OTA Dispatch Issue 4 2019

18 Oregon Trucking Associations, Inc. Oregon Truck Dispatch businesses that purchase equipment through a nationalized program and then deploy to individual states as needed. The CAT law contains an exception to this rule if the taxpayer can demonstrate that avoiding Oregon tax wasn’t the purpose for the transaction structure. Any business that purchases property and equipment outside Oregon should document its business purpose for doing so. ADDITIONAL CONSIDERATIONS Accounting for Receipts The CAT is assessed on gross receipts. Trucking and logistics businesses may have industry‐specific accounting methods that could either gross up their receipts or reduce them. For example, a logistics business may act as either principal or agent on a given contract, and it would record customer receipts on a gross or net basis, accordingly. Logistics businesses required to prepare financial statements under Generally Accepted Accounting Principles (GAAP) generally must review contracts to determine the gross versus net treatment. With the CAT based on gross receipts, even businesses that aren’t subject to GAAP will want to carefully review their contract terms to make sure items are correctly categorized. Trucking businesses that impose fuel surcharges or provide customer discounts face a similar analysis. Fuel surcharges, for instance, could be an offset to fuel expenses as opposed to a separate revenue line. Structuring Oregon, like most states, follows the federal treatment of pass‐through entities (PTEs), according to Oregon Revised Statutes Section 63.810. A business with investments in partnerships that include the distributive share of net income and apportionment factors from the partnerships should evaluate its apportionment in light of this new tax. Passing through the tax? Many businesses subject to the CAT plan to collect or or pass through the tax in some form to their customers. The pass through can be complex due to the deduction allowed, which isn’t known until a business completes its taxable year. Additionally, any amounts collected as reimbursements for the tax may themselves be subject to CAT. Trucking and logistics businesses will want to discuss the availability of this option with their tax advisors and legal counsel. On the other side of the transaction, vendors may be including this tax, in whole or in part, on invoices. Businesses may want to work with their accounts payable departments to review their responsibilities for paying this tax. Portland, Oregon also implemented a gross receipts tax impacting certain large retailers doing business in the city. Businesses with Portland locations may see this new 1% tax on invoices. Trucking and logistics businesses will want to discuss potentially passing through the CAT, and any CAT or CES tax on invoices, with legal counsel and their accounts payable and purchasing departments. IMPLICATIONS As with all taxes imposed on gross receipts or modified gross receipts, businesses operating with lower margins are hit especially hard. Oregon’s CAT applies in addition to the existing tax on apportioned net income. Coupled with Portland’s existing taxes, including a surcharge for public companies with executive compensation exceeding city‐ approved ratios, a business could be subject to as many as seven of the following taxes: ` Oregon CAT ` Oregon net income tax or minimum tax ` Portland license tax ` Multnomah license tax ` Portland CES ` Portland CEO surcharge ` Portland Heavy Vehicle Use Tax WE’RE HERE TO HELP Trucking and logistics businesses often operate in high gross revenue, low net margin environments that make receipts and margins taxes costly. This multilayered tax regime increases the need for trucking and logistics businesses to carefully examine their Oregon locations, activities, and potential liabilities.  About The Authors Moss Adams LLP is a national leader in assurance, tax, consulting, risk management, transaction, and wealth services, serving local, regional, national, and international transportation and logistics companies. Jennifer Young and Matt Solomon provide accounting, tax, and value-added services to trucking and logistics firms, as well as automotive, heavy equipment, commercial trucking, RV, and transportation-related retailers and wholesalers. Contact Jennifer at jennifer. young@mossadams.com or 503.478.2242; or Matt at matt.solomon@mossadams.com or 503.478.2161. Oregon Gross Receipts Tax, cont.