If you've recently begun taking steps to realize your dream of owning your own business in Oregon, you may be nearly overwhelmed at the amount of paperwork that awaits you -- from articles of incorporation and filings with the Secretary of State to applying for an employer identification number from the IRS. Because tax or liability problems can often sink a business, it's important to ensure these documents are in order, and with potential sweeping changes to Oregon's business tax laws coming on the November ballot, it's also important to familiarize yourself with your potential best-case scenario (and worst-case scenario) tax liabilities. Read on to learn more about Oregon's proposed business tax changes and how these could affect the amount your business pays if passed by a majority of the voters.
What changes are being proposed to Oregon's business tax brackets?
Oregon, nestled between California and Washington State on the "left coast," tends to be more economically and socially liberal than other states -- and this commitment to social welfare is evident in the state's recently proposed business tax increase. Oregon businesses have tended to pay a relatively low tax rate for decades, and, some argue, this dearth of corporate tax income has led the schools and other public institutions to suffer from lack of funding.
The proposed tax increase would largely affect only those businesses with more than $25 million in annual sales. The tax rate for businesses selling between $25 million and $50 million would triple from its current level, while the current tax rate for businesses selling between $50 and $100 million of services or merchandise would quadruple under this measure. Although many fledgling businesses won't come near the $25 million mark, those that do a high volume (but don't make much of a profit on each individual item) or that sell expensive items may find they hit this threshold sooner than expected.
Is there anything you can do to prepare yourself for this change?
Although it's always possible this measure won't be ratified by the voting public, it's good to prepare yourself for a potential future tax hike. You'll want to utilize bookkeeping software that will allow you to run reports detailing your year-to-date sales or even help you generate graphs that show sales trends over time. By knowing where you stand financially at any given point, you'll avoid being surprised when tax time rolls around.
If you do hit the $25 million threshold mid-year, you may want to consider accelerating certain equipment deductions rather than depreciating them over the usual five- to seven-year schedule. As a new business, it's likely you've had a lot of capital expenditures since launching, and by capturing your entire depreciation in a single year rather than spreading it out, you'll be able to reduce your tax burden immediately and avoid the sting of higher rates.Share