Portland Clean Energy and Justice Measure
(Gross Receipts Tax)
June 2017

_______________________________
Revenue Division
Bureau of Revenue and Financial Services
Office of Management and Finance
City of Portland, Oregon

 Background
This document will briefly review the administrative feasibility and expected revenues associated
with the “Portland Clean Energy and Justice Measure” (“the Measure”). The Measure is a retail
business gross receipts tax (GRT) with exemptions for food, medicine and internet sales. It applies
only to businesses with global gross sales receipts of $1 billion or more, and Portland gross
revenues of $500,000 or more. As proposed, the GRT would be in addition to the current Business
License Tax (BLT), with a deduction or credit for the BLT payment.

Executive Summary
The Measure as written is estimated to raise between $35 and $51 million. However, the Revenue
Division does not recommend implementing the Measure as written because it subjects a narrow
group of 122 primarily retail taxpayers to the bulk of the tax, one of which would pay over $3
million. The Revenue Division recommends levying the tax on all businesses with global gross
receipts of $1 billion rather than only those with retail sales of $1 billion. This has the benefits of
spreading the tax over more payers and making it easier to administer and comply with. Other
reasons are provided below.

Organization and Scope of the Review
This document begins by outlining the Measure as written, followed by revenue projections and
estimated taxpayer impacts (Tables 1 and 1a). It then discusses issues with the Measure and
proposes a number of variations designed to incrementally improve the Measure (Tables 2-5) while
adhering as closely as possible to the apparent core intent of the Measure authors. Table 6
captures the final Revenue Division recommended approach: a universal GRT. The document
concludes by briefly discussing administration, budget, impact on current BLT receipts,
implementation timing, and limitations of the estimates.
The focus of this review is strictly on the tax portions of the Measure and not the programs it would
fund.

Summary of the Measure as Written
The specific elements of the Measure are as follows:
 Applies only to “Large Retailers” which are defined by the Measure as:
o A business “engaged in retail sales” in Portland, AND
o With global gross receipts of $1 billion or more, OR
 Is a subsidiary, franchisee or “otherwise owned or controlled” by a business with gross
global receipts of $1 billion or more, including brand name, trademark or logo
associations
o Banks shall be considered Large Retailers if their global gross receipts are $1 billion or
more
o Large Retailer does NOT include:
 Any manufacturer or other business that is not engaged in “Retail Sales” as defined
below
 Any cooperative recognized under state or federal law

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 


Any franchisee or subsidiary whose annual gross revenue from retail sales within the
City are less than $500,000 regardless of the annual revenue of the franchisor or
national chain of which the business may be a part
A federal or state credit union

 Applies only to “Retail Sales” which are defined by the Measure as:
o “The sale of products, goods or services to the general public by a Large Retailer
physically located within the City,” not including “internet sales”1
 The tax rate is 1% of Portland-apportioned adjusted gross revenue:
o “A Large Retailer’s in-City gross revenue is their gross revenue generated within the City
from retail sales minus any taxes paid to the City to satisfy other tax requirements under
the City of Portland’s Business License Law”2
o Exempt from the calculation of in-City gross revenue:
 Qualifying groceries (“SNAP” approved)3
 Medicine or drugs regulated by the U.S. Food and Drug Administration

Revenue Estimate: The Measure as Written
There are 955 businesses with global gross receipts of at least $1 billion operating in taxable
capacities in Portland.4 107 (11%) of these businesses report Portland gross receipts of less than
$500,000 and are therefore excluded from the revenue forecast.5 Another 116 (12%) would
certainly be liable under the Measure and will be referred to hereafter as “certain payers.”6 The
remaining 732 (77%) would be liable on a case-by-case basis depending upon sales data provided
on an annual GRT schedule that would be developed if the Measure is enacted, and filed along
1

According to the U.S. Census Bureau, E-commerce sales in the first quarter of 2017 accounted for 8.4
percent of total U.S retail sales. See www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf. The
Revenue Division does not have information about local retail E-commerce sales and it is unclear how this
provision of the Measure would be implemented locally, or which and how many taxpayers would be
subject to the deduction. This provision may be intended as recognition that the City of Portland must
adhere to the Internet Tax Freedom Act (the Act) which prohibits taxing internet access or imposing
internet-only taxes. On the other hand, the Act does not exempt sales made on the Internet from taxation, as
these may be taxed at the same state and local rate as non-Internet sales. In any case, we believe this
deduction, however it may be implemented, is likely accounted for in the broad range estimates provided in
the tables to follow.
2
Tax paid under Portland City Code Section 7.02 (Business License Law, referred to in this paper and
commonly as the Business License Tax) is therefore a deduction to Portland gross receipts arriving at
adjusted Portland gross receipts which is then used as the base to compute the 1% tax. We believe the
authors may have intended a credit rather than a deduction. Both scenarios are modeled below.
3
USDA Supplemental Nutrition Assistance Program.
4
Most of which are corporations and hundreds of which have widely recognized brand names. This
information is based on tax year 2015 returns, the most recent available in most cases.
5
The Measure calls for the taxation of subsidiaries, franchisees or businesses “otherwise owned or
controlled” by a business with global gross receipts of $1 billion or more, so long as they have Portland
gross receipts of at least $500,000, including “brand name, trademark or logo associations.” The Revenue
Division does not maintain this type of data so an assumption was made for forecasting purposes that any
business with less than $500,000 in Portland gross receipts is exempted from the tax. If this exemption is
going to be extended, it should be extended to all.
6
The 116 certain payers were generally identified by their NAICS codes as voluntarily self-reported to the
Revenue Division and spot-checked for accuracy.

Portland Clean Energy and Justice Measure (Gross Receipts Tax)

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 with the current annual BLT return. The revenues forecasted in Tables 1-4 below are primarily
based on a “floor” created by the 116 certain payers of the tax7 and a “ceiling” based on state and
federal data.8 The estimate ranges are conservative and broad enough to encompass anticipated
taxable retail sales associated with traditionally non-retail businesses (in other words, businesses
reporting with NAICS9 codes other than retail sales or Measure-taxable banking).
See Table 1 below for an estimate of revenues raised by the Measure as written.
Table 1. Estimated Tax Revenue
Measure as Written
BLT Deduction
Tax
Rate
1.00%

Low
High
Revenue Revenue
(millions) (millions)
$35.3
$51.0

Table 1a. Taxpayer Statistics for Table 1, 116 Certain Payers
Minimum GRT Maximum GRT Estimated Average
Taxpayers
Taxpayers
GRT
116
848
$372,126
Estimated Median
Minimum GRT Maximum GRT
GRT
$5,649
$3,767,092
$86,572

Table 2 is also an estimate of the Measure as written, but treats the BLT as a credit rather than a
deduction. In other words, the GRT liability is reduced dollar-for-dollar by the amount paid under
the BLT which may have been the intent of the author(s) of the Measure.
Table 2. Estimated Tax Revenue
Measure as Written
BLT Credit
Tax
Rate
1.00%

Low
High
Revenue Revenue
(millions) (millions)
$28.3
$40.9

7

For certain payers this information is based on tax year 2015 tax returns filed with the Revenue Division.
U.S Census Bureau Economic Census (www.census.gov/quickfacts/) and Oregon Department of Revenue
corporate excise and income tax data (www.oregon.gov/DOR/programs/govresearch/Documents/corporate-excise-income_102-405_2016.pdf).
9
North American Industry Classification System. See www.census.gov/eos/www/naics/.
8

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 Table 2a. Taxpayer Statistics for Table 2, 116 Certain Payers
Minimum GRT Maximum GRT Estimated Average
Taxpayers
Taxpayers
GRT
116
848
$298,035
Estimated Median
Minimum GRT Maximum GRT
GRT
$3,848
$2,699,629
$76,579

Issues to Consider with the Measure as Written
Decision makers may wish to consider the following issues.
1. The tax as written has no maximum liability (hereafter, “cap”). The tax as estimated in
Table 1 results in a GRT assessment of over $3.7 million ($4.96 million including the BLT)
for one taxpayer and GRTs of over $2 million for three others. While corporate relocation is
a complex and costly decision and may or may not have an impact on Portland
apportionment and tax liability (it depends on the nature of the business), it is possible
some businesses may reassess their presence in Portland if faced with a tax increase of
multiple millions of dollars. Under any scenario, the Revenue Division recommends a GRT
cap of $1 million to minimize this risk. Million-dollar caps are modeled on all remaining
scenarios (Tables 3-6).
2. The Measure states, “Large retail businesses with gross revenue greater than $1 billion a
year have significant revenue and profits and are responsible for generating a substantial
portion of the City’s overall greenhouse gas emissions.”10 While this statement is
undoubtedly true, it should be recognized that a number of non-retail businesses also have
a significant carbon footprint and would pay little or no tax, undermining the rationale for
choosing to tax retail over other sectors. Examples include but are not limited to
commercial construction, oil and gas extraction, passenger car, truck and RV rental and
leasing, mining operations, petroleum refineries and petrochemical manufacturing.11
3. A number of businesses that might at first seem taxable under the Measure will pay little or
nothing. Examples include restaurants and fast food, Nike (NAICS 42391, Sporting and
Recreational Goods and Supplies Merchant Wholesalers), 1-800 Flowers (NAICS 49221,
Local Messengers and Local Delivery), Alaska Airlines (NAICS 48111, Scheduled Air
Transportation), carpet installers and so on.
4. Some businesses will partially or wholly pass the GRT on to consumers in the form of a
price increase.
5. The definition of terms such as “retail”, “services” and “internet sales” will need to be
clarified in detail and will have meaningful impacts on administration, revenues raised and
taxpayer filing burden.

10
11

Purpose (i), pg. 2.
These are not hypothetical examples. Businesses operating in these sectors file Portland BLT tax returns.

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 Revenue Estimate: The Measure as Written with a $1 Million Cap
To address the issue of possible flight due to an excessive GRT as discussed above, the Revenue
Division recommends a cap of $1 million on the GRT assessment. A capped GRT with a BLT
deduction to Portland gross receipts is displayed in Table 3 below. A variation with a BLT credit is
captured in Table 4.
Table 3. Estimated Tax Revenue
Measure as Written
BLT Deduction, $1M Cap
Tax
Rate
1.00%

Low
High
Revenue Revenue
(millions) (millions)
$24.8
$35.9

Table 3a. Taxpayer Statistics for Table 3, 116 Certain Payers
Minimum GRT Maximum GRT Estimated Average
Taxpayers
Taxpayers
GRT
116
848
$261,649
Estimated Median
Minimum GRT Maximum GRT
GRT
$5,649
$1,000,000
$86,572

Table 4. Estimated Tax Revenue
Measure as Written
BLT Credit, $1M Cap
Tax
Rate
1.00%

Low
High
Revenue Revenue
(millions) (millions)
$22.2
$32.0

Table 4a. Taxpayer Statistics for Table 4, 116 Certain Taxpayers
Minimum GRT Maximum GRT Estimated Average
Taxpayers
Taxpayers
GRT
116
848
$233,596
Estimated Median
Minimum GRT Maximum GRT
GRT
$3,848
$1,000,000
$76,579

Revenue Estimate: Universal GRT Approach with Exemptions
The Measure as written puts the taxpaying burden on too few taxpayers and introduces complexity
and probable revenue leakage (by intentional or unintentional non-compliance). The focus on retail
sales and exemptions like internet sales will drive up the cost of collections and will complicate the
audit and potentially legal environment.
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 The Revenue Division recommends an approach based on all Portland gross receipts (retail,
wholesale, manufacturing, and others), with a $1 million cap and continued deductions for food and
medicine. Tables 5 and 6 display expected revenues under a universal GRT approach; Table 5
offers no BLT credit, while Table 6 includes a credit.
Table 5. Estimated Tax Revenue
Universal GRT, $1M Cap
Tax
Rate
0.50%
0.40%
0.30%
0.20%
0.10%

Low
High
Revenue Revenue
(millions) (millions)
$87.9
$107.5
$74.0
$90.5
$58.5
$71.5
$41.3
$50.5
$22.4
$27.4

Table 5a. Taxpayer Statistics for Table 5, 822 Certain Payers
Minimum GRT Maximum GRT
Taxpayers
Taxpayers
822
848
Tax Rate

Minimum GRT

0.5%
0.4%
0.3%
0.2%
0.1%

$2,589
$2,071
$1,553
$1,035
$518

Maximum GRT
$1,000,000
Estimated Median
GRT
$40,272
$32,218
$24,163
$16,109
$8,054

If a GRT is considered, the Revenue Division recommends the Table 6 variation (universal, BLT
credit and cap) at a rate to be determined by the City Council based on program funding
requirements.
Table 6. Estimated Tax Revenue
Universal GRT
BLT Credit, $1M Cap
Tax
Rate
0.50%
0.40%
0.30%
0.20%
0.10%

Low
High
Revenue Revenue
(millions) (millions)
$66.9
$81.7
$52.2
$63.8
$37.2
$45.5
$23.0
$28.1
$9.8
$12.0

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 Table 6a. Taxpayer Statistics for Table 6, 822 Certain Payers
Minimum GRT Maximum GRT
Taxpayers
Taxpayers
822
848
Tax Rate

Minimum GRT

0.5%
0.4%
0.3%
0.2%
0.1%

$0
$0
$0
$0
$0

Maximum GRT
$1,000,000
Estimated Median
GRT
$26,888
$19,290
$10,899
$4,127
$103

Administration and Budget
The Revenue Division will need 4.5 positions to administer the GRT in the as written scenarios
(Tables 1-4). The work is primarily auditing the moderately complex schedules that will be required
from all subject taxpayers, not just certain payers. Accounting for retail, service and internet sales
in particular will need significant attention.
If the Revenue Division recommended universal GRT variation is adopted (Table 5 or 6), 2.5 FTE
will suffice to administer the program, reflecting less audit work because there are fewer distinct
income types to examine. A one-time start-up budget is estimated at $200,000. Ongoing expenses
are estimated at $400,000 (universal GRT) to $600,000 (as written), making the cost of collection
reasonable for all scenarios with gross tax receipts of about $10-12 million or more.12

Impact on Current BLT Receipts
We anticipate a reduction to BLT receipts as most taxpayers will take a Portland GRT deduction at
the state and federal levels which will in turn flow back to Portland tax returns because Portland’s
returns begin with federal data. While we have not formally estimated the reduction, it is likely
immaterial because apportionment dilutes the local impact of the deduction. If the Measure moves
forward, the Revenue Division will analyze the impact in more detail.

Timing
The tax should be implemented on a tax year basis to consolidate filing requirements, allow for
education and outreach, and ease administrative burden for taxpayers and the Revenue Division. If
the Measure is passed by voters in 2018,13 the Revenue Division recommends implementing the
tax effective tax year 2019 with an initial filing and payment due in 2020. Because of the variables
involved in estimating the tax, the Revenue Division also recommends setting a temporary rate for
the first two years of the tax, with a true-up to the desired revenue target in the third year after the
Revenue Division has actual tax receipts to model more accurate projections.14
12

About five percent as called for in the Measure.
This is not meant to imply a ballot measure is required. City Council has the authority to expand the BLT
to include a GRT, subject to City Attorney review.
14
Final first year revenues will not be fully realized until well into the second tax year so the rate cannot be
accurately adjusted until the third year.
13

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 Limitations to the Estimates
The Revenue Division does not possess the data necessary to directly estimate the Measure’s
revenue potential. The BLT is a net income tax and does not require taxpaying businesses to
separately account for retail, wholesale, manufacturing, medicine, internet or food-related revenues
because that data is not currently necessary for the computation of tax liability.
The Revenue Division does track voluntary, self-reported NAICS codes. NAICS codes allocate
each tax reporting entity to a high-level description of its general business activity and were used to
estimate potential revenues in conjunction with state and national economic and tax data.
Forecasted revenues are presented as broad ranges because of these limitations.

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