It’s that time of year again… All the busyness of year-end has subsided, and the fuss from new laws taking effect on January 1st has passed. Now that we’re fully settled into 2018, it’s time for a whole new wave of changes. For our Oregon clients (or out-of-state clients with employees performing services in Oregon!), are you ready for the new statewide transit tax taking effect this Sunday?
Oregon’s Statewide Transit Tax
The 2017 Oregon Legislature passed House Bill (HB) 2017, which included the new Statewide Transit Tax. Effective July 1, 2018, employers must start withholding the tax (one-tenth of 1 percent or 0.1%) from:
- Wages of Oregon residents (regardless of where the work is performed).
- Wages of nonresidents who perform services in Oregon.
Be advised that this tax is not related to either the Lane Transit District (LTD) or Tri-County Metropolitan Transportation District (TriMet) payroll taxes. Transit payroll taxes are imposed on the employer based on the amount of payroll. Conversely, the statewide transit tax is imposed on the wages of each employee. Under this new tax law, the employer is responsible for withholding, reporting, and remitting the Statewide Transit Tax.
Additionally, note that even employees who aren’t subject to regular income tax withholding are subject to Oregon’s statewide transit tax withholding. This includes employees with high exemptions or who have wages below the threshold for income tax withholding.
Southland Data Processing has added the new tax codes to your company and the resident tax code (OR-TRA1) to employees with an Oregon address. You will need to add the non-resident tax code (OR-TRA2) to employees who do not reside in Oregon.
The deduction will take effect with your first pay period following July 1, 2018.
Under the new tax law, Oregon 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.
If you don’t withhold this tax appropriately or file and pay on time, you may be subject to penalties and interest. We can assess penalties for knowingly failing to deduct and withhold the tax of $250 per employee, up to $25,000 for each tax period, in addition to other penalties and interest authorized by state law.
Additionally, 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, we can’t require out-of-state employers to do so, as they’re outside Oregon’s taxing jurisdiction.
If the employer doesn’t withhold the tax, the employee is responsible for reporting and paying the tax when filing their personal income tax return. There is no extension to the filing and payment deadline for the statewide transit tax.
If employees don’t report or pay on time, they may be subject to penalties and interest. The Oregon Department of Revenue is still finalizing their process for filing and paying these taxes. Once finalized, the Department of Revenue will post this information on their website.
The Oregon Department of Revenue has created a message you can use to share information about this new tax with your employees. As a quick and easy way to inform employees, you can use these easy-to-print stuffers. If you issue paper paystubs, they are easy to include on your next pay day. Additionally, you can also add the verbiage to your company newsletter or bulletin.
For more information, check out the Oregon Department of Revenue’s Frequently Asked Questions on the new law. Simply type in “statewide transit tax” in the search bar here.
What Do You Think?
Comment below to share your thoughts on the new Oregon Statewide Transit Tax! Not in Oregon? Not a problem. Stay tuned for more updates throughout the month regarding changing laws as part of our mid-year tune up! Want more information on how to stay up to date with the latest business news? Follow us on Facebook, Twitter, and LinkedIn to make sure you never miss a beat!