Are You Prepared for Oregon’s Move to Market Sourcing?

On July 3, 2017, Governor Kate Brown signed Senate Bill (SB) 28, requiring Oregon taxpayers to use a market-based apportionment methodology as it relates to receipts from sales of other than tangible personal property.

This law replaces Oregon’s current cost-of-performance apportionment methodology and could greatly impact businesses with customers inside and outside of Oregon.

Key Provisions

Effective for tax years beginning on or after January 1, 2018, SB 28 provides that a taxpayer's “sales, other than the sales of tangible personal property, are in this state if the taxpayer’s market for sales is in this state.”

SB 28 is based on model provisions adopted by the Multistate Tax Commission (MTC).

Sales of Services

The law specifies that a sale will be sourced to Oregon if “the service is delivered to a location” in Oregon. While the law doesn’t provide further guidance regarding this standard, the MTC’s model regulations state that the term “delivered to a location” refers to the location of the taxpayer’s market for the service.

Sales of Intangible Property

SB 28 requires receipts from intangible property that’s rented, leased, licensed, or sold be sourced to Oregon to the extent the property is used in the state. As an example, the bill states that "a contract right, government license, or other intangible property that authorizes the holder to conduct a business activity in a specific geographic area is deemed to be used in this state if the geographic area includes all or part of this state.

The law appears to exclude some potentially significant receipts from the sales factor. Although further guidance from the Oregon Department of Revenue (DOR) is required to identify these items, the fact that the MTC’s model regulations exclude, for example, sales of a partnership interest and business goodwill could provide a clue as to what the DOR will decide.

Determining the Market State

Sometimes a taxpayer can easily determine where it delivers a service or licenses an intangible. Often, however, it’s difficult to attribute receipts to a specific state. A taxpayer’s customer for a service may do business globally or intangibles may be licensed for use across several states, for example.

Under SB 28, taxpayers must reasonably approximate the state of assignment if it can’t be determined.

Further Guidance

The DOR plans to release an official draft of administrative rules by the middle of August 2017 to give taxpayers additional market-sourcing guidance. Because the DOR has indicated it will base its rules on the MTC’s model regulations, taxpayers can look to the MTC for an idea of what the final guidance will be.

We're Here to Help

Oregon’s switch to market sourcing may be cause for a reexamination of your company’s sales apportionment strategy. We can help your company review and calculate the impact of this law on your Oregon sales factor.

If you’re interested in learning more about an apportionment study, including reasonable approximation, visit or email

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