Current through Register Vol. 63, No. 9, September 1, 2024
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
314.667:
(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 &
314.667
Stats. Implemented: ORS
314.665
