Oregon Bulletin
January 1, 2011
Rule Caption: Defining tangible personal property for corporation tax
apportionment.
Adm.
Order No.: REV 14-2010(Temp)
Filed with Sec. of
State: 12-1-2010
Certified to be
Effective: 12-1-10 thru 5-27-11
Notice Publication
Date:
Rules Amended: 150-314.665(2)-(A)
Subject: In 2007, the department adopted amendments to
150-314.665(2)-(A). In 2010, the Court of Appeals invalidated an administrative
rule adopted by the department because of an inadequate statement of fiscal
impact. Following that decision, the department determined that the fiscal
impact statement filed with the 2007 rule changes may also have failed to meet
statutory requirements, The department is adopting 150-314.665(2)-(A) as a
temporary rule to restore the language that was in effect prior to the 2007
amendments.
Rules Coordinator: Debra L. Buchanan—(503) 945-8653
150-314.665(2)-(A)
Sales Factor; Sales of Tangible
Personal Property in this State
The rule adopts provisions of a model regulation
recommended by the Multistate Tax Commission to promote uniform treatment of
this item by the states.
(1) For purposes of ORS 314.665 and the rules
thereunder, “tangible personal property” means personal property that can be
seen, weighed, measured, felt, or touched, or that is in any other manner
perceptible to the senses. “Tangible personal property” includes electricity,
water, gas, steam, and prewritten computer software.
(2) For purposes of apportioning income under ORS
314.665 and this rule, gross receipts from the sales of tangible personal
property (except sales to the United States Government; see OAR
150-314.665(2)-(B)) are in this state:
(a) If the property is delivered or shipped to a
purchaser within this state (Oregon) regardless of the f.o.b. point or other
conditions of sale; whether transported by seller, purchaser, or common
carrier; or
(b) If the property is shipped from an office, store,
warehouse, factory, or other place of storage in this state and the taxpayer is
not taxable in the state of the purchaser.
Example 1: A seller with a place
of business in State A is a distributor of merchandise to retail outlets in
multiple states. A purchaser with retail outlets in several states, including
Oregon, makes arrangements to hire a common carrier to pick up merchandise,
f.o.b. plant, at the seller’s place of business and have it delivered to the
purchaser’s outlet in Oregon. The seller, who is subject to Oregon excise tax,
must treat this as a sale of property delivered or shipped to a purchaser in
Oregon.
Example 2: A seller with a place
of business in Oregon is a distributor of merchandise to retail outlets in
multiple states. A purchaser with retail outlets in several states, including
State A, sends its own truck to pick up the merchandise at the seller’s place
of business and have it transported to the purchaser’s outlet in State A. The
seller is taxable in State A. The seller must treat this as a sale of property
delivered or shipped to a purchaser in State A.
(c) Notwithstanding subsection (2)(b) of this rule, for
tax years beginning on or after January 1, 2006, the sale of goods from a
public warehouse is not considered to take place in Oregon if:
(A) The taxpayer’s only activity in Oregon is the
storage of the goods in a public warehouse prior to shipment; or
(B) The taxpayer’s only activities in Oregon are the
storage of the goods in the public warehouse prior to shipment and the presence
of employees within this state solely for purposes of soliciting sales of the
taxpayer’s products.
(3) Property is deemed to be delivered or shipped to a
purchaser within this state if the recipient is located in this state, even
though the property is ordered from outside this state.
Example 3: The taxpayer, with
inventory in State A, sold $100,000 of its products to a purchaser having
branch stores in several states including Oregon. The order for the purchase
was placed by the purchaser’s central purchasing department located in State B.
$25,000 of the purchase order was shipped directly to purchaser’s branch store
in Oregon. The branch store in this state is the “purchaser within this state”
with respect to $25,000 of the taxpayer’s sales.
(4) Property is delivered or shipped to a purchaser
within this state if the shipment terminates in this state, even though the
property is subsequently transferred by the purchaser to another state.
Example 4: The taxpayer makes a
sale to a purchaser who maintains a central warehouse in Oregon at which all
merchandise purchases are received. The purchaser reships the goods to its
branch stores in other states for sale. All of taxpayer’s products shipped to
the purchaser’s warehouse in Oregon is property “delivered or shipped to a
purchaser within this state.”
(5) The term “purchaser within this state” includes the
ultimate recipient of the property if the taxpayer in Oregon, at the
designation of the purchaser, delivers to or has the property shipped to the
ultimate recipient within Oregon.
Example 5: A taxpayer in Oregon
sold merchandise to a purchaser in State A. Taxpayer directed the manufacturer
or supplier of the merchandise in State B to ship the merchandise to the
purchaser’s customer in Oregon pursuant to purchaser’s instructions. The sale
by the taxpayer is in Oregon.
(6) When property being shipped by a seller from the
state of origin to a purchaser in another state is diverted while enroute to a
purchaser in Oregon, the sales are in Oregon.
Example 6: The taxpayer, a produce
grower in State A, begins shipment of perishable produce to the purchaser’s
place of business in State B. While enroute the produce is diverted to the
purchaser’s place of business in Oregon, in which state the taxpayer is subject
to tax. The sale by the taxpayer is attributed to Oregon.
(7) If the taxpayer is not taxable in the state of the
purchaser, the sale is attributed to Oregon if the property is shipped from an
office, store, warehouse, factory, or other place of storage in Oregon.
(a) Sales to a purchaser in a state other than Oregon
will not be attributed to Oregon if the other state imposes a net income tax on
the seller.
(b) Sales to a purchaser in a state other than Oregon
will not be attributed to Oregon if the other state would have jurisdiction to
tax the seller on net income under the constitution of the United States and
federal Public Law (P.L.) 86-272.
(c) OAR 150-314.620-(C) provides that sales and
activities in a foreign country will be treated the same as those in another
U.S. state for determining if the foreign country has jurisdiction to tax the
seller on net income.
(d) The guidelines provided by federal P.L. 86-272
apply equally to activities regarding sales to unrelated parties and sales to
affiliated corporations.
(e) The immunity provided by P.L. 86-272 is not lost
when a business engages in de minimis activities unrelated to the solicitation
of orders in a state or foreign country where its only other activities are
those protected by P.L. 86-272. Examples of such immune activities include the
following:
(A) The board of directors of a corporation based in
Oregon holds a meeting at a hotel in another state or in a foreign country,
(B) The president of a parent corporation based in
Oregon meets with the managers of a subsidiary in a foreign country to discuss
the subsidiary’s five-year plan and capital acquisitions budget.
(C) The controller of a parent corporation based in
Oregon meets with the accounting staff of a subsidiary in a foreign country to
discuss federal financial reporting requirements.
Example 7: The taxpayer has its
head office and factory in State A. It maintains a branch office and inventory
in Oregon. Taxpayer’s only activity in State B is the solicitation of orders by
a resident salesman. All orders by the State B salesman are sent to the branch office
in Oregon for approval and are filled by shipment from the inventory in Oregon.
Since taxpayer is immune under Public Law 86-272 from tax in State B, all sales
of merchandise to purchasers in State B are attributed to Oregon, the state
from which the merchandise was shipped.
Example 8: A parent company sells
its product to a subsidiary, organized in a foreign country, that uses the
parent’s product in manufacturing its product. Because of the parent-subsidiary
relationship, orders are not solicited in the same way as sales to unrelated
customers. Instead, the products are shipped as needed to the subsidiary.
Officials from the parent company maintain a close liaison with the foreign
subsidiary on the planning and design of the items sold. After the parties
agreed on a contract in which the parent would manufacture and sell certain
items to the subsidiary, the close working relationship continued between the
technicians of both companies. Many of the parent’s employees made regular
trips to the subsidiary after the contract was signed, to take care of such
items as manufacturing problems, installation problems, repair work, redesign
discussions, and/or production problems. Parent’s production engineers,
production workers, metallurgists, quality control managers, and assembly
supervisors were some of the personnel who spent several weeks of the year
working closely with the foreign subsidiary. The foreign country does not
impose an income tax on the parent corporation. Based upon the above facts, the
parent is not considered to be protected under P.L. 86-272 and therefore is not
required to attribute sales to Oregon.
Example 9: A subsidiary organized
in a foreign country purchases products from its parent, a manufacturing
company in Oregon. The subsidiary places a purchase order with the parent on an
“as needed” basis. The parent, upon receipt of the purchase order, makes
shipment to the subsidiary. The subsidiary, upon receipt of the product, makes
payment to the parent. The parent has a relationship with its foreign
subsidiary that is unrelated to the sale of its product. Officials from the
parent company occasionally visit the foreign subsidiary to discuss matters
unrelated to the sale of its product, including: (1) public relations, (2)
personnel matters, and (3) government relations. The foreign country does not
impose an income tax on the parent corporation. Based upon the above facts, the
parent is considered to be protected under P.L. 86-272 and is required to
attribute the sales to Oregon.
(8) If a taxpayer whose salesman operates from an
office located in Oregon makes a sale to a purchaser in another state in which
the taxpayer is not taxable and the property is shipped directly by a third
party to the purchaser, the following rules apply, under authority of ORS
314.670:
(a) If the taxpayer is taxable in the state from which
the third party ships the property, then the sale is in such state.
(b) If the taxpayer is not taxable in the state from
which the property is shipped, then the sale is in Oregon.
Example 10: The taxpayer in Oregon
sold merchandise to a purchaser in State A. Taxpayer is not taxable in State A.
Upon direction of the taxpayer, the merchandise was shipped directly to the
purchaser by the manufacturer in State B. If the taxpayer is taxable in State
B, the sale is in State B. If the taxpayer is not taxable in State B, the sale
is in Oregon.
Publications: Publications
referenced are available from the Agency
Stat. Auth.: ORS 305.100 &
314.670
Stats. Implemented: ORS 314.665
Hist.: 12-70; RD 9-1992, f.
12-29-92, cert. ef. 12-31-92; RD 5-1994, f. 12-15-94, cert. ef. 12-31-94; REV
11-2004, f. 12-29-04, cert. ef. 12-31-04; REV 3-2005, f. 12-30-05, cert. ef.
1-1-06; REV 5-2007, f. 7-30-07, cert. ef. 7-31-07; REV 14-2010(Temp), f. &
cert. ef. 12-1-10 thru 5-27-11
Rule
Caption: Determining Oregon sales of
electricity or natural gas for corporation tax apportionment.
Adm.
Order No.: REV 15-2010(Temp)
Filed with Sec. of
State: 12-1-2010
Certified to be
Effective: 12-1-10 thru 5-27-11
Notice Publication
Date:
Rules Suspended: 150-314.665(2)-(C)
Subject: In 2007, 150-314.665(2)-(C) was adopted to explain how
apportionment f Oregon sales of electricity or natural gas is determined. In
2010, the Court of Appeal invalidated an administrative rule adopted by the
department because of an inadequate statement of fiscal impact. Following that
decision, the department determined that the fiscal impact statement filed with
the 2007 rule changes may also have failed to meet statutory requirements. The
department is suspending the provisions of 150-314.665(2)-(C) and we plan to
re-promulgate both rules in the near future.
Rules Coordinator: Debra L. Buchanan—(503) 945-8653
150-314.665(2)-(C)
Sales Factor; Sale of Electricity
or Natural Gas
(1) A sale of tangible personal property, including but
not limited to the sale of a commodity like electricity or natural gas, which
is delivered or shipped to a purchaser with a contracted point of delivery in
Oregon is a sale in this state. This is regardless of whether the purchaser
uses the property in Oregon, transfers the property to another state, or
resells the property in Oregon. If the contract states the point of delivery is
at the border with another state, the sale is presumed to be in Oregon unless the
taxpayer can demonstrate to the satisfaction of the department that delivery
occurred in some other place.
Example 1: A provider of wholesale electricity enters into a contract to
deliver a specified amount and duration of a supply of electricity to a purchaser
who takes possession at a specified point of delivery in Oregon. The sale is an
Oregon sale.
(2) A taxpayer who contracts to sell electricity to and
also buy electricity from the same entity during the same period or partial
period of time will have an offsetting contractual amount. The gross sales of
electricity, without regard to the offsetting purchase amount, are considered
to be Oregon sales if the contracted point of delivery is in Oregon.
Example 2: Company A signed a contract on January 2, 2006, to purchase 50
megawatts of electricity for a period of 10 hours starting November 15, 2006,
from Company B with a delivery point of Malin, Oregon. For this same time
period, Company A signed a contract on March 15, 2004, to sell 30 megawatts of
electricity to Company B with a point of delivery at Malin, Oregon. The 30
megawatts of power is recorded as a book-out on both companies’ books for
reporting to Oregon. The offsetting transaction for the 30 megawatts is deemed
to be delivered in Oregon for the purposes of computing the Oregon sales
factor. Company A will report the sale of 30 megawatts in its Oregon sales
factor numerator and Company B will report the sale of 50 megawatts (20
megawatts to complete the sales contract plus 30 megawatts of book-out) of
electricity in its Oregon sales factor numerator.
Stat. Auth.: ORS 305.100
Stats. Implemented: ORS 314.665
Hist.: REV 5-2007, f. 7-30-07,
cert. ef. 7-31-07; Suspended by REV 15-2010(Temp), f. & cert. ef. 12-1-10
thru 5-27-11
Notes
1.) This online version of the OREGON BULLETIN is provided for convenience of reference and enhanced access. The official, record copy of this publication is contained in the original Administrative Orders and Rulemaking Notices filed with the Secretary of State, Archives Division. Discrepancies, if any, are satisfied in favor of the original versions. Use the OAR Revision Cumulative Index found in the Oregon Bulletin to access a numerical list of rulemaking actions after November 15, 2010.
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