Oregon Levies New Gross Receipts Tax on Businesses, Reduces Individual Tax Rates

Oregon has enacted a new law that imposes a tax of $250 plus 0.57% on gross receipts of businesses with gross receipts in Oregon of over $1 million: H.B. 3427, signed into law on May 20, 2019.  The new law is effective for tax years beginning on or after January 1, 2020. 

The same law also reduces some individual income tax rates, effective for 2020.  The lowest three rates are reduced to 4.75%, 6.75%, and 8.75%from 5%, 7%, and 9%, respectively.  However, the highest rate (which applies to taxable income over $125,000) remains at 9.9%.

The business tax is intended to bring in about $1 billion in new annual revenue earmarked to fund state education programs.  Because the tax is considered regressive, income tax rates for lower income individual taxpayers were reduced to help offset the regressive nature of the business tax.

The new law includes exemptions for groceries, hospitals and health insurers, and motor vehicle fuel.  Businesses subject to the tax can subtract from taxable gross receipts 35% of their labor or cost inputs apportioned to Oregon in computing the tax. 

How This Impacts Mobility

Most Worldwide ERC® members with business operations in Oregon will have a rise in tax costs there.  This will include relocation management companies (RMCs) that buy and sell homes in Oregon and are registered to do business there.  The reduction in individual tax rates likely will affect few transferees. 

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