If your company does business in Oregon, then starting July 1, 2018, you will be required to withhold a new transit tax at payroll. The tax, which amounts to one-tenth of a percent (.001) of wages, must be withheld from the wages of all employees who provide services in Oregon, whether or not they are Oregon residents. Revenue from the tax will go to the Statewide Transportation Improvement Fund, which finances public transportation investments and improvement projects (but not any involving light rail).
All employees are subject to this withholding; employees who don’t pay income taxes due to high exemptions, and employees whose wages don’t meet the income tax threshold, must still pay this tax. It does not, however, apply to wages paid to independent contractors or any other income derived from self-employment.
Because this tax is withheld at payroll, it’s up to employers to implement it. Starting July 1, Oregon employers are required to:
- Withhold the tax from employee wages every pay period
- Report taxes withheld on quarterly or annual returns
- Remit taxes quarterly or annually
- Reconcile reports on annual reconciliation return
The fine for knowingly failing to deduct and withhold the tax is $250 per employee, up to $25,000 per tax period. Depending on the situation, the failure to withhold the tax correctly may result in additional penalties and interest due.
If you do not conduct business in Oregon, but you employ Oregon residents, they may ask you to withhold this tax for them. You are not required to do so. However, in that case, that employee is still responsible for paying that tax on their personal income tax return.
But remember: if your company provides services in Oregon, you are required to withhold this tax for your employees. The penalty for failing to do so falls on you, not the employee.
And if you use Xenium for payroll processing, we will ensure the taxes are collected and remitted appropriately.