Oregon Statewide Transit Tax Takes Effect July 1, 2018

The Oregon legislature recently passed House Bill (HB) 2017, which creates a new statewide transit tax on Oregon residents and nonresidents working in Oregon to fund state highway upgrades. Employees become subject to this new tax on July 1, 2018. 

About the Tax

On July 1, 2018, employers must start withholding the tax (one-tenth of 1 percent or .001) from:  

• Employee wages of Oregon residents, regardless of where the work is performed. 
• Employee wages of nonresidents who perform services in Oregon.

This tax is not related to the Lane Transit District (LTD) or Tri-County Metropolitan Transportation District (TriMet) transit payroll taxes. Transit payroll taxes are imposed on the employer based on the amount of payroll. The statewide transit tax is imposed on the wages of each employee.

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. 

For Employers

Employers are responsible for: 

• Withholding the tax from employees’ wages.
• Reporting taxes withheld on a quarterly or annual return.
• Remitting taxes withheld quarterly or annually.
• Reconciling quarterly or annual reports on the annual reconciliation return.

Currently, Oregon requires the withholding of state income tax from wages and, in some areas of the state, employer payment of taxes to fund mass transit — TriMet and LTD. Under the new law, residents and nonresidents will see an increase in their withholding taxes.

Oregon residents that work for an out-of-state employer not doing business within the state will be required to report and pay the tax when you file your personal income taxes. Optionally, they can ask their out-of-state employer to withhold the tax from their wages as a courtesy—similar to income tax withholding. However, Oregon cannot require out-of-state employers to do so, as they are outside Oregon’s taxing jurisdiction. 

Employers are not required to match the employee withholding tax. An employer that fails to withhold and submit the new payroll tax will be held responsible for the payment of the tax in an amount equal to the amount required to be withheld from the employee’s wages. Additionally, the employer will be subject to a penalty of $250 per employee, up to a maximum penalty of $25,000, if the employer knowingly fails to withhold and remit the tax. 

New Transit Tax Forms

 Oregon has created specific forms for the reporting of this new statewide transit tax. The forms include: 

• 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

Note that 2018 Form OR-WR, Oregon Annual Withholding Tax Reconciliation Report, is also available (due January 31, 2019), and it will require the statewide transit tax to be reported and reconciled. 

Paylocity will prepare and file the appropriate forms and remit payment for this new statewide transit tax on your behalf. 

What to Expect within HR & Payroll

Effective July 1, 2018, HR & Payroll will automatically assign the new Oregon statewide transit tax code to employers, and their applicable employees. 

Employers will begin to see the tax on subsequent payrolls. Oregon has provided an optional Statewide Transit Tax Employee Informational Stuffer for your convenience. Click here to access this document 

Click here for more information on the new statewide transit tax. 

Thank you for choosing Paylocity as your Payroll Tax partner. Should you have any questions please contact your Paylocity Account Manager. 

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.