one-third of these tax provisions permanent. Many others have been extended for periods ranging from two to five years.
Several of these provisions can produce significant savings for taxpayers on their 2015 income tax returns, but quick action (before January 1, 2016) may be needed to take advantage of some of them. Here are some details on this tax savings package.
The U.S. House of Representatives and the U.S. Senate have approved H.R. 5771, the Tax Increase Prevention Act of 2014, which extends almost all of the tax incentives that expired on December 31, 2013. President Obama signed H.R. 5771 into law on Saturday, December 20. The $42 billion in reinstated tax incentives can only be claimed for the 2014 tax year which will be fortunate for millions of businesses and individuals.
Posted on: September 26, 2014 by David S. Porter
Over the past decade, the FASB has worked on a project to simplify revenue recognition standards. After much deliberation, re-working and public comment, the final ASU for the revenue recognition project, ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606, was released in May 2014. The guidance affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).
House Bill 3601 (H.B. 3601) was passed by the Oregon legislature and signed by the Governor on October 8, 2013. It contains several important tax provisions relating to businesses and individuals.
These provisions are effective starting in 2013, except the preferential tax rate provision is effective starting in 2015. Here’s a brief summary of the most important provisions.
Posted on: April 2, 2013 by Kyle A. Podd
Geffen Mesher professionals Kyle Podd, CPA, and Tasha Ravinowich, CPA, co-authored a bylined article that appeared in the Portland Business Journal's Real Estate Daily blog. In early January 2013, The American Taxpayer Relief Act of 2012 was signed into law by President Obama. Many of its provisions may provide tax benefits to real estate professionals, although the result also leads to increased taxes on high income individuals.
Visit the publication's website to read this timely article.
Posted on: January 10, 2013
The American Taxpayer Relief Act averts the United States’ descent over the "fiscal cliff" — a combination of higher taxes and forced spending cuts scheduled to go into effect in 2013. The act prevents income tax rate increases for about 98% of taxpayers and makes other changes affecting individuals and businesses. Here’s a brief summary of the most important provisions.