Rule Rule 150-317-0020
Substantial Nexus Guidelines


The State of Oregon imposes taxes on or measured by net income to the extent allowed under state statutes, federal Public Law 86-272, and the Oregon and U.S. Constitutions. For purposes of determining whether Oregon has jurisdiction to impose an excise tax for the privilege of doing business in the state under ORS Chapter 317 (Corporation Excise Tax) or tax on income from sources within this state under ORS Chapter 318 (Corporation Income Tax), there must exist a substantial nexus between the state and the activity or income it seeks to tax.


“Substantial nexus” for corporate excise and income tax jurisdiction purposes, under the Commerce Clause of the U.S. Constitution, does not require a taxpayer to have a physical presence in Oregon. Substantial nexus exists where a taxpayer regularly takes advantage of Oregon’s economy to produce income for the taxpayer and may be established through the significant economic presence of a taxpayer in the state.


In determining whether a taxpayer has a substantial nexus with Oregon the department may consider whether the taxpayer:


Maintains continuous and systematic contacts with Oregon’s economy or market;


Conducts deliberate marketing to or solicitation of Oregon customers;


Files or is required to file reports or returns with Oregon regulatory bodies;


Receives significant gross receipts attributable to customers in Oregon;


Receives significant gross receipts attributable to the use of taxpayer’s intangible property in Oregon; or


Receives benefits provided by the state, such as:


Laws providing protection of business interests or regulating consumer credit;


Access to courts and judicial process to enforce business rights, including debt collection and intellectual property rights;


Highway or transportation system access for transport of taxpayer’s goods or services;


Access to educated workforce in Oregon; or


Police and fire protection for property in Oregon that displays taxpayer’s intellectual or intangible property.


The list of possible facts in section (3) that the department may consider in determining whether a taxpayer has a substantial nexus with Oregon is meant to be nonexclusive, and those facts should be considered only to the extent they are relevant. The department may consider any other relevant facts and circumstances.


The provisions in sections (1) through (4) of this rule, as well as the provisions in OAR 150-314-0365 (Taxable in Another State; In General), 150-314-0367 (Taxable in Another State; When a Taxpayer is “Subject To” Tax Under ORS 314.620(1)), and 150-314-0369 (Taxable in Another State; When a State has Jurisdiction to Subject a Taxpayer to a Net Income Tax), must be applied in determining if a taxpayer has substantial nexus in a state other than Oregon.
Example 1: Credit Card Company (CC) has, for several years, provided credit card lending services over the internet and by mail to over 25,000 Oregon customers. Solicitations for such credit cards have been mailed three or four times a year for the last three years to prospective Oregon customers in six Oregon cities. CC has substantial nexus in Oregon.
Example 2: IS Company (IS), headquartered in San Francisco, operates a website supporting internet sales, primarily to Asian country customers. IS made approximately 50 sales, at $6.95 per sale, to residents of Oregon during the tax year. IS contracts with an Oregon mailing service to make deliveries of the merchandise in Oregon (all sales are final). IS does not have substantial nexus in Oregon. Even though activities in greater volume might be sufficient for nexus, the amount of sales is de minimis.
Example 3: WB Distributing Company (WB) has for many years distributed wine and beer throughout Oregon, through Oregon licensed distributors with whom WB has distribution agreements. WB is required to obtain and maintain a wholesaler’s license from the Oregon Liquor Control Commission (OLCC). A condition of the license is that WB must make monthly reports of sales volumes to the OLCC. WB also periodically seeks advice and approval from the OLCC for special event activities in Oregon, at which no sales are solicited by the corporation. WB has substantial nexus in Oregon.
Example 4: IP Company (IP), organized under Delaware law and wholly owned by FP Company (FP) a foreign parent, owns intellectual property including trade marks, trade names, and logos. RS Company (RS), also wholly owned by FP but not unitary with IP, operates retail stores in Oregon that prominently and beneficially use the intellectual property owned by IP. By agreement, RS pays IP five percent of its gross sales for the right to use the intellectual property. IP has substantial nexus in Oregon.
Last accessed
Nov. 24, 2020