Or. Admin. Code § 150-317-1040
Example 1: Salon Corp has retail locations in Oregon and in other states where it provides hair cutting services to individual and business customers, the latter of whom are paid for through the means of a company account. The receipts from sales of services provided at Salon Corp's in-state locations are in Oregon. The receipts from sales of services provided at Salon Corp's locations outside Oregon, even when provided to residents of Oregon, are not receipts from in-state sales.
Example 2: Landscape Corp provides landscaping and gardening services in Oregon and in neighboring states. Landscape Corp provides landscaping services at the in-state vacation home of an individual who is a resident of another state and who is located outside Oregon at the time the services are performed. The receipts from sale of services provided at the in-state location are in Oregon.
Example 3: Same facts as Example 2, except that Landscape Corp provides the landscaping services to Retail Corp, a corporation with retail locations in several states, and the services are with respect to those locations of Retail Corp that are in Oregon and in other states. The receipts from the sale of services provided to Retail Corp are in Oregon to the extent the services are provided in Oregon.
Example 4: Camera Corp provides camera repair services at an in-state retail location to walk-in individual and business customers. In some cases, Camera Corp actually repairs a camera that is brought to its in-state location at a facility that is in another state. In these cases, the repaired camera is then returned to the customer at Camera Corp's in-state location. The receipts from sale of these services are in Oregon.
Example 5: Same facts as Example 4, except that a customer located in Oregon mails the camera directly to the out-of-state facility owned by Camera Corp to be fixed, and receives the repaired camera back in Oregon by mail. The receipts from sale of the service are in Oregon.
Example 6: Teaching Corp provides seminars in Oregon to individual and business customers. The seminars and the materials used in connection with the seminars are prepared outside the state, the teachers who teach the seminars include teachers that are resident outside the state, and the students who attend the seminars include students that are resident outside the state. Because the seminars are taught in Oregon, the receipts from sales of the services are in Oregon.
Example 7: Direct Mail, a company based outside Oregon, provides direct mail services to its customer, Business LLP. Business LLP contracts with Direct Mail to deliver printed fliers to a list of customers that is provided to it by Business LLP. Some of Business LLP's customers are in Oregon and some are in other states. Direct Mail will use the postal service to deliver the printed fliers to Business LLP's customers. The receipts from the sale of Direct Mail services to Business LLP are assigned to Oregon to the extent that the services are delivered on behalf of Business LLP to Oregon customers (i.e., to the extent that the fliers are delivered on behalf of Business LLP to Business LLP's intended audience in Oregon).
Example 8: Ad LLP is a partnership based outside Oregon that provides advertising and advertising-related services in Oregon and in neighboring states. Ad LLP enters into a contract at a location outside Oregon with an individual customer who is not an Oregon resident to design advertisements for billboards to be displayed in Oregon and to design fliers to be mailed to Oregon residents. All of the design work is performed outside Oregon. The receipts from the sale of the design services are in Oregon because the service is physically delivered on behalf of the customer to the customer's intended audience in Oregon.
Example 9: Same facts as Example 8, except that the contract is with a business customer that is based outside Oregon. The receipts from the sale of the design services are in Oregon because the services are physically delivered on behalf of the customer to the customer's intended audience in Oregon.
Example 10: Fulfillment Co., a company based outside Oregon, provides product delivery fulfillment services in Oregon and in neighboring states to Sales Co., a company located outside Oregon that sells tangible personal property through a mail order catalog and over the Internet to customers. In some cases when a customer purchases tangible personal property from Sales Co. to be delivered in Oregon, Fulfillment Co. will, pursuant to its contract with Sales Co., deliver that property from its fulfillment warehouse located outside Oregon. The receipts from the sale of the fulfillment services of Fulfillment Co. to Sales Co. are assigned to Oregon to the extent that Fulfillment Co.'s deliveries on behalf of Sales Co. are to recipients in Oregon.
Example 11: Software Enterprise, a software development company, enters into a contract with a business customer, Buyer Company, which is physically located in Oregon, to develop custom software to be used in Buyer Company's business. Software Enterprise develops the custom software outside Oregon, and then physically installs the software on Buyer Company's computer hardware located in Oregon. The development and sale of the custom software is properly characterized as a service transaction, and the receipts from the sale are assigned to Oregon because the software is physically delivered to the customer in Oregon.
Example 12: Same facts as Example 11, except that Buyer Company has offices in Oregon and several other states, but is commercially domiciled outside Oregon and orders the software from a location outside Oregon. The receipts from the development and sale of the custom software service are assigned to Oregon because the software is physically delivered to the customer in Oregon.
Example 13: Support Corp, a corporation that is based outside Oregon, provides software support and diagnostic services to individual and business customers that have previously purchased certain software from third-party vendors. These individual and business customers are located in Oregon and other states. Support Corp supplies its services on a case by case basis when directly contacted by its customer. Support Corp generally provides these services through the Internet but sometimes provides these services by phone. In all cases, Support Corp verifies the customer's account information before providing any service. Using the information that Support Corp verifies before performing a service, Support Corp can determine where its services are received, and therefore must assign its receipts to these locations. The receipts from sales made to Support Corp's individual and business customers are in Oregon to the extent that Support Corp's services are received in Oregon. See sections (4)(c)(B)(ii)(I) and (II) of this rule.
Example 14: Online Corp, a corporation based outside Oregon, provides web-based services through the means of the Internet to individual customers who are resident in Oregon and in other states. These customers access Online Corp's web services primarily in their states of residence, and sometimes while traveling, in other states. For a substantial portion of its receipts from the sale of services, Online Corp can either determine the state or states where the services are received, or, where it cannot determine the state or states, has sufficient information regarding the place of receipt to reasonably approximate the state or states. However, Online Corp cannot determine or reasonably approximate the state or states of receipt for all of the sales of its services. Assuming that Online Corp reasonably believes, based on all available information, that the geographic distribution of the receipts from sales for which it cannot determine or reasonable approximate the location of the receipt of its services generally tracks those for which it does have this information, Online Corp must assign to Oregon the receipts from sales for which it does not know the customers' location in the same proportion as those receipts for which it has this information. See section (1)(d)(B) of this rule.
Example 15: Same facts as 14, except that Online Corp reasonably believes that the geographic distribution of the receipts from sales for which it cannot determine or reasonably approximate the location of the receipt of its web-based services do not generally track the sales for which it does have this information. Online Corp must assign the receipts from sales of its services for which it lacks information as provided to its individual customers using the customers' billing addresses. See section (4)(c)(B)(ii)(I) of this rule.
Example 16: Net Corp, a corporation based outside Oregon, provides web-based services to a business customer, Business Corp, a company with offices in Oregon and two neighboring states. Particular employees of Business Corp access the services from computers in each Business Corp office. Assume that Net Corp determines that Business Corp employees in Oregon were responsible for 75 percent of Business Corp's use of Net Corp's services, and Business Corp employees in other states were responsible for 25 percent of Business Corp's use of Net Corp's services. In this case, 75 percent of the receipts from the sale are received in Oregon. See section (4)(c)(B)(ii)(II)(II-a). Assume alternatively that Net Corp lacks sufficient information regarding the location or locations where Business Corp's employees used the services to determine or reasonably approximate the location or locations. Under these circumstances, if Net Corp derives five percent or less of its receipts from sales to Business Corp, Net Corp must assign the receipts under section (4)(c)(B)(ii)(II)(II-c) of this rule to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable, to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable, to the state of Business Corp's billing address. If Net Corp derives more than five percent of its receipts from sales of services to Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state.
Example 17: Net Corp, a corporation based outside Oregon, provides web-based services through the means of the Internet to more than 250 individual and business customers in Oregon and in other states. Assume that for each customer Net Corp cannot determine the state or states where its web services are actually received and lacks sufficient information regarding the place of receipt to reasonably approximate the state or states. Also assume that Net Corp does not derive more than five percent of its receipts from sales of services to a single customer. Net Corp may apply the safe harbor stated in section (4)(c)(B)(ii)(II)(II-d) of this rule and may assign its receipts using each customer's billing address.
Example 18: Cable TV Corp, a corporation that is based outside of Oregon, has two revenue streams. First, Cable TV Corp sells advertising time to business customers pursuant to which the business customers' advertisements will run as commercials during Cable TV Corp's televised programming. Some of these business customers, though not all of them, have a physical presence in Oregon. Second, Cable TV Corp sells monthly subscriptions to individual customers in Oregon and in other states. The receipts from Cable TV Corp's sale of advertising time to its business customers are assigned to Oregon to the extent that the audience for Cable TV Corp's televised programming during which the advertisements run is in Oregon. See (4)(c)(B)(iii)(I) of this rule. If Cable TV Corp is unable to determine the actual location of its audience for the programming and lacks sufficient information regarding audience location to reasonably approximate the location, Cable TV Corp must approximate its Oregon audience using the percentage that reflects the ratio of its Oregon subscribers in the geographic area in which Cable TV Corp's televised programming featuring the advertisements is delivered relative to its total number of subscribers in that area. See section (4)(c)(B)(iii)(III)(III-a) of this rule. To the extent that Cable TV Corp's sales of monthly subscriptions represent the sale of a service, the receipts from these sales are properly assigned to Oregon in any case in which the programming is received by a customer in Oregon. See section (4)(c)(B)(ii)(I) of this rule. In any case in which Cable TV Corp cannot determine the actual location where the programming is received and lacks sufficient information regarding the location of receipt to reasonably approximate the location, the receipts from these sales of Cable TV Corp's monthly subscriptions are assigned to Oregon where its customer's billing address is in Oregon. See section (4)(c)(B)(ii)(I)(I-b) of this rule. Note that whether and to the extent that the monthly subscription fee represents a fee for a service or for a license of intangible property does not affect the analysis or result as to the state or states to which the receipts are properly assigned. See section (5)(e) of this rule.
Example 19: Network Corp, a corporation that is based outside of Oregon, sells advertising time to business customers pursuant to which the customers' advertisements will run as commercials during Network Corp's televised programming as distributed by unrelated cable television and satellite television transmission companies. The receipts from Network Corp's sale of advertising time to its business customers are assigned to Oregon to the extent that the audience for Network Corp's televised programming during which the advertisements will run is in Oregon. See section (4)(c)(B)(iii)(I) of this rule. If Network Corp cannot determine the actual location of the audience for its programming during which the advertisements will run and lacks sufficient information regarding audience location to reasonably approximate the location, Network Corp must approximate the receipts from sales of advertising that constitute Oregon sales by multiplying the amount of advertising receipts by a percentage that reflects the ratio of the Oregon population in the specific geographic area in which the televised programming containing the advertising is run relative to the total population in that area. See sections (4)(c)(B)(iii)(III)(III-b) and (III-c) of this rule.
Example 20: Web Corp, a corporation that is based outside Oregon, provides Internet content to viewers in Oregon and other states. Web Corp sells advertising space to business customers pursuant to which the customers' advertisements will appear in connection with Web Corp's Internet content. Web Corp receives a fee for running the advertisements that is determined by reference to the number of times the advertisement is viewed or clicked upon by the viewers of its website. The receipts from Web Corp's sale of advertising space to its business customers are assigned to Oregon to the extent that the viewers of the Internet content are in Oregon, as measured by viewings or clicks. See section (4)(c)(B)(iii)(I) of this rule. If Web Corp is unable to determine the actual location of its viewers and lacks sufficient information regarding the location of its viewers to reasonably approximate the location, Web Corp must approximate the amount of its Oregon receipts by multiplying the amount of receipts from sales of advertising by a percentage that reflects the Oregon population in the specific geographic area in which the content containing the advertising is delivered relative to the total population in that area. See section (4)(c)(B)(iii)(III) of this rule.
Example 21: Retail Corp, a corporation that is based outside of Oregon, sells tangible property through its retail stores located in Oregon and other states and through a mail order catalog. Answer Co, a corporation that operates call centers in multiple states, contracts with Retail Corp to answer telephone calls from individuals placing orders for products found in Retail Corp's catalogs. In this case, the phone answering services of Answer Co are being delivered to Retail Corp's customers and prospective customers. Therefore, Answer Co is delivering a service electronically to Retail Corp's customers or prospective customers on behalf of Retail Corp and must assign the proceeds from this service to the state or states from which the phone calls are placed by the customers or prospective customers. If Answer Co cannot determine the actual locations from which phone calls are placed and lacks sufficient information regarding the locations to reasonably approximate the locations, Answer Co must approximate the amount of its Oregon receipts by multiplying the amount of its fee from Retail Corp by a percentage that reflects the Oregon population in the specific geographic area from which the calls are placed relative to the total population in that area. See section (4)(c)(B)(iii)(III)(III-a) of this rule.
Example 22: Web Corp, a corporation that is based outside of Oregon, sells tangible property to customers via its Internet website. Design Co designed and maintains Web Corp's website, including making changes to the site based on customer feedback received through the site. Design Co's services are delivered to Web Corp, the proceeds from which are assigned pursuant to section (4)(c)(B)(ii) of this rule. The fact that Web Corp's customers and prospective customers incidentally benefit from Design Co's services and may even interact with Design Co in the course of providing feedback, does not transform the service into one delivered "on behalf of" Web Corp to Web Corp's customers and prospective customers.
Example 23: Wholesale Corp, a corporation that is based outside Oregon, develops an Internet-based information database outside Oregon and enters into a contract with Retail Corp whereby Retail Corp will market and sell access to this database to end users. Depending on the facts, the provision of database access may be either the sale of a service or the license of intangible property or may have elements of both, but for purposes of analysis it does not matter. See section (5)(e) of this rule. Assume that on the particular facts applicable in this example Wholesale Corp is selling database access in transactions properly characterized as involving the performance of a service. When an end user purchases access to Wholesale Corp's database from Retail Corp, Retail Corp in turn compensates Wholesale Corp in connection with that transaction. In this case, Wholesale Corp's services are being delivered through Retail Corp to the end user. Wholesale Corp must assign its receipts from sales to Retail Corp to the state or states in which the end users receive access to Wholesale Corp's database. If Wholesale Corp cannot determine the state or states where the end users actually receive access to Wholesale Corp's database and lacks sufficient information regarding the location from which the end users access the database to reasonably approximate the location, Wholesale Corp must approximate the extent to which its services are received by end users in Oregon by using a percentage that reflects the ratio of the Oregon population in the specific geographic area in which Retail Corp regularly markets and sells Wholesale Corp's database relative to the total population in that area. See section (4)(c)(B)(iii)(II) of this rule. Note that it does not matter for purposes of the analysis whether Wholesale Corp's sale of database access constitutes a service or a license of intangible property, or some combination of both. See section (5)(e) of this rule.
Example 24: Broker Corp provides securities brokerage services to individual customers who are resident in Oregon and in other states. Broker Corp is not a financial institution described in ORS 317A.100(5). Assume that Broker Corp knows the state of primary residence for many of its customers, and where it does not know the state of primary residence, it knows the customer's billing address. Also assume that Broker Corp does not derive more than five percent of its receipts from sales of all services from any one individual customer. If Broker Corp knows its customer's state of primary residence, it must assign the receipts to that state. If Broker Corp does not know its customer's state of primary residence, but rather knows the customer's billing address, it must assign the receipts to that state. See section (4)(d)(C)(i)(I) of this rule.
Example 25: Same facts as Example 24, except that Broker Corp has several individual customers from whom it derives, in each instance, more than five percent of its receipts from sales of all services. Receipts from sales to customers from whom Broker Corp derives five percent or less of its receipts from sales of all services must be assigned as described in Example 24. For each customer from whom it derives more than five percent of its receipts from sales of all services, Broker Corp is required to determine the customer's state of primary residence and must assign the receipts from the services provided to that customer to that state. In any case in which a five percent customer's state of primary residence is Oregon, receipts from a sale made to that customer must be assigned to Oregon; in any case in which a five percent customer's state of primary residence is not Oregon, receipts from a sale made to that customer are not assigned to Oregon.
Example 26: Architecture Corp provides building design services as to buildings located, or expected to be located, in Oregon to individual customers who are resident in Oregon and other states, and to business customers that are based in Oregon and other states. The receipts from Architecture Corp's sales are assigned to Oregon because the locations of the buildings to which its design services relate are in Oregon, or are expected to be in Oregon. For purposes of assigning these receipts, it is not relevant where, in the case of an individual customer, the customer primarily resides or is billed for the services, and it is not relevant where, in the case of a business customer, the customer principally manages the contract, placed the order for the services, or is billed for the services. Further, these receipts are assigned to Oregon even if Architecture Corp's designs are either physically delivered to its customer in paper form in a state other than Oregon or are electronically delivered to its customer in a state other than Oregon. See sections (4)(d)(B)(ii) and (C)(ii) of this rule.
Example 27: Law Corp provides legal services to individual clients who are resident in Oregon and in other states. In some cases, Law Corp may prepare one or more legal documents for its client as a result of these services and/or the legal work may be related to litigation or a legal matter that is ongoing in a state other than where the client is resident. Assume that Law Corp knows the state of primary residence for many of its clients, and where it does not know the state of primary residence, it knows the client's billing address. Also assume that Law Corp does not derive more than five percent of its receipts from sales of all services from any one individual client. If Law Corp knows its client's state of primary residence, it must assign the receipts to that state. If Law Corp does not know its client's state of primary residence, but rather knows the client's billing address, it must assign the receipts to that state. For purposes of the analysis it is irrelevant whether the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or the litigation or other legal matter that is the underlying predicate for the services is in another state. See sections (4)(d)(B)(ii) and (C)(i) of this rule.
Example 28: Law Corp provides legal services to several multistate business clients. In each case, Law Corp knows the state in which the agreement for legal services that governs the client relationship is principally managed by the client. In one case, the agreement is principally managed in Oregon; in the other cases, the agreement is principally managed in a state other than Oregon. If the agreement for legal services is principally managed by the client in Oregon, the receipts from sale of the services are assigned to Oregon; in the other cases, the receipts are not assigned to Oregon. In the case of receipts that are assigned to Oregon, the receipts are so assigned even if (1) the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or (2) the litigation or other legal matter that is the underlying predicate for the services is in another state. See sections (4)(d)(B)(ii) and (C)(i) of this rule.
Example 29: Consulting Corp, a company that provides consulting services to law firms and other customers, is hired by Law Corp in connection with legal representation that Law Corp provides to Client Co. Specifically, Consulting Corp is hired to provide expert testimony at a trial being conducted by Law Corp on behalf of Client Co. Client Co pays for Consulting Corp's services directly. Assuming that Consulting Corp knows that its agreement with Law Corp is principally managed by Law Corp in Oregon, the receipts from the sale of Consulting Corp's services are assigned to Oregon. It is not relevant for purposes of the analysis that Client Co is the ultimate beneficiary of Consulting Corp's services, or that Client Co pays for Consulting Corp's services directly. See section (4)(d)(C)(i)(II) of this rule.
Example 30: Advisor Corp, a corporation that provides investment advisory services and is not a financial institution described in ORS 317A.100(5), provides investment advisory services to Investment Co. Investment Co. is a multistate business client of Advisor Corp that uses Advisor Corp's services in connection with investment accounts that it manages for individual clients, who are the ultimate beneficiaries of Advisor Corp's services. Assume that Investment Co's individual clients are persons that are resident in numerous states, which may or may not include Oregon. Assuming that Advisor Corp knows that its agreement with Investment Co is principally managed by Investment Co in Oregon, receipts from the sale of Advisor Corp's services are assigned to Oregon. It is not relevant for purposes of the analysis that the ultimate beneficiaries of Advisor Corp's services may be Investment Co's clients, who are residents of numerous states. See section (4)(d)(C)(i)(II) of this rule.
Example 31: Advisor Corp, a corporation that provides investment advisory services and is not a financial institution described in ORS 317A.100(5), provides investment advisory services to Investment Fund LP, a partnership that invests in securities and other assets. Assuming that Advisor Corp knows that its agreement with Investment Fund LP is principally managed by Investment Fund LP in Oregon, receipts from the sale of Advisor Corp's services are assigned to Oregon. See section (4)(d)(C)(i)(II) of this rule. Note that it is not relevant for purposes of the analysis that the partners in Investment Fund LP are residents of numerous states.
Example 32: Design Corp is a corporation based outside Oregon that provides graphic design and similar services in Oregon and in neighboring states. Design Corp enters into a contract at a location outside Oregon with an individual customer to design fliers for the customer. Assume that Design Corp does not know the individual customer's state of primary residence and does not derive more than five percent of its receipts from sales of services from the individual customer. All of the design work is performed outside Oregon. Receipts from the sale are in Oregon if the customer's billing address is in Oregon.
Example 33: Crayon Corp and Dealer Co enter into a license contract under which Dealer Co as licensee is permitted to use trademarks that are owned by Crayon Corp in connection with Dealer Co's sale of certain products to retail customers. Under the contract, Dealer Co is required to pay Crayon Corp a licensing fee that is a fixed percentage of the total volume of monthly sales made by Dealer Co of products using the Crayon Corp trademarks. Under the contract, Dealer Co is permitted to sell the products at multiple store locations, including store locations that are both within and without Oregon. Further, the licensing fees that are paid by Dealer Co are broken out on a per store basis. The licensing fees paid to Crayon Corp by Dealer Co represent fees from the license of a marketing intangible. The portion of the fees to be assigned to Oregon are determined by multiplying the fees by a percentage that reflects the ratio of Dealer Co's receipts that are derived from its Oregon stores relative to Dealer Co's total receipts. See section (5)(b) of this rule.
Example 34: Program Corp, a corporation that is based outside Oregon, licenses programming that it owns to licensees, such as cable networks, that in turn will offer the programming to their customers on television or other media outlets in Oregon and in all other U.S. states. Each of these licensing contracts constitutes the license of a marketing intangible. For each licensee, assuming that Program Corp lacks evidence of the actual number of viewers of the programming in Oregon, the component of the licensing fee paid to Program Corp by the licensee that constitutes Program Corp's Oregon receipts is determined by multiplying the amount of the licensing fee by a percentage that reflects the ratio of the Oregon audience of the licensee for the programming relative to the licensee's total U.S. audience for the programming. See section (5)(e) of this rule. Note that the analysis and result as to the state or states to which receipts are properly assigned would be the same to the extent that the substance of Program Corp's licensing transactions may be determined to resemble a sale of goods or services, instead of the license of a marketing intangible. See section (5)(e) of this rule.
Example 35: Moniker Corp enters into a license contract with Wholesale Co. Pursuant to the contract, Wholesale Co is granted the right to use trademarks owned by Moniker Corp to brand sports equipment that is to be manufactured by Wholesale Co. or an unrelated entity, and to sell the manufactured equipment to unrelated companies that will ultimately market the equipment to consumers in a specific geographic region, including a foreign country. The license agreement confers a license of a marketing intangible, even though the trademarks in question will be affixed to property to be manufactured. In addition, the license of the marketing intangible is for the right to use the intangible property in connection with sales to be made at wholesale rather than directly to retail customers. The component of the licensing fee that constitutes the Oregon receipts of Moniker Corp is determined by multiplying the amount of the fee by a percentage that reflects the ratio of the Oregon population in the specific geographic region relative to the total population in that region. See section (5)(b) of this rule. If Moniker Corp is able to reasonably establish that the marketing intangible was materially used throughout a foreign country, then the population of that country will be included in the population ratio calculation. However, if Moniker Corp is unable to reasonably establish that the marketing intangible was materially used in the foreign country in areas outside a particular major city, then none of the foreign country's population beyond the population of the major city is include in the population ratio calculation.
Example 36: Formula, Inc and Appliance Co enter into a license contract under which Appliance Co is permitted to use a patent owned by Formula, Inc to manufacture appliances. The license contract specifies that Appliance Co is to pay Formula, Inc a royalty that is a fixed percentage of the gross receipts from the products that are later sold. The contract does not specify any other fees. The appliances are both manufactured and sold in Oregon and several other states. Assume the licensing fees are paid for the license of a production intangible, even though the royalty is to be paid based upon the sales of a manufactured product (i.e., the license is not one that includes a marketing intangible). Because the department can reasonably establish that the actual use of the intangible property takes place in part in Oregon, the royalty is assigned based to the location of that use rather than to the location of the licensee's commercial domicile, in accordance with section (5)(a) of this rule. It is presumed that the entire use is in Oregon except to the extent that the taxpayer can demonstrate that the actual location of some or all of the use takes place outside Oregon. Assuming that Formula, Inc can demonstrate the percentage of manufacturing that takes place in Oregon using the patent relative to the manufacturing in other states, that percentage of the total licensing fee paid to Formula, Inc under the contract will constitute Formula, Inc's Oregon receipts. See section (5)(e) of this rule.
Example 37: Axel Corp enters into a license agreement with Biker Co. in which Biker Co. is granted the right to produce motor scooters using patented technology owned by Axel Corp, and also to sell the scooters by marketing the fact that the scooters were manufactured using the special technology. The contract is a license of both a marketing and production intangible, i.e., a mixed intangible. The scooters are manufactured outside Oregon. Assume that Axel Corp lacks actual information regarding the proportion of Biker Co.'s receipts that are derived from Oregon customers. Also assume that Biker Co. is granted the right to sell the scooters in a U.S. geographic region in which the Oregon population constitutes 25 percent of the total population during the period in question. The licensing contract requires an upfront licensing fee to be paid by Biker Co. to Axel Corp and does not specify what percentage of the fee derives from Biker Co.'s right to use Axel Corp's patented technology. Because the fees for the license of the marketing and production intangible are not separately and reasonably stated in the contract, it is presumed that the licensing fees are paid entirely for the license of a marketing intangible, unless either the taxpayer or the department reasonably establishes otherwise. Assuming that neither party establishes otherwise, 25 percent of the licensing fee constitutes Oregon receipts. See sections (5)(b) and (d) of this rule.
Example 38: Same facts as Example 37, except that the license contract specifies separate fees to be paid for the right to produce the motor scooters and for the right to sell the scooters by marketing the fact that the scooters were manufactured using the special technology. The licensing contract constitutes both the license of a marketing intangible and the license of a production intangible. Assuming that the separately stated fees are reasonable, the department will:
Example 39: Better Burger Corp, which is based outside Oregon, enters into franchise contracts with franchisees that agree to operate Better Burger restaurants as franchisees in various states. Several of the Better Burger Corp franchises are in Oregon. In each case, the franchise contract between the individual and Better Burger provides that the franchisee is to pay Better Burger Corp an upfront fee for the receipt of the franchise and monthly franchise fees, which cover, among other things, the right to use the Better Burger name and service marks, food processes, and cooking know-how, as well as fees for management services. The upfront fees for the receipt of the Oregon franchises constitute fees paid for the licensing of a marketing intangible. These fees constitute Oregon receipts because the franchises are for the right to make Oregon sales. The monthly franchise fees paid by Oregon franchisees constitute fees paid for (1) the license of marketing intangibles (the Better Burger name and service marks), (2) the license of production intangibles (food processes and know-how), and (3) personal services (management fees). The fees paid for the license of the marketing intangibles and the production intangibles constitute Oregon receipts because in each case the use of the intangibles is to take place in Oregon. See sections (5)(b) and (c) of this rule. The fees paid for the personal services are to be assigned pursuant to section (4) of this rule.
Example 40: Online Corp, a corporation based outside Oregon, licenses an information database through the means of the Internet to individual customers that are resident in Oregon and in other states. These customers access Online Corp's information database primarily in their states of residence and sometimes while traveling in other states. The license is a license of intangible property that resembles a sale of goods or services, and receipts are assigned in accordance with section (5)(e) of this rule. If Online Corp can determine or reasonably approximate the state or states where its database is accessed, it must do so. Assuming that Online Corp cannot determine or reasonably approximate the location where its database is accessed, Online Corp must assign the receipts made to the individual customers using the customers' billing addresses to the extent known. Assume for purposes of this example that Online Corp knows the billing address for each of its customers. In this case, Online Corp's receipts from sales made to its individual customers are in Oregon in any case in which the customer's billing address is in Oregon. See section (4)(c)(B)(ii)(I) of this rule.
Example 41: Net Corp, a corporation based outside Oregon, licenses an information database through the means of the Internet to a business customer, Business Corp, a company with offices in Oregon and two neighboring states. The license is a license of intangible property that resembles a sale of goods or services, and receipts are assigned in accordance with section (5)(e) of this rule. Assume that Net Corp cannot determine where its database is accessed but reasonably approximates that 75 percent of Business Corp's database access took place in Oregon, and 25 percent of Business Corp's database access took place in other states. In that case, 75 percent of the receipts from database access is in Oregon. Assume alternatively that Net Corp lacks sufficient information regarding the location where its database is accessed to reasonably approximate the location. Under these circumstances, if Net Corp derives five percent or less of its receipts from database access from Business Corp, Net Corp must assign the receipts under section (4)(c)(B)(ii)(II) of this rule to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable, to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable, to the state of Business Corp's billing address. If Net Corp derives more than five percent of its receipts from database access from Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state. See section (4)(c)(B)(ii)(II) of this rule.
Example 42: Net Corp, a corporation based outside Oregon, licenses an information database through the means of the Internet to more than 250 individual and business customers in Oregon and in other states. The license is a license of intangible property that resembles a sale of goods or services, and receipts from that license are assigned in accordance with section (5)(e) of this rule. Assume that Net Corp cannot determine or reasonably approximate the location where its information database is accessed. Also assume that Net Corp does not derive more than five percent of its receipts from sales of database access from any single customer. Net Corp may apply the safe harbor stated in section (4)(c)(B)(ii)(II)(II-d) of this rule and may assign its receipts to a state or states using each customer's billing address.
Example 43: Web Corp, a corporation based outside of Oregon, licenses an Internet-based information database to business customers who then sublicense the database to individual end users that are resident in Oregon and in other states. These end users access Web Corp's information database primarily in their states of residence and sometimes while traveling in other states. Web Corp's license of the database to its customers includes the right to sublicense the database to end users, while the sublicenses provide that the rights to access and use the database are limited to the end users' own use and prohibit the individual end users from further sublicensing the database. Web Corp receives a fee from each customer based upon the number of sublicenses issued to end users. The license is a license of intangible property that resembles a sale of goods or services, and receipts are assigned by applying the rules set forth in section (4)(c)(B)(iii) of this rule. If Web Corp can determine or reasonably approximate the state or states where its database is accessed by end users, it must do so. Assuming that Web Corp lacks sufficient information from which it can determine or reasonably approximate the location where its database is accessed by end users, Web Corp must approximate the extent to which its database is accessed in Oregon using a percentage that represents the ratio of the Oregon population in the specific geographic area in which Web Corp's customer sublicenses the database access relative to the total population in that area. See section (4)(c)(B)(iii)(III) of this rule.
Or. Admin. Code § 150-317-1040
Publications: Contact the Oregon Department of Revenue for information about how to obtain a copy of the publication referred to or incorporated by reference in this rule pursuant to ORS 183.360(2) and ORS 183.355(1)(b).
Statutory/Other Authority: ORS 305.100, 317A.128 & 317A.143
Statutes/Other Implemented: ORS 317A.128