Oregon: The Strategic Exemptions in the Beaver State’s Tax Climate

Oregon has managed to take the numbers 30, 36, 37, 17 and 4, and somehow make them average out to 7.

It’s not some unique lottery combination; it’s how the state’s tax climate ranks nationally.

The first five numbers represent rankings in individual categories.

The #7 is the important one though—the final ranking of the Oregon tax climate for business, as recently calculated by MaxFilings.

Are you puzzled by how?

We were too.

To gain a full understanding of this seeming anomaly, let’s start with the obvious strength: the state’s #4 ranking in sales taxes.

Oregon has no statewide sales tax, and there are minimal levies at the county and municipal levels.

For business owners, the outlook is even better — there no taxes on business purchases, inventories or capital stock.

Even so, this alone wouldn’t make up for low rankings on corporate tax rates, personal income tax rates, property taxes and unemployment insurance taxes.

So what’s the deal?

Where Oregon businesses really get ahead are the exemptions offered to corporations.

The state has made a concerted effort to attract international business by making only sales within Oregon responsible in determining taxable corporate income.

For example, Oregon-based Nike doesn’t have to pay corporate taxes on the income they make selling shoes around the rest of the United States and the world.

By keeping the tax liability strictly connected to the local customer base, Oregon makes itself attractive to businesses with large-scale designs.

What’s more, the owners of S-corporations or partnerships don’t pay corporate income taxes at all.

They are instead taxed only on profits, which a business can more readily adjust.

Oregon also offers significant tax relief to businesses that invest in specific enterprise-zone areas of the state.

Also, an exemption from property taxes altogether is available on certain large capital investments.

The bottom line:

Don’t be fooled by Oregon’s surface rankings in individual categories.

If you understand the tax code and where the advantages are, the state can be a great place to do business.