New Oregon Transit Tax for Payroll Begins July 1st
Friday, June 29, 2018
On July 1, 2018, Oregon employers must start withholding the new Statewide Transit Tax from the wages of Oregon residents (regardless of where the work is performed) and nonresidents who work or perform services in Oregon.
Employers are responsible for withholding the tax (one-tenth of 1% of wages); reporting taxes withheld on a quarterly or annual return; remitting taxes withheld quarterly or annually; and reconciling quarterly or annual reports on the annual reconciliation return. Amounts withheld must be held to be remitted and reported to the Department of Revenue on or before the last day of the month following the previous calendar quarter.
There is no employer-paid component to this tax, the entire tax amount will be withheld from employee wages. There is also no minimum threshold and no exemptions for withholding or filing. Employees who aren’t subject to income tax withholding due to high exemptions, wages below the threshold for income tax withholding, or other factors are still subject to the Statewide Transit Tax.
Employers who outsource their payroll should work with their provider over the upcoming weeks so that the system is accounting for the new tax when it goes into effect. For those who provide payroll in house, the software used should be up to date to administer the transit tax on July 1.
Employers who fail to deduct, withhold, and remit the tax to the Oregon Department of Revenue will be subject to a penalty of $250 per employee, up to $25,000 for each tax period (in addition to other penalties and interest authorized by state law).
This new transit tax isn't related to the Lane or TriMet transit payroll taxes. Revenue from the statewide transit tax will go into the Statewide Transportation Improvement Fund to finance investments and improvements in public transportation services, except for those involving light rail.
The following forms are available for employers:
- Form OR-STT-1, Oregon Quarterly Statewide Transit Tax Withholding Return
- Form OR-STT-2, Statewide Transit Tax Employee Detail Report
- Form OR-STT-A, Oregon Annual Statewide Transit Tax Withholding Return
- Form OR-STT-V, Oregon Statewide Transit Tax Quarterly Payment Voucher and Instructions
In addition, the Oregon Annual Withholding Tax Reconciliation Report, 2018 Form OR-WR, is also available (due January 31, 2019), which will require the statewide transit tax to be reported and reconciled.
Employees who are residents of Oregon and work for employers outside of Oregon (e.g., WA, CA) can ask their employer to withhold the tax from their wages as a courtesy similar to Oregon income tax withholding. However, out-of-state employers are not required to do so, as they are outside Oregon's taxing jurisdiction.