Last November, we published this alert about the 1% gross receipts surcharge tax on large retailers passed by Portland voters for tax years beginning on or after January 1, 2019. The Portland Revenue Division has proposed amendments to the measure. The Revenue Division has also prepared a draft codification of the measure and proposed amendments, which would incorporate them into the existing Portland Business License Law. The proposed amendments would add new definitions, address ambiguities in the measure, and provide guidance on how to report and compute the surcharge. However, they also would make changes to the measure that could affect whether a business would be subject to the surcharge. The proposed amendments would not become effective until, and unless, they are passed by the Portland City Council.
Key Proposed Changes
1. $1 billion retail sales threshold would no longer be limited to sales only from U.S. locations.
The measure defined a “Large Retailer” as a business with both (a) more than $1 billion in “retail sales” from U.S. locations, and (b) $500,000 or more in Portland “retail sales,” in the prior year.
The Revenue Division proposes to strike the reference to “U.S. locations” so that retail sales would be taken into account regardless of where the sales occurred. This could increase the number of businesses classified as “Large Retailers,” as sales from non-U.S. locations would be included.
2. Determination of whether a business is a “Large Retailer” would be based on current year, rather than prior year, sales.
The measure based the determination of whether a business was a “Large Retailer” on prior year sales (i.e., whether a business would be subject to the surcharge in 2019 would depend on its 2018 retail sales). Under the proposed amendments, the determination would be based on current year sales.
3. A business’s “Gross Revenue from Retail Sales” subject to the surcharge would include any portion of the surcharge collected from customers.
While a retailer would not be barred from itemizing the surcharge on consumer invoices separate from the sale price, under the Revenue Division’s proposed amendments, the total amount charged to the customer (including both the stated retail price AND the itemized surcharge) would be included in the retailer’s gross retail sales in determining the surcharge amount due from the retailer. Thus, if a retailer provided a customer with a receipt, showing a $100 sales price plus a $1 surcharge, $101 would be included in the retailer’s retail sales for purposes of computing the retailer’s surcharge due to the city.
4. Deduction for general business license tax paid would be limited to tax paid on revenue subject to the surcharge.
The measure provided for a deduction from “gross retail sales” for (i) sales of certain groceries, medicines and health care services, and (ii) “the amount of Portland Business License Tax” paid to the city.
Under the proposed amendments, the deduction for Portland business license tax paid to the city would be limited to the tax attributable to revenue subject to the surcharge.
5. Businesses subject to the surcharge would be required to attach a surcharge schedule to their business license tax returns.
Under the proposed amendments, any business with (i) “Total Gross Revenue” of $1 billion or more, and (ii) “Portland Total Gross Revenue” of $500,000 or more would be required to file a surcharge schedule with its Portland business license tax return. The details of the schedule are not addressed.