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How to Calculate Oregon's Proposed Corporate Activity Tax Under HB 3427
Determine Tax Base
Gather all business receipts "arising from transactions and
activity in the regular course of a trade of business."
Exclude: receipts from the sale of motor fuel oil, cigarettes or tobacco, malt
beverages, wine or liquor, and groceries, among others.
Apportion income based on a single sales factor: Add up all sales
from Oregon and divide by sales everywhere. Multiply this number
by total labor costs or cost of inputs paid to other businesses.
This step is multiple flowcharts
worth of calculations.
Apply a 6.6% corporate income tax rate on corporate income up to
$1 million. Apply a 7.6% corporate income tax rate on corporate
income above $1 million.
$250 flat tax for businesses receiving Oregon-sourced receipts
For Oregon-sourced receipts exceeding $1 million, apply a 0.49%
levy on taxable Oregon-sourced business receipts.
Either deduction may not exceed 95 percent of the taxpayer's
business receipts in this state.
Apply the tax rate:
Final Tax Liability
Remit the tax to Oregon Department of Revenue
Taxable receipts minus
25% of labor costs.
Labor costs are "salary and wages paid directly to an
employee of the taxpayer and benefits paid on behalf of
the employee." Excludes salary of wages paid to a single
employee in excess of $1 million, bonuses, and
compensation to officers of a corporation.
Taxable receipts minus 25% of
cost inputs paid to other businesses
with these purchases defined as "the cost of materials
incurred in the creation of a good or service and the cost
of purchase of items held in the ordinary course of
business for inventory, in accordance with section 471 of
the Internal Revenue Code."
Apportion the firm's labor costs or cost of inputs paid to other businesses using a
single sales factor.
In addition to the Corporate Activity Tax, C corporations must pay Oregon's
Corporate Income Tax:
Calculate Tax Base:
Source Business Receipts:
For real property, to the extent t