On January 11, 2021, H.B. 2392 was introduced in Oregon, which if passed would impose 5% gross receipts tax on the sale of “taxable personal information” of individuals located in the state, which is sold in Oregon. The definition of “personal information” (PI) includes “information that identifies, relates to, describes or is capable of being associated with an individual” and includes a laundry list of information that could qualify (i.e., name, physical address or other location information, telephone number, email address, IP address, signature, physical characteristics or description, biometric data, driver license number, state identification card number, passport number, Social Security number or other government-issued identification number, bank account number, debit card number, credit card number or other financial information, insurance information, medical information, employment information, educational background information, browser habits, consumer preferences, and other data that can be attributed to the individual and used for marketing or determining access and costs related to insurance, credit or health care). Photographs are specifically carved out of the definition of PI. “Taxable personal information” is defined as “personal information accumulated from the internet.”
Not only is a 5% rate extraordinary for a gross receipts tax, this proposal is riddled with compliance issues. Again, the tax is only imposed on the sale of information of an “individual located in” Oregon and provides that would be determined by use of one’s IP address, which would be very challenging to comply with – for example, an IP address may not accurately reflect in-state activity based on server location or use of a virtual private network. In addition, the tax is required to be filed on a quarterly basis and a business is required to file regardless of whether tax is actually due.
This proposal also raises several legal issues, including potential Internet Tax Freedom Act (ITFA) challenges based on the tax only being applicable to PI accumulated online. In addition, there may raise international, federal, and state privacy law issues as the list of information it covers is incredibly broad.
Finally, the proposed gross receipts tax may result in “tax pyramiding” and damaging economic effects, as such taxes apply to receipts from all transactions, including intermediate business-to-business purchases and not just final sales.
The Oregon Legislature will start holding public hearings on bills later this month, and we anticipate this bill will be set for hearing. The bill sponsor, Representative Marsh, is on the House Revenue Committee and is well respected; thus, the proposal is one to be taken seriously.