Will a new corporate activity (i.e., gross sales) tax in OR affect day traders?

H

HotTip

This was just signed into law by the governor of OR and will go into effect 1/1/20.

"The Corporate Activity Tax, created by House Bill 3427, imposes a $250 tax on the first $1 million of gross receipts after subtractions and 0.57% tax on gross receipts greater than $1 million after subtractions"

https://www.claconnect.com/resources/articles/2019/oregon-enacts-new-gross-receipts-tax

This new law applies not just to S & C corps, but also individuals & partnerships. I'm nervous that this will be imposed on proceeds when I sell a stock, which will essentially destroy my profits. Apparently it only applies to "in-state" revenues, so I guess technically since all my trading is done through IB, who's based in Chicago, and is traded on the exchanges in NY, then I'm in the clear?

Any thoughts? Any OR based traders who are familiar with this new state law?

Thanks!
 
Thanks for posting.

You may want to send an email to Robert Green at greentradertax. He is EXPERT in trader taxation.

The way I read it there are 2 major criterias to be affected...

1) You would need to be operating as a trading business.
2) The instruments (property) you trade must not be exempt according to IRC 1221/1231.

Seems the OR CAT tax is modeled on Ohio's CAT tax.
Here's a doc from Ohio... https://www.tax.ohio.gov/portals/0/commercial_activities/information_releases/cat200508.pdf

Stocks (for personal investment) are not subject. But if you operate as a trading business, ask Green! Also there specific mentions of derivatives as being exempt in IRC 1221. Ask Green.

Politburo jackwagons!!

Good luck.
 
Thank you tiddly! The other constraint of the Oregon law is that the tax is limited to commercial activity within the state of Oregon, which I think exempts my trades from the tax.
 
HotTip said:
Thank you tiddly! The other constraint of the Oregon law is that the tax is limited to commercial activity within the state of Oregon, which I think exempts my trades from the tax.
More...


FWIW... If you are operating a trading business, the business activity IS conducted in the State where you operate, not where a brokerage or exchange exists. CAT tax can get convoluted if a trading business operates (ie. trades/has trading partners in other states, etc) out of multiple "offices". The real point is... unless you are operating a trading business, stocks (for personal investment) and other specific items granted by OR and/or IRC 1221/1231 are PROBABLY exempt from CAT. Ask Green for certainty. As a rule, local CPAs have no clue about trading as a business. They understand personal taxation only.

The good news is it does not go live until the 2020 tax year. Lot's of time to get accurate answers and prepare if needed.
 
tiddlywinks said:
FWIW... If you are operating a trading business, the business activity IS conducted in the State where you operate, not where a brokerage or exchange exists. CAT tax can get convoluted if a trading business operates (ie. trades/has trading partners in other states, etc) out of multiple "offices". The real point is... unless you are operating a trading business, stocks (for personal investment) and other specific items granted by OR and/or IRC 1221/1231 are PROBABLY exempt from CAT. Ask Green for certainty. As a rule, local CPAs have no clue about trading as a business. They understand personal taxation only.

The good news is it does not go live until the 2020 tax year. Lot's of time to get accurate answers and prepare if needed.
More...

Thanks again tiddly. I just spoke to the Ohio Dept of Taxation and they confirmed what you said that if I treat it as a business my trading would be subject to the CAT tax. The guy even went so far as to say "yeah, you probably wouldn't want to move here." WTH?

Oh well. Time to give Green a call.
 
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