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Business Q&A

Gordon Safley on electronic commerce

Q: You were at a recent meeting about electronic commerce zones in Salem. Who was involved and what was the general talk among representatives?

The event was sponsored by the Oregon Economic and Community Development Department and the Department of Revenue. There were representatives from Burns and Hines, Medford, Northeast Portland and Roberts Creek, which is Roseburg. I would say the talk among the representatives was guarded optimism. I think everybody is excited about the opportunity the e-commerce overlay provides. In each area, it looks a little bit different. But we were all enthusiastic that it will bring new jobs to the region. It's important to remember that it's for existing businesses, as well as new ones coming to the area.

Q: What were the key topics of discussion?

The meeting was primarily to bring clarity to the legislation in terms of business eligibility and the amount of income tax credit that can be obtained and the duration of the credit.

We were primarily listeners trying to figure out how the program applied in our region. The Department of Revenue explained how to justify transactions. For example, you might be a provider that does software servicing with call-center activity. You may do marketing over the Internet and as a result of marketing the client looks up an 800 number, but that would not be a qualifying activity.

Q: What were the eligibility factors?

Primary criteria to get the e-commerce tax credit is that the company must be receiving a tax credit benefit from the enterprise zone in the initial year that it makes the investment. It can be carried for five additional years, so you have six years to claim the exemption, but to qualify you must have the property tax exemption. The enterprise e-zone exemption is for three or five years, based on the wages that are paid. Let's say this is the third year you're getting the property tax credit. You'd still be eligible for the e-commerce income tax credit for an additional five years .

In addition, you must be receiving enterprise property tax exemption in the year you file. To qualify 51 percent of your business must be in e-commerce, using Internet or networks related to Internet. That's going to have to be by sales and clients. Not everybody is going to qualify. If you're primary customers are within the city, then you're probably not going to qualify because orders and transactions must be completed over the Internet. Most of it will be companies delivering goods, products and services outside the Rogue Valley.

Q: What's the amount of credit available.?

It's 25 percent of the qualifying investment in an e-commerce operation, but there is a $2 million cap. If you invested $8 million that qualifies, then you receive a $2 million credit. It is all presupposed that you make a profit. If you don't, you don't get credit. You must make a profit and pay taxes. You may have a year or two with minimal profit or none where you don't get the credit. But you can still carry it forward to the years when you do make a profit.

Q: How has the addition of e-commerce zones changed enterprise zone thinking?

Originally it was set up for manufacturing and industrial job creation and investment. Within that legislation, commercial and retail activity was exempted. By adding the e-commerce definitions as qualifying investments, businesses involved in e-commerce that deliver goods and services do qualify. That's a big change.

Q: Who has been involved in enterprise zones?

Medford became eligible for enterprise zone exemptions in 1997 and seven companies had applied through the end of 2001. Bear Creek and Boise came in within the zones last year. Currently there are a total of 14 parcels designated within the enterprise zone.

Q: Who has applied for e-commerce zone exemptions?

So far, three companies have applied for 2002 e-commerce zone benefits: Bear Creek, Regence Blue Cross/Blue Shield, and MotorcycleUSA.com.

Q: Do you foresee more companies stepping in line?

I would guess there are 10 to 15 that might apply this year.

To suggest a subject for this column, please contact business reporter Greg Stiles at 776-4463 or e-mail