Business Tax Policy: Real Estate Brokers with Separate Business Activity (Including Residential Rentals)
According to ORS 696.365: “A city or county may not impose a business license tax on or collect a business license tax from an individual licensed as a real estate broker who engages in professional real estate activity only as an agent of a principal real estate broker.”
This exemption will only apply if the agent of the principal real estate broker has no other separate business activities. If the individual with exempt business activity as a real estate broker has receipts from other business activity within the City of Portland (including rents from residential rentals within Portland) such person must pay the City of Portland Business License Tax if the combined business activities generate $50,000 or more in gross receipts in any tax year. However, in calculating the City of Portland Business License Tax for the separate business activity, gross and net incomes from the real estate broker activity are not included.
A real estate broker:
1. Receives gross real estate commissions of $45,000 (with a net income of $12,000).
2. Has a residential duplex located in the City of Portland with a total of $20,000 in rents.
3. Reports a net loss from the duplex of ($2,000).
The real estate broker would file and pay both the Multnomah County Business Income Tax and the City of Portland Business License Tax on the following incomes:
I. Multnomah County Business Income Tax (determined on all business incomes)
Gross Income: $65,000 ($45,000 + $20,000)
Net Income subject to Multnomah Tax: $10,000 ($12,000 - $2,000)
II. City of Portland Business License Tax (determined only on business incomes other than real estate commissions received as a broker)
Gross Income: $20,000 1
Net Income subject to Portland Business License Tax: ($2,000)
1 The gross receipts exemption only applies if business activity from all sources is less than $50,000. Additionally, the separate exemption for less than 10 residential units does not apply if any other business activity occurs, regardless of the otherwise exempt nature of the business activity.
5-15-2012 Thomas W. Lannom
Date Director, Revenue Bureau