Tektronix, Inc. v. Dept. of Rev.

Under ORS 314.665(6)(a), the term intangible assets does not mean only “liquid assets,” and instead carries its ordinary legal meaning. The receipts from the sale of intangible assets that are not derived from a taxpayer’s primary business activity must be excluded from the sales factor under ORS 314.665(6)(a).

The Department of Revenue appealed a general judgment of the Tax Court. In 2006, the Department issued a notice of deficiency against Tektronix for $3.7 million in additional tax for taxpayer’s 1999 tax year. Tektronix contented that the statute of limitations barred the Department from assessing that deficiency, and in any event, the Department had incorrectly calculated its tax liability. Accordingly, the Tax Court granted partial summary judgment for Tektronix on both grounds. Tektronix develops and sells test, measurement, and monitoring equipment. During its 1999 tax year, Tektronix sold its printer division for $925 million, of which, $590 million represented the gross proceeds for intangible assets. Tektronix did not include the $590 million in the sales factor when it filed its tax return for that year and maintained that it should be excluded from the sales factor under ORS 314.665(6)(a) because that amount constituted the gross receipts from the sale of intangible assets. Tektronix’s tax liability would have increased by $3.7 million if it had included that amount in the sales factor. The Supreme Court rejected the Tax Court’s determination that “intangible assets” in ORS 314.665(6)(a) meant only those liquid assets held to provide a relatively immediate source of funds for Tektronix’s liquidity needs. The Court concluded that the $590 million fit within the well-defined legal meaning of “intangible assets.” Accordingly, the exclusion of that statute removed the $590 million from the sales factor. Furthermore, the Court concluded that that amount did not fall within the statutory directive to include in the sales factor those gross receipts from intangible assets that were derived from Tektronix’s primary business activity, as it was not selling an entire division of its business. Affirmed.