overall Tax Impact on Business in Oregon
Oregon is business-friendly and offers low taxes; in fact, the national 2008 Council on State Taxation study conducted in conjuction with Ernst & Young, found that of all states, Oregon offers the second lowest tax impact on business.
In Oregon, a company's annual cost basis will depend on several factors: income or operating profits, its ownership or corporate structure, location of its customers, employees and wages (payroll), and investment made in new structures, equipment or other properties. O
regon does not have taxes on:
• General sales
• Use of equipment or other purchases
• Receipts/revenue tax (like Washington State B&O tax)
• Inventory or goods in transit
• Worldwide unitary income
• Motor vehicle purchase
• Statewide capital or asset value
• Intangible properties, such as stocks, bonds or securities.
Income taxes
The tax rate on corporate income of firms doing business in the state is 6.6 percent (minimum payment = $10). To apportion income for corporations with multi-state operations, Oregon relies 100 percent on relative interstate sales—i.e., single-sales factor with throwback rule in adherence to Uniform Division of Income Tax Purposes Act (UDITPA). Consequently, additional corporate assets or payroll in Oregon does not increase tax exposure.
Personal income taxes supply most of the operating revenue for state government and for public education. Maximum personal income tax rate is 9 percent on single returns with taxable income greater than $7,300, or joint returns, greater than $14,600, in 2008. Same rate applies to capital gains as other personal income.
Payroll taxes
In addition to federal withholdings and minor payroll-based rates in a few county–regional transit districts, the following apply to businesses with employees in Oregon.
Unemployment insurance
In good times and down times, Oregon enjoys one of the most stable unemployment funds throughout the nation, minimizing payroll costs over the long run. In 2008—as calculated on the first $30,200 of each covered employee’s wages—this tax rate ranges from 0.7 to 5.4 percent for experienced employers with an average rate of nearly 1.7 percent. The 2008 base rate for new employers is 2.1 percent, which changes to a company-specific, experience-based rate after the first 21 to 33 months of operations.
Workers’ compensation insurance
Having long enjoyed some of the lowest rates in the country, Oregon employers are seeing the average workers’ compensation “pure” premium rate decrease again in 2008 (by 2.3 percent). This continues Oregon’s unmatched record among all states, going 18 straight years without such a rate increase. Since 1990, Oregon employers have saved close to $15 billion in premium payments. In 2008, they will pay about 32 percent less per $100 of payroll compared to employers in California, and about 14 percent less than in Washington State. With a focus on business, safety and efficiency, Oregon has created a system that is a benefit to employers, who may purchase coverage from any provider qualified to write workers’ compensation insurance. Alternatively, the State Accident Insurance Fund (SAIF), a public, non-profit corporation, offers coverage, and qualifying large employers may receive certification as self-insured. Actual premiums will depend on the insurance carrier and on industrial and occupational classifications. Employee/employer withholding of $0.014/hour (each) supports state services.
Property taxes
Tangible real and (business) personal property, unless specifically exempted, is subject to local taxation by counties, cities, schools and other districts. Registered vehicles and inventories, including raw materials, goods-in-process and finished products, are entirely exempt. Taxable property is always assessed at an amount equal to or less than real market value. A lower ratio may apply, because any annual appreciation in taxable value may not exceed 3 percent. The taxable value of new property is determined based on the county’s average ratio of assessed value to real market value (AV/RMV) for all property with the same classification (e.g., residential); for new industrial property, the initial AV will typically be at or near 100 percent of RMV. Additionally, the State Constitution caps every property tax bill at not more than 1.5 percent of RMV, aside from levies for voter-approved bond issuances.
Sales and use taxes
Other than fuel, tobacco and other assorted excise taxes, Oregon does not levy sales or use taxes.
Overall Tax Impact on Business in Oregon
In conjunction with the Council on State Taxation, Ernst & Young released in 2008 their "Total State and Local Business Taxes: 50-State Estimates for Fiscal Year 2007" report. It shows that amongst all states in the U.S., Oregon has the second lowest tax impact overall on business. At 3.8%, Oregon is well below the national average of 5.0% and fares very well relative to neighboring states in the Pacific Northwest.
Examples of Business Cost Points for Oregon and Neighboring States
For companies considering relocation to the Pacific Northwest or are looking to have close access to populous metro areas in California, Oregon offers the advantage of an attractive corporate tax rate, no sales or use tax, and no tax on machinery and equipment.
| Examples of Cost Points |
|
| State |
Corporate Tax
Rate |
Corporate Tax
Sales Factor |
Health
Insurance |
Sales/Use Tax
Max Rate |
Sales/Use Tax
M&E? |
| Oregon |
6.6% |
100% |
$11,613 |
0.0% |
NA |
| California |
8.84% |
50% |
$11,493 |
9.1% |
YES |
| Idaho |
7.6% |
50% |
$10,775 |
9.0/6.0% |
NO |
| Nevada |
0.0% |
NA |
$9,746 |
7.75% |
Y/N |
| Washington |
0.0% |
NA |
$11,423 |
9.0% |
NO |
Source: Oregon Economic & Community Development Department, 2008
M&E = Machinery & Equipment
See also specific incentive pages regarding Income Tax Incentives, Property Tax Incentives, Workforce Incentives, Business Financing Solutions, and Other Incentives, as well as Cost Comparisons.