Or. Admin. R. 150-317-1100 - Agent Exclusion

Current through Register Vol. 61, No. 4, April 1, 2022

(1) "Agent" means a person who is acting on behalf of another and is subject to that other person's control.
(2) All facts and circumstances must be considered to determine if a person is an agent.
(3) An agent may exclude the fair market value of property, money and other amounts from their commercial activity only to the extent the property, money and other amounts are received or acquired on behalf of the person who controls the agent.
(4) An agent must include the agent's fee, commission or remuneration in the agent's commercial activity. An agent's commercial activity includes any property, money and other amounts that an agent retains from the property, money and other amounts received on behalf of the principal to pay the agent's commission, fee or remuneration.
(5) Examples.

Example 1: On June 30, 2020, York Escrow Company agrees to hold $60,000 for a real estate transaction down payment on behalf of Mr. Thomas. Mr. Thomas has the ability to direct payment of the real estate down payment. York Escrow Company charges Mr. Thomas a three percent fee ($1,800) for the escrow services. York Escrow Company does not include the $60,000 real estate down payment in its commercial activity. However, York Escrow Company must include the $1,800 fee in its commercial activity.

Example 2: Human Resource Services, Inc. (HRS) provides payroll, human resources, and benefits services to XYZ Corporation for a fee. As part of its services provided to XYZ, HRS processes employee payroll; assists XYZ with hiring and firing, FMLA and OFLA regulations; and manages employee insurance benefits. XYZ pays fees to HRS for its services in a lump sum that includes the compensation amounts owed to XYZ's employees and other payroll amounts. Based on the totality of facts and circumstances, HRS acts as the agent of XYZ when paying wages and payroll amounts to XYZ's employees. Therefore, HRS does not include in its commercial activity the amount it receives from XYZ that corresponds to the compensation of XYZ's employees' wages and related payroll amounts, but it must include in its commercial activity the fees that it receives from XYZ for its services.

Example 3: Staffing Solutions, Inc. provides workers to Office Works. Office Works has the right to control the workers as to the details and means of the work performed for Office Works. Staffing Solutions is responsible for paying the employees' wages and related payroll amounts, serves as the employer of record for taxes, and provides the workers with health insurance and other benefits. Office Works reimburses Staffing Solutions, according to its payroll schedule frequency, for wages paid to the workers and payroll taxes, plus a fee. Based on the totality of facts and circumstances, Staffing Solutions acts as the agent of Office Works in making payments of wages and payroll taxes to the workers performing services under the direction and control of Office Works. The reimbursement amounts paid for wages to the workers while on assignment at Office Works and related payroll taxes are not included in Staffing Solutions' commercial activity. Staffing Solutions must include in its commercial activity all other fees and amounts it receives from Office Works.

Example 4: Jones Corporation owns a plot of land in Oregon and enters into a fixed-price $10 million contract with a general contractor, Strong-R Construction, to construct a mixed-use building on the land. Strong-R Construction agrees to provide specified services for the $10 million contract and bears all risks involved in completing the project in a cost-effective manner. Strong-R Construction may perform the necessary services itself, or it may bid out some or all the work to subcontractors. According to the terms of the contract, Strong-R Construction is solely responsible and liable for completing the project as agreed and does not need to inform or disclose to Jones Corporation any details as to the costs or the manner in which the work is conducted or completed. Based on the totality of the facts and circumstances, Strong-R Construction does not qualify as an agent for purposes of the agency exclusion and includes the entire $10 million in Oregon commercial activity.

Example 5: ABC Corporation (ABC) enters into a cost-reimbursable contract with DEF Construction (DEF) to construct or equip an office building in Oregon. ABC agrees to pay DEF for all costs incurred for completed work by subcontractors, plus a fee equal to five percent of the total project costs. Under the terms of the contract, DEF must act on behalf of and under the direction and control of ABC related to the use of subcontractors. Such direction and control includes, but is not limited to, the bidding and awarding of subcontracts, the setting of a schedule of activities and deliverables, and the management of project costs. DEF acts as a conduit regarding any payments made to the subcontractors, by remitting monies received from ABC to the subcontractors, provided that project deliverables are completed according to the terms of the subcontracts. ABC pays $10 million of project costs to DEF. If DEF turns around and remits the entire $10 million to the subcontractors for the total costs of the project work completed by the subcontractors, that amount may be excluded from commercial activity. However, any portion of the $10 million not remitted directly to the subcontractors that is used instead for other expenses such as materials or other labor must be included in commercial activity. Assume that DEF remits the entire $10 million directly to the subcontractors and collects a $500,000 fee ($10,000,000 * 5%) from ABC as compensation for the services provided to ABC. Based on the totality of facts and circumstances, DEF includes only the $500,000 fee in its commercial activity.


Or. Admin. R. 150-317-1100
REV 15-2019, temporary adopt filed 12/30/2019, effective 01/01/2020 through 06/28/2020; REV 11-2020, adopt filed 06/24/2020, effective 6/28/2020

Statutory/Other Authority: ORS 305.100 & 317A.143

Statutes/Other Implemented: ORS 317A.100

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