State Taxation of Gross Receipts: Minimizing Tax in Oregon, Texas, Ohio, Nevada, Delaware, and Others

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, November 21, 2019

Recorded event now available

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Program Materials

This webinar will address how to minimize the increasingly popular gross receipts taxes (GRTs) charged by states. The panel will cover Oregon's recently enacted corporate activity tax (CAT), Texas' franchise tax, and Ohio's CAT, among others. The speakers will discuss which businesses are subject to these taxes, what constitutes nexus in these states, and how to lessen the tax burden of GRTs on businesses.

Description

Called by many different names (corporate activity tax, franchise tax, margins tax, commerce tax, etc.), a gross receipts tax (GRT) is still a tax on receipts. It's a tax that can be charged multiple times on the same product as well as to businesses operating at a loss. As a result, this is an ideal tax for states needing to raise revenue and one that is being embraced by more and more states. Minimizing the impact of GRTs is an increasingly important concern for businesses and SALT professionals.

Oregon recently joined the group of states with a GRT. Its tax is described as a corporate activity tax (CAT) and is effective Jan. 1, 2020. The tax applies to "persons" that have substantial nexus in Oregon. Nexus includes, but is not limited to, receipts of $750,000 or more, property valued at $50,000 or more, or payroll of $50,000 or more. This CAT is assessed on receipts of $1 million and above, after a 35% deduction for certain costs and is calculated as $250 plus .57 percent of "calculated taxable commercial activity." These gross receipts calculations are subject to unitary reporting rules.

In 2016 Nevada, which like Oregon formerly was a no state tax state, added a GRT. It is called a commerce tax. Nevada's taxing regime includes a table with 27 varying rates based on the category a business falls into for assessment. The tax is imposed on revenue of at least $4 million annually, and fees range from .051% to .331%, with a rate of .128% for unclassified businesses.

One of the better-known GRTs is Texas' franchise tax. As the Texas Comptroller's website explains: the tax rates, thresholds, and deduction limits change annually. A tax rate of .75% applies to "most entities." Entities with less than $1,000 in tax due or with less than $1,130,000 annualized total revenue owe no tax; these entities are still required to file the No Tax Due Report. Determining when a return is due and which period to include in the return can be a challenge.

With more states charging GRTs, additional planning opportunities exist to minimize the impact of GRTs in these states. Categorizing a business correctly and ensuring it does meet the criteria for nexus is a primary consideration. Some states, like Texas, allow deductions for specific costs. Understanding what cost deductions are allowed is critical to minimizing the GRTs. Some states require business registration and minimum fees, even when the business is below the GRT threshold for taxation. Noncompliance can be costly.

Listen as our panel of SALT experts explains the new Oregon CAT and who is required to file, Texas' franchise tax, Nevada's commerce tax, and strategies to minimize taxation in other states that raise revenue by taxing gross receipts.

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Outline

  1. Taxation of gross receipts
    1. Overview
    2. Trends
    3. Nexus
  2. Oregon CAT in 2020
  3. Texas
  4. Nevada
  5. Ohio
  6. Other states
  7. Best practices to minimize taxes

Benefits

The panel will review these and other important issues:

  • Who is subject to Oregon's new CAT?
  • What is included in Texas' deduction for the cost of goods sold?
  • What constitutes nexus in states that tax gross receipts?
  • What steps can be taken to minimize tax liability in GRT states?

Faculty

Roberts, Stacey
Stacey L. Roberts, CPA
State and Local Tax Director
TaxOps

Ms. Roberts finds the singular state and local tax (SALT) area fascinating and is energized by the daily challenges to...  |  Read More

Vorndran, Judith
Judith B. Vorndran, JD, CPA, MSBA

Partner
TaxOps

Ms. Vorndran helps clients and tax professionals navigate the morass of state and local tax issues with the goal of...  |  Read More

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