June 25, 2019
On May 16, 2019, Governor Brown signed into effect Oregon House Bill 3427. This bill, called the “Student Success Act,” imposes a gross receipts tax on many businesses in Oregon.
In summary, businesses with gross receipts over $1 million are subject to the tax, which is $250 plus 0.57% of sales over that $1 million mark. A subtraction of 35% of the greater of labor costs or cost of goods sold is available to be taken against gross receipts before applying the 0.57% calculation.
Several exemptions from the tax exist, including sales of fuel and groceries.
Businesses with gross receipts over $750,000 are required to register with the Oregon Department of Revenue. A return must be filed each year to report sales and any allowed subtractions, and any tax due under the Act must be paid quarterly in January, April, July and October for the preceding quarter. At least 80% of the tax must be paid in quarterly installments or the taxpayer may face a 20% penalty for underpayment.
The bill also includes a reduction in personal income tax rates for income under $125,000, since lawmakers anticipate that prices will rise due to the new law. The tax benefit amounts to a maximum of approximately $312 per family.
The bill’s effective date is 91 days after the end of the legislative session, which would be October 1, 2019. The bill itself indicates that the tax will go into effect for tax years beginning on or after January 1, 2020.
Very little official guidance has been offered since the bill passed, but SGA CPAs & Consultants is keeping a close eye on the potential challenges to businesses this law may create.
Much discussion surrounds this new law and the impact it will have on Oregon businesses. Both opponents and proponents agree that there’s a possibility that the law will be challenged and/or go to a referendum vote. Paperwork was filed to refer the tax to voters within weeks of the law passing, and the referendum will go on the ballot if sufficient signatures are collected. Several new political action committees have been formed to fight the new tax, including Defeat the Tax on Oregon Sales Now and the associated Keep Oregon Affordable PAC.
The issue is garnering nationwide interest. An article in Forbes points out that five states levy a gross receipts tax. It lists several of the characteristics of a gross receipts tax, including that the tax applies regardless of whether a company is profitable. A link to the full article is here: https://www.forbes.com/sites/patrickgleason/2019/05/14/or-grt/#3c55a89a2cb9
SGA will continue to monitor updated information on this topic and share it with you in future emails and on our social media. As always, please reach out to one of our staff if you have any questions.
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If you have provided us all the information to complete your returns, thank you! We'll be in touch soon with any additional questions we may have prior to finishing your returns.