Little guidance has been released for individuals working remotely in Oregon. However, that does not mean that employees should ignore the effects of their new working arrangements. For example, a taxpayer’s resident state usually taxes all their income, regardless of where it is earned. When a taxpayer works in more than one state during the year, the taxpayer must allocate their income to the respective state in which it was earned. The taxpayer will be entitled to claim a tax credit for income tax paid to another state, which reduces their taxes payable on their resident state return. Thus, if a taxpayer normally works in a different state than their resident state, they could incur penalties for not making sufficient tax payments in their home state because they will no longer be receiving a state income tax credit from the state where they normally work. Taxpayers should make sure they have changed their withholding requirements to ensure they do not incur penalties.
Corporate Activity Tax
- Insufficient funds due to COVID-19 that caused the business to not be able to pay a full quarterly installment.
- The impact of COVID-19 made it so the business could not reasonably calculate a quarterly payment.
- The taxpayer could not determine whether it will have a CAT liability in 2020.
- The taxpayer made a reasonable estimate based on information available at the time.
- The taxpayer relied on information that was contained in a proposed administrative rule.
Business & Occupation (B&O) Tax
The Washington Department of Revenue has offered favorable guidance for businesses that received federal financial assistance. Businesses that received any federal assistance (including the federal Paycheck Protection Program (PPP)) should not report the assistance as gross receipts for B&O tax purposes for now. However, this is not a final decision, and the Department of Revenue indicated that it would continue to analyze the various programs more thoroughly. It will issue a final decision once the Legislature has had an opportunity to act, so businesses should be mindful that this is not a final ruling.
Washington has not released any guidance regarding the “physical presence” threshold for its B&O tax. In Washington, a business must pay B&O tax if it (1) has physical presence nexus in Washington; (2) has more than $100,000 in combined gross receipts sourced to Washington; or (3) is organized or commercially domiciled in Washington. The Washington Administrative Code says that even the “slightest presence” of a single employee may trigger the physical presence nexus. Thus, a remote worker could trigger nexus and an additional filing requirement for a company even if they do not normally meet the $100,000 threshold.