Pacific Northwest Tax Update
Does your business have operations in Oregon or Washington?
Get ready to pay more taxes.
Starting 2020, WA imposes a 20% surcharge 20 service-based industries, raising the effective business & occupation (B&O) rate from 1.5% to 1.8% of gross receipts. The service-based industries affected by the surcharge include, but are not limited to: healthcare, financial services, information technology, telecommunications, utilities, engineering, publishers, professional services and broadcasting.
What happens if you try to pass on the B&O tax to your customers? The WA courts have ruled this tax is imposed on the business and therefore they can not pass it on to their customers.
Besides income tax, Oregon now has a commercial activity tax (which is modeled after Ohio’s CAT). effective January 1, 2020.
All businesses with commercial activity in Oregon are subject to the CAT if they meet Oregon’s nexus requirements. Nexus in Oregon, for purposes of the CAT, is established if you are a resident, commercially domiciled business, or meet one the following thresholds during a calendar year:
Owning property in Oregon with an aggregate value of at least $50,000
Oregon-sourced payroll of at least $50,000
Oregon-sourced sales, or commercial activity, of at least $750,000
The newly enacted CAT is imposed at $250, plus 0.57% of the businesses’ Oregon-sourced commercial activity over $1 million.