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BP Blast: Oregon Corporate Activity Tax


Last week Oregon Governor Kate Brown signed legislation creating a new corporate activity tax, which will be applicable for tax years beginning on or after January 1, 2020. The tax for each calendar year will be based on the taxpayer’s commercial activity in the state, and is in addition to any other fees or taxes imposed under Oregon law.

Here are a few additional details:

  • The tax rate is equal to $250 plus the product of the taxpayer’s taxable commercial activity in excess of $1 million for the calendar year multiplied by 0.57%.
  • Persons subject to the tax include, but are not limited to, individuals, partnerships, C corporations, S corporations, and estates.
  • The new tax is not considered transactional, so it is not subject to the rules of Public Law 86-272, which allows income tax exemption for sales of tangible personal property in certain circumstances.
  • The term “commercial activity” means amounts realized by a person from the transactions of a trade or business.
  • Taxpayers are allowed to subtract from the commercial activity sourced to the state 35% of the greater of cost of goods sold or labor costs. Both will be apportioned amounts, similar to requirements for apportionment of income for income tax purposes.

Any taxpayer with commercial activity in excess of $750,000 during the year must register with the Oregon Department of Revenue. Further, every individual doing business in Oregon with commercial activity in excess of $1 million must file an annual return by April 15 of the following year.

This new law was introduced with Oregon House Bill 3427, which also lowered tax rates for Oregon personal income taxes. Personal income tax rates, on average, dropped 0.25% across income tax brackets below $125,000 of Oregon sourced income.

If you have questions about the new law, please reach out to our State Income Tax Practice Leader, Krysta Smith, CPA, at ksmith@bpcpa.com. We’re here to help!