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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.?

To assist with The Oregon Department of Revenue recently issued clarification concerning the guidelines for withholding and report in its recent frequently asked questions.

— Employee information stuffer now available. The Department has posted an employee information stuffer on the website that employer can download, print, and include with employee paychecks or paystubs which provide high-level information on the new Statewide Transit Tax or employers can include this information in any digital form of paycheck or paystub. The informational stuffer can be found here.

— Registering for withholding. Most employers who are subject to income tax withholding should have received a letter from the Department which provides information for the new Statewide Transit Tax with information on how to register for a Revenue Online account. Employers may file returns electronically, but only if they've registered for a Revenue Online account. Otherwise, quarterly or annual returns, the employee detail report, and payment voucher may be filled out and printed to be mailed to the Department.

— Form W-2 reporting. The Department will require employers to report the subject wages and withholding amounts for Statewide Transit Tax on the Form W-2 in Box 14. Filers using Manual Entry in iWire will see the appropriate text boxes for entering this information. Otherwise, bulk filers using text files will find the appropriate W-2 specifications on the Eepartment's iWire.

— The Statewide Transit Tax is not the same as transit payroll taxes (TriMet and Lane Transit). The Statewide Transit Tax is a tax on employee wages that are deducted, withheld, reported, and paid to the Department of Revenue by the employer. This requirement mirrors the requirements for state income tax withholding. Transit payroll taxes are a tax on the employer that is paid by the employer based on the amount of payroll earned within a transit district. There are some organizations whose payroll is exempt from transit payroll tax (e.g. federal credit unions, 501(c)(3) nonprofit and tax-exempt institutions, etc.). However, every employer must deduct, withhold, report, and remit the new Statewide Transit Tax to the Department.

— Nonresident employers. Nonresident employers who are outside of Oregon's taxing jurisdiction may deduct, withhold, report, and remit the statewide transit tax for Oregon resident employees similar to Oregon income tax withholding. Those nonresident employers who are currently performing courtesy income tax withholding for Oregon resident employees should have received a letter from the Department with information on how to comply with the new tax. If nonresident employers do not want to perform courtesy withholding for the Statewide Transit Tax, the Department must be notified in writing using the Business Change in Status form.

— Return filing and tax payments. Employers can file returns and detail reports using electronic or paper options. Filing electronic returns and detail reports will require setting up a Revenue Online account. For more information on how to set up an account, please visit Revenue Online. Employers can pay cash, check, money order, or Electronic Funds Transfer (EFT). Include the new Statewide Transit Tax payment coupon with your check or money order so we can ensure its applied appropriately.

Most employers will file returns and pay the new tax on a quarterly basis. Agricultural and domestic employers may file return and pay the new tax on an annual basis unless they've already established a quarterly filing frequency for state income tax withholding. These employers may then file quarterly for the Statewide Transit Tax.

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