As we previously reported, legislation enacted in 2017 created a new payroll tax on Oregon residents and nonresidents working in Oregon to fund state highway upgrades. The new tax, which must be withheld by Oregon employers, goes into effect July 1, 2018.?

In addition to the forms previously released to the Oregon Department of Revenue website, the Department has released revised Form OR-WR, Oregon Annual Withholding Tax Reconciliation Report, to be used by employers to report the statewide transit payroll tax in addition to income tax withholding.

Employers must begin withholding for the new statewide transit tax on July 1, 2018??

Effective July 1, 2018, Oregon employers and payers must start withholding the?new 0.1% tax?from the:

— wages of Oregon residents (regardless of where the work is performed);
— wages of nonresidents who perform services in Oregon;
— periodic payments made under ORS 316.189, not including retirement income paid to nonresidents from an Oregon source.?

Employer contributions do not apply.

Out-of-state employers

Out-of-state employers not doing business in Oregon are not required to withhold the new transit tax from Oregon residents' wages. Oregon residents that work for an out-of-state employer not doing business within Oregon will be required to report and pay the tax at the time and in the manner determined by the Department, or they may ask their out-of-state employer to voluntarily withhold the new tax.

Quarterly and annual return filing requirements ?

Oregon employers are required to report the new statewide transit tax on a quarterly basis on new OR-STT-1, Oregon Quarterly Statewide Transit Tax Withholding Return, and OR-STT-2, Statewide Transit Tax Employee Detail Report, submitting payments electronically through a?Revenue Online account or with Form OR-STT-V, Oregon Statewide Transit Tax Quarterly Payment Voucher (by check?or money order).?

Cash payments will only be accepted at the Department's main office?at 955 Center Street NE in Salem.??

Employers will not report the new transit tax on their quarterly income tax withholding return.??

Because employers will begin withholding the new transit tax on July 1, 2018, they will need to file a statewide transit tax return beginning for the third quarter 2018, due by October 31, 2018.??

Form OR-STT-A, Oregon Annual Statewide Transit Tax Withholding Return, is used by agricultural and domestic employers and must be filed January 31 each year. ?Agricultural and domestic employers?will file returns and make payments for the new transit tax annually, as they do with their income tax withholding.?

Form OR-WR, Oregon Annual Withholding Tax Reconciliation Report, has been revised to include the statewide transit tax and must be filed by January 31 each year.

Proposed statewide transit tax regulations issued

Proposed regulations on the statewide transit tax were issued that (1) amend the model recordkeeping and retention rule (150-314-0265) to include the new tax; (2) amend the rule providing for the treatment of payroll-based program overpayments (150-316-0275) to allow an employer to instruct the department to either refund an overpayment of the new tax or roll over an overpayment of the tax to the current or prior quarter; and (3) add Rule 150-320-0520 to provide when and how employers must file the statewide transit tax reports and any schedules, and pay statewide transit tax.

The rule also provides information for Oregon residents not employed by an Oregon employer on how and when to self-report and pay statewide transit tax to the Department.

For more information, see the Department's website.

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