Business tax changes for Multnomah County and Portland

Local tax change will see Multnomah County and Portland’s Business Taxes affect businesses located outside the Multnomah County/Portland area

Changes made to Multnomah County and City of Portland business tax codes mean that these taxes will now affect businesses outside of Portland and Multnomah County. With a few exceptions, any person or company that does business in the City of Portland or Multnomah County must now register with the Portland Revenue Division and file a local joint tax return to both the City of Portland and/or Multnomah County.

“Doing business” is broadly defined, and a company or person is presumed to be doing business in Multnomah County if they advertise in the county, deliver goods or services in the county, or “engage in any pursuit of gain” in the county.¹ These broad definitions encapsulate many businesses that are not based in Multnomah County and many may not realize that they are subject to Multnomah County and City of Portland taxes. Local business owners should be aware of the tax requirements for Multnomah County and the City of Portland–summarized below–and keep detailed records of their revenue so that they can accurately identify the amount due for these business taxes.

¹Individuals whose only income is wages as an employee in the Multnomah County or Portland area are not subject to these business taxes.

Amount taxed:

• The Multnomah County business tax imposes a 2.0% tax on a business’ net income from business within the county and establishes a minimum tax of $100.00.
• The Portland business tax imposes a 2.6% tax on a business’ adjusted net income from business within the city. The Portland tax also establishes a minimum tax of $100.00.

Business owners may need adjust their recordkeeping practices in order to keep track of all earnings in the Portland and Multnomah County area so that they can accurately pay these taxes. Employers should be aware that services or sales performed in Multnomah County are not necessarily within the City of Portland, so it is prudent to keep separate records for each. The taxes are based solely on business performed within the city and county, respectively, thus the tax will not affect earnings made outside of the city and county. Failure to pay these taxes may result in presumptive taxes and fees being charged to the business.

Main exceptions to the Multnomah County business tax:

• Gross annual receipts under $100,000, including any receipts earned in and outside Multnomah County.
• Business transactions that are exclusively limited to the renting or leasing of residential housing if the owner rents or leases less than a total of ten dwelling units, including units located inside and outside of Multnomah County. If a building contains more than one residential living quarter, the County defines “dwelling unit” as each separate living quarter.
• Exempt organizations such as 501(c)(3) nonprofits.

Main exceptions to the Portland business tax:

• Gross annual receipts under $50,000, including any receipts in and outside Multnomah County.
• Exempt organizations such as 501(c)(3) nonprofits.

If a business owner qualifies for one of the exceptions, they still need to file a Mult/PDX return and request an exemption. Unfortunately, these exceptions will not apply to the majority of local Oregon and Washington businesses that do business in the Portland/Multnomah County area. To illustrate, if a company made $100,000 last year, even if $90,000 of its revenue was earned outside of Multnomah County, and only $10,000 was earned in Multnomah County, the company would be subject to the Multnomah County business tax for the amount earned within the county. Multnomah County has been slowly increasing its minimum earnings exception over the years, but as it stands, it will not be helpful for large swaths of local businesses. With the City of Portland’s earnings threshold being even smaller, many business owners will not be able to rely on fitting into an exception and should keep records of all earnings in the city and county to prepare to file the newly expanded Multnomah County / Portland business tax return.

If you have questions about compensation structure within your own organization, please don’t hesitate to reach out.

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