Some WA Businesses & Professional Services Subject To OR Income Tax

Posted on
Piggy bank looking at some change
income tax
Image by Nick Youngston

Certain Southwest Washington businesses and professionals who provide services to clients located in Oregon may be subject to reporting and paying Oregon income tax.

Previously, payment for services provided at the professional’s Washington office or over the phone or internet were merely subject to Washington business and occupation (B&O) tax.

As of January 1, 2018, however, if the client is located in Oregon, the income will be subject to Oregon income tax, requiring the professional to file an Oregon income tax return — even if the professional neither maintains an Oregon bank account nor is registered to do business in Oregon. This new rule applies even if the services have nothing to do with Oregon.

The types of services that fall within the new law are broadly defined to include:

(P)rofessional services … that require specialized knowledge and in some cases require a professional certification, license, or degree. These services include the performance of technical services that require the application of specialized knowledge. Professional services include, without limitation, management services, bank and financial services, financial custodial services, investment and brokerage services, fiduciary services, tax preparation, payroll and accounting services, lending services, credit card services (including credit card processing services), data processing services, legal services, consulting services, video production services, graphic and other design services, engineering services, and architectural services. [emphasis added][1]

In deciding if the client is located in Oregon, it must first be determined if the client is an individual or a business.

If the client is an individual whose primary residence or billing address is in Oregon, the income received from the client will likely be subject to Oregon income tax.

If the client is a business and the contract with the professional is managed in Oregon, income for the services will be taxable by Oregon.

If the location of the contract management cannot be determined but the services are ordered from an Oregon location, the income received for the service will be subject to Oregon income tax.

Lastly, if the “customer place of order is not reasonably determinable,”[2]and the client’s billing address is in Oregon, the service provider must pay Oregon income tax on receipts from the client. If a client has a multi-state business, the analysis gets more interesting.

A word of caution: The Oregon Department of Revenue has access to IRS 1099 filings and thus will easily be able to monitor compliance with income tax reporting and payment by southwest Washington professional service providers.

Horenstein Law Group urges you to consider and review this new rule with your accountant and tax preparer.


OR Income Flow Chart with logo

Click here for a full view of this easy-reference flow chart (PDF)

[1] OAR 150-314-0435(4)(d)

[2] OAR 150-314-0435(4)(d)(C)(i)(II)

Please note that merely sending e-mail to one of our lawyers or our client services department does not create an attorney-client relationship. Such relationship will exist only once it is confirmed in writing between Horenstein Law Group PLLC and you or your company. Please do not send information you deem to be confidential unless or until we establish a formal attorney-client relationship.

The materials on the website are for informational purposes only and not for the purpose of providing legal advice. You should not consider any information on the website as legal advice. You should consult an attorney with respect to advice applicable to your particular situation or issue. By clicking “I ACCEPT” below, you agree that any information you provide, including without limitation name and e-mail address, may be entered into our database.