Stemming from House Bill 2017, which Oregon Legislature passed in 2017, Oregon employers will be responsible for a new statewide transit tax. Starting July 1, 2018 employers are to begin withholding one-tenth of a percentage or 0.1% for all wages earned in Oregon. This includes wages of all Oregon residents regardless of where the work is or was performed and wages of nonresidents who perform services in Oregon.
For the calculation the wage based is defined in ORS 316.162. Generally speaking, all wages earned will qualify for the special tax unless noted in ORS 316.162. Additionally, self-employment income is not subject to the tax.
For example, a salaried employee makes $100,000 annually. He or she would make $25,000 quarterly. Their quarterly tax burden would be calculated by multiplying $25,000 times 0.1%. The tax to be withheld per quarter on that employee is $25.
From a compliance standpoint for employers, they are responsible for withholding the tax from the employees’ wages, reporting the taxes withheld on the quarterly or annual reports, remitting the taxes withheld, and reconciling quarterly or annual reports with an annual reconciliation return. These steps are very similar to the system already in place for state income tax withholding.
Taxes are due on a similar schedule to current quarterly payroll reports and payments. For example, the initial period will start July 1, 2018 and run through September 30, 2018 completing the third quarter. The quarterly filing and payment of the tax withheld will be October 31, 2018. Similar to federal and state tax due dates, if the due date falls on a weekend or holiday, the due date moves to the next business day.
If you are currently a payroll client, we will be accounting for this beginning with your third quarter 2018 payroll tax filings. Should you have any questions regarding this new tax, our team at Fitzpatrick, Johnson & Associates CPAs can help guide you through these uncharted waters.
If you would like to discuss this new tax and the potential impact it could have on your quarterly and annual reporting, give us a call today at (503) 472-0576 to see how we can help you.
Fitzpatrick, Johnson & Associates CPAs is a full-service accounting firm with a team of Certified Public Accountants providing tax, financial statement, and bookkeeping services. We are based in McMinnville, Oregon in the heart of Oregon’s wine country, the Willamette Valley.