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Oregon Supreme Court requires use of transaction-based approach to calculate cost of performance for sales factor purposes

The Oregon Supreme Court held on Sept. 11  that under the cost of performance (COP) method for sourcing sales other than sales of tangible personal property, sales should be sourced using a transactional rather than an operational approach. In affirming the Oregon Tax Court, the Supreme Court held that the definition of “income producing activity” as it applies to a COP analysis relates to individual sales to customers. As a result, only direct costs associated with the individual transactions should be considered.

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