The World Health Organization has officially declared the coronavirus outbreak to be a pandemic. In addition to the cost on human life, the rapid spread of COVID-19 has left a trail of economic damage affecting business revenues. COVID-19 has caused complete or partial shutdown of factories, supply chain disruptions, and labor shortages, and has impacted demand in certain industries. This impact will also be felt by U.S. state, and local governments.
Following several failed attempts by Oregon voters and the Oregon legislature to pass a gross receipts tax (see Not Dead Yet: Oregon Voters Propose Another Gross Receipts Tax in the Wake of Market-Based Sourcing and Oregon Proposes “Gross” New Tax), Governor Kate Brown signed Enrolled House Bill 3427, Oregon’s corporate activity tax (CAT), into law on May 16, 2019.
Baker McKenzie attended the U.S. Supreme Court’s oral arguments yesterday in South Dakota v. Wayfair, Docket No. 17-494. At issue in the case is whether the Court should abrogate the physical presence nexus standard that it first articulated in National Bellas Hess v. Dep’t of Revenue, 386 U.S. 753 (1967), and later affirmed in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). The Court’s decision could have a profound impact on sales and use tax nexus in the United States by altering the limitations currently imposed on a state’s ability to require out-of-state retailers to collect such tax.
Less than a year after a similar minimum tax proposal was soundly defeated at the polls, a gross receipts minimum tax measure is again being proposed by way of voter initiative in Oregon. A draft ballot title for Initiative Petition 2018-027 (“IP 27”) was received by the Oregon Secretary of State Elections Division from the Attorney General on July 13, 2017 for the November 6, 2018 general election. While the specifics of IP 27 are yet to be revealed, the summary provided in the draft ballot indicates that it is in ways even more aggressive than the one rejected by voters last November (“Measure 97”). Although the fate of this latest tax proposal is still very much in question, companies doing business in Oregon should take notice of the continued interest in gross receipts taxes (another proposal, H.B. 2830, which would have imposed a tax similar to Ohio’s Commercial Activity Tax, was narrowly defeated in the state legislature earlier this year), especially in light of the state’s recent move to market-based sourcing.