Tax change will net huge savings for Portland businesses

November 2022

New alignment toward market-based sourcing in Portland, Multnomah County and Metro lowers business tax burden for many businesses, reduces complexity, and makes Portland companies more competitive.

At the urging of the Portland Business Alliance, Greater Portland’s Chamber of Commerce, our region’s three tax jurisdictions—the City of Portland, Multnomah County and Metro—all revised the method by which they assess taxable business income. For many businesses this will lower their overall taxable revenue and tax liability and make them more competitive with out-of-market competitors.

The details

Portland area companies are generally subject to three local/regional business taxes:

To collect these new taxes, the County and Metro contract with the City of Portland’s Revenue Division.

Historically, all three entities have assessed business revenue from services and other intangible sales based on cost-of performance–sourcing all income to the location where the income-producing activity occurs. This means that Portland-area businesses making and selling services locally would be taxed on revenue from sales they made anywhere in the world. The tax treatment amounted to a significant tax advantage for businesses located outside the Portland area at the expense of our homegrown companies.

In contrast, the State of Oregon and many other jurisdictions use market-based sourcing—sourcing the sale of intangibles to a customer’s location. Under market-based sourcing Oregon companies are only taxed on revenue that is earned through sales within the state, creating an equal playing field for all businesses.

The cost-of-performance sourcing model used by Portland, Multnomah County and Metro was out-of-line with other jurisdictions, complicating tax compliance and significantly increasing tax liability for many businesses.

Over the past two years, the Portland Business Alliance has pushed all three taxing entities to realign around a shared market-based sourcing model for assessing business taxes. Most importantly, we argued these local jurisdictions should follow the state’s rules and guidance, making it easier for companies to file their taxes. This work has finally paid off.

In September, Portland City Council unanimously agreed to move to market-based sourcing. In October, Multnomah County and Metro followed suit.

This fix represents an unprecedented level of collaboration between our regional governments and the business community.

Why this matters

  1. If your company makes any sales outside of the Portland OR Multnomah County OR Metro, your business taxes will go down.
  2. Business tax compliance just got a lot easier. Portland businesses must no longer navigate different rules for each tax jurisdiction. You have one-set of market-based rules from the state-level down to the city-level.
  3. Portland-based businesses will become more competitive. When businesses get taxed, they often push those costs onto customers. Now that out-of-market sales are no longer counted towards gross receipt, Portland businesses can sell cheaper services to a larger audience of prospective customers.
  4. Out-of-market businesses pay their fair share. Under the old rules, businesses based outside of the Metro area that had clients or customers in Portland were not subject to these local business taxes. Realigning around market-based sourcing changes this dynamic and makes non-Portland businesses taxable.

What’s next

Market sourcing for local and regional business taxes goes into effect on January 1, 2023—just two months from now.

To help local employers prepare for this impactful change, the Portland Business Alliance is developing informational resources, including a webinar led by our region’s leading tax experts.

The Alliance is also continuing to work with the City, County and Metro to further streamline the assessment and payment process, to reduce the administrative burden on businesses.

This is just one concrete accomplishment in the Alliance’s larger mission to build a stronger, more robust business community in Portland—a business community that in turn supports the Portland community. This work is only possible with the support of our 2,200+ members.

If you’re already a member, THANK YOU! If you’re not a member, please consider joining the Portland Business Alliance.

To learn more contact Ben Forstag, Vice President of Strategic Partnerships at

Let’s connect and together keep these wins going!