Tax Planning Guide

Commercial Activity Tax Update

May 3, 2019
Ashley Klaus

The Oregon House passed HB 3427A (the commercial activity tax) Wednesday evening. The vote was 37-21 along party lines. The Senate could vote as early as Tuesday, May 7th.

The tax bill as it currently stands would impose an annual tax, beginning in 2020, on all commercial activity (so it does not matter what your client’s form of business is (corporation, pass-through entity, sole proprietor) even though it is called a “corporate activity tax” in the bill text. The tax is at a rate of 0.57% on the total of all receipts from a trade or business (with a number of exceptions), less 35% of inputs (COGS) or labor (the subtraction cannot exceed 95% of receipts), plus a $250 minimum tax. No “person” with less than $1,000,000 of receipts sourced to Oregon is subject to the tax. The rule regarding how to source revenue is the same as we currently have, although it does not appear to require throwback of tangible personal property sales. Sourcing will be a key consideration, as will the potential application of exemptions and documentation required to claim them.

Oregon’s commercial activity tax will be an annual tax with returns due April 15 following the end of the tax year, and with payments due January, April, July and October.

There is also a bright line nexus threshold of $50,000 of payroll or property, or $750,000 of sales (or 25% of any of these), as well as organized/registered to do business in the state.

If you have any questions about this, our team of experts is eager and prepared to help you with anything you need. Feel free to reach out!