On July 1, 2018 all Oregon employers must start withholding the new statewide “Transit Tax” from each employee’s paycheck. 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.
Who exactly will be taxed?
• Oregon residents—regardless of where their work is performed.
• Non-residents who perform services in Oregon.
Who will NOT be taxed?
The definition of “wages” excludes amounts paid to certain types of employees and independent contractors (ORS 316.162). Self-employment income isn’t subject to this tax as well as employees who aren’t subject to regular income tax withholding due to high exemptions, or whose wages are below the threshold for income tax withholding.
What about “out of state” workers who live in Oregon?
Oregon residents who perform services outside of Oregon can ask their out-of-state employer to withhold the tax from their wages as a courtesy—similar to income tax withholding. However, the state of Oregon cannot require out-of-state employers to do so, as they’re outside Oregon’s taxing jurisdiction.
How much is the tax?
The statewide transit tax is calculated based on the employee’s wages as defined in ORS 316.162. Employees will notice a one-tenth of 1 percent or .001 deduction from their wages. While the statewide transit tax is imposed on the wages of each employee, it is the employer who is responsible for withholding, reporting, and remitting (paying) the statewide transit tax to the state of Oregon.
FYI – This tax isn’t related to transit payroll taxes. Transit payroll taxes are imposed on the employer based on the amount of payroll – this Transit tax is a different tax altogether!
What happens if the employer does not withhold this tax from an employee’s paycheck?
If you don’t withhold this tax appropriately or file and pay on time, you may be subject to penalties and interest.
Don’t forget, Oregon employers are responsible for Withholding the tax from employees’ wages, then Reporting the taxes withheld on a quarterly or annual return; then Remitting taxes withheld quarterly or annually and Reconciling their quarterly or annual reports on the annual reconciliation return.
So the state can assess penalties for companies who knowingly fail to deduct and withhold the tax – that’s $250 per employee and up to $25,000 for each tax period, in addition to other penalties and interest authorized by state law. For more information on exceptions and rules, you can go to the Oregon.gov website and get instructions, forms and facts about the new tax.
Honk your horn if you’re confused!
Not to worry!!! Let the professionals at Cardinal manage your “transit tax” traffic!
If this new tax has got you scratching your head on how this will impact your employees or your back office bookkeeper/payroll person, just give us a call. Let us drive your payroll – we can handle complex payroll accounting, accruals, tax reporting and remitting the payments for you—including providing your employees with a detailed paycheck stub that is easy to read and explains it all.
Don’t get caught in the state of Oregon’s headlights on this one, call Cardinal 1.800.342.4742 today and ease on down the road!