Or. Admin. Code § 150-314-0425

Current through Register Vol. 63, No. 10, October 1, 2024

Section 150-314-0425 - Sales Factor; Definition of Gross Receipts

(1) This rule adopts provisions of a model regulation recommended by the Multistate Tax Commission to promote uniform treatment of this item by the states. This rule applies to tax years beginning on or after January 1, 2018.

(2) "Gross receipts" are the gross amounts realized (the sum of money and the fair market value of other property or services received) on the sale or exchange of property, the performance of services, or the use of property or capital in a transaction which produces apportionable income, in which the income or loss is recognized (under the Internal Revenue Code (IRC), and, where the income of foreign entities is included in apportionable income, amounts which would have been recognized under the IRC if the relevant transactions or entities were in the United States.) Amounts realized on the sale or exchange of property are not reduced for the cost of goods sold or the basis of property sold.

(3) "Sales" means all gross receipts of the taxpayer that are not allocated under paragraphs of ORS 314.625 to 314.645 and that are received from transactions and activity in the regular course of the taxpayer's trade or business. The following are additional rules for determining "sales" in various situations:

(a) In the case of a taxpayer engaged in manufacturing and selling or purchasing and reselling goods or products, "sales" includes all gross receipts from the sales of such goods or products (or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the tax period) held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business. Gross receipts for this purpose means gross sales less returns and allowances. Federal and state excise taxes (excluding sales taxes) will be included as part of such receipts if such taxes are passed on to or collected from the buyer or included as part of the selling price of the product. The exclusion of sales taxes from the sales factor is effective January 1, 2014 and applies to tax years beginning on or after that date.

(b) In the case of cost plus fixed fee contracts, such as the operation of a government-owned plant for a fee, "sales" includes the entire reimbursed cost plus the fee.

(c) In the case of a taxpayer engaged in providing services, such as the operation of an advertising agency or the performance of equipment service contracts or research and development contracts, "sales" includes the gross receipts from the performance of such services, including fees, commissions, and similar items.

(d) In the case of a taxpayer engaged in the sale of equipment used in the taxpayer's trade or business, when the taxpayer disposes of the equipment under a regular replacement program, "sales" includes the gross receipts from the sale of this equipment. For example, a truck express company owns a fleet of trucks and sells its trucks under a regular replacement program; the gross receipts from the sale of the trucks would be included in "sales."

(e) In the case of a taxpayer with insubstantial amounts of gross receipts arising from sales in the ordinary course of business, the insubstantial amounts may be excluded from the sales factor unless their exclusion would materially affect the amount of income apportioned to this state.

(f) The denominator of the sales factor will include the total gross receipts derived by the taxpayer from transactions and activity in the regular course of its trade or business except as provided by ORS 314.610(7) and the rules adopted thereto.

(g) Gross premium receipts. Gross premium receipts are all receipts paid in by the subscribers to the various coverages offered by the company and are assigned to the state of the domicile of the subscriber. In the case of a group policy, the assignment is to the state of the domicile of the employer-agent who collects and remits the premiums to the company.

(4) In the case of a taxpayer engaged in the operation of a casino, "gross drop" rather than "net drop" will be used in computing the gross receipts factor. "Gross drop" is computed as follows:

(a) Keno. Gross drop is the cumulative total cash paid in at the keno windows determined by totaling the amounts set forth on the customer's tickets.

(b) Slots. Gross drop is the cumulative total of all coins removed from the machines, plus jackpots paid less the coins previously added to the machines.

(c) Table games. Gross drop is the cumulative total of all cash funds and credit slips dropped in the cash boxes. When the cash method is used, only credit slips relating to chips removed from the tables should be considered.

(5) Sales of a taxpayer from hedging transactions, or from holding cash or securities, or from the maturity, redemption, sale, exchange, loan, or other disposition of cash or securities, must be excluded. Sales arising from a business activity are receipts from hedging if the primary purpose of engaging in the business activity is to reduce the exposure to risk caused by other business activities. Whether events or transactions not involving cash or securities are hedging transactions must be determined based on the primary purpose of the taxpayer engaging in the activity giving rise to the receipts, including the acquisition or holding of the underlying asset. Gross receipts from the holding of cash or securities, or maturity, redemption, sale, exchange, loan, or other disposition of cash or securities are excluded from the definition of sales whether or not those events or transactions are engaged in for the purpose of hedging. The taxpayer's treatment of the sales as hedging gross receipts for accounting or federal tax purposes may serve as indicia of the taxpayer's primary purpose, but shall not be determinative.

(6) Sales of a taxpayer do not include the following items:

(a) Property or money received by an agent, intermediary, fiduciary, or other person acting in a similar capacity on behalf of another in excess of the recipient's commission, fee, or other remuneration; or

(b) Amounts received from others and held in trust by the taxpayer.

(7) Sales, even if apportionable income, are presumed not to include such items as, for example:

(a) Damages and other amounts received as the result of litigation unless the transaction or activity that gave rise to the damages or other amounts was in the regular course of business;

(b) Tax refunds and other tax benefit recoveries;

(c) Contributions to capital;

(d) Income from forgiveness of indebtedness;

(e) Amounts realized from exchanges of inventory that are not recognized by the IRC; or

(f) Amounts realized as a result of factoring accounts receivable recorded on an accrual basis.

(8) Exclusion of an item from the definition of "sales" is not determinative of its character as apportionable or non-apportionable income. Certain gross receipts that are "sales" under the definition are excluded from the "sales factor" under ORS 314.665. Nothing in this definition is to be construed to modify, impair, or supersede any provision of or rule adopted pursuant to ORS 314.667.

(9) Security means any interest or instrument commonly treated as a security as well as other instruments which are customarily sold in the open market or on a recognized exchange, including, but not limited to, transferable shares of a beneficial interest in any corporation or other entity, bonds, debentures, notes, and other evidences of indebtedness, accounts receivable and notes receivable, cash and cash equivalents including foreign currencies, and repurchase and futures contracts.

(10) In filing returns with this state, if the taxpayer departs from or modifies the basis for excluding or including gross receipts in the sales factor used in returns for prior years, the taxpayer will disclose in the return for the current year the nature and extent of the modification.

(11) If the returns or reports filed by the taxpayer with all states to which the taxpayer reports under Article IV of the Multistate Tax Compact or the Uniform Division of Income for Tax Purposes Act are not uniform in the inclusion or exclusion of gross receipts, the taxpayer will disclose in its return to this state the nature and extent of the variance.

Or. Admin. Code § 150-314-0425

12-70; 8-73; RD 7-1983, f. 12-20-83, cert. ef. 12-31-83; RD 12-1985, f. 12-16-85, cert. ef. 12-31-85; RD 9-1992, f. 12-29-92, cert. ef. 12-31-92; RD 3-1995, f. 12-29-95, cert. ef. 12-31-95; REV 12-2000, f. 12-29-00, cert. ef. 12-31-00; REV 5-2015, f. 12-23-15, cert. ef. 1-1-16; Renumbered from 150-314.665(1)-(A), REV 35-2016, f. 8-12-16, cert. ef. 9/1/2016; REV 71-2017, amend filed 12/22/2017, effective1/1/2018

Publications: Contact the Oregon Department of Revenue to learn how to obtain a copy of the publication referred to or incorporated by reference in this rule pursuant to ORS 183.360(2) and 183.355(1)(b).

Statutory/Other Authority: ORS 305.100 & 314.665

Statutes/Other Implemented: ORS 314.665 & 314.667