On February 26, 2019, the Oregon Tax Court held that an out-of-state cigarette manufacturer’s in-state activities violated Public Law 86-272, resulting in the manufacturer being subject to Oregon’s corporation excise tax. P.L. 86-272 prohibits any state from imposing a net income tax on out-of-state taxpayers that generally limit their in-state business activities to solicitation. The manufacturer sold cigarettes to Oregon wholesalers, which then sold them to in-state retailers. The manufacturer had a program by which it paid wholesalers to accept returns of non-saleable cigarettes from retailers for replacement or refund. The court held that this practice exceeded mere solicitation and, thus, violated Public Law 86-272, subjecting the manufacturer to the Oregon corporation excise tax. Santa Fe Natural Tobacco Co. v. Dep’t of Revenue, Dkt. No. TC-MD 170251G (Or. Tax Ct. Feb. 26, 2019).
