TAX POLICY IMPACT

SPECIAL REPORT

OREGON TAX POLICY UPDATE

Learn how Oregon's tax landscape just got better for tech firms


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SUMMARY


This year's policy cycle brings some good news for Oregon technology firms. In particular, companies offering non-tangible goods and services, such as Software-as-a-Service, will realize lower overall state taxes. Other firms will benefit from a variety of other policies, from simpler filings to fewer taxable forms of income. Read on to learn more!

HOW DOES OREGON STACK UP TODAY?


Before diving into the updates, have a quick look at how Oregon compares to other states around the U.S. The map below shows the income tax rates by state, with darker areas having relatively higher overall rates. 

Source: 2018 Tax Foundation | Link to full report >

2018 STATE TAX CLIMATE INDEX

#10
Oregon national tax ranking

POLICY UPDATE



Market-based sourcing will benefit SaaS and other tech services.

PARTICULARLY COMPANIES WITH OUT-OF-STATE SALES

POTENTIAL FOR SUBSTANTIAL REDUCTION IN STATE TAX


Market-Based Sourcing has been adopted, replacing Cost of Performance Standard for services and intangible revenue.

  • Beginning in 2018, Oregon’s current cost-of-performance apportionment methodology for services and intangible revenue has been replaced by a market-based sourcing approach. 
  • With a move to market sourcing, Oregon-based software and technology businesses could see a substantial reduction in their Oregon sourced sales, particularly if their customers are located outside the state.

Sales tax rejected!

0.7% TAX ON REVENUE WOULD HAVE IMPACTED WIDE RANGE OF BUSINESSES

GROSS RECEIPTS PROPOSAL REJECTED 


Efforts to enact a 0.7% gross receipts tax, similar to the Ohio CAT tax failed to gather necessary support.

  • These efforts followed on the heels of a similar tax, Measure 97, that was also rejected by Oregon voters in November 2016. Further consideration of gross receipts taxes are likely on hold until the 2019 legislative session. 

New sales rule means fewer taxable revenue categories

POTENTIAL TO BOOST BOTTOM LINE

 SALES DEFINITION NARROWED


  • Beginning in tax year 2018, the Oregon definition of sales has been narrowed and will exclude occasional and incidental sales of property, receipts from hedging transactions and certain types of commission revenue.

Businesses with international affiliates will have simplified filings.

INTERNATIONAL UNITS NOW PART OF SAME FILING

EXPANDED UNITARY GROUP TO INCLUDE FOREIGN AFFILIATES


  • Beginning in tax year 2018, unitary foreign affiliates can be included as part of the Oregon unitary group. Previously foreign corporations with Oregon nexus would have been required to file separately in the state.




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Grant Thornton’s local tax professionals are available to provide additional insight on Federal and State Tax updates. Additional resources and details of the Oregon tax legislation can be found here: link to report.

Interested in learning more?

Please get in touch!

Nisha Mathew

Senior Manager, State & Local Tax

Phone +1 206 398 2445

Email  nisha.mathew@us.gt.com