Our Oregon legislature passed HB 2017, which will create a new payroll tax on Oregon residents (and nonresidents, working in Oregon). The tax will be effective on July 1, 2018. The purpose of the new law is to fund the highway upgrades needed for our roads.

The new withholding tax requires all employers to withhold an additional tax of 0.1% from employee wages. The tax will be remitted to Oregon and deposited into a new Statewide Transportation Improvement Fund (STIF).

There will be no employer match on this withholding tax.

The tax applies to all Oregon residents, regardless of where services are performed (as well as nonresidents who perform services inside Oregon).

The current expectation is for the employer to submit the withheld tax with the quarterly report, and file an annual return with Oregon.

An employer that fails to withhold (and submit the new payroll tax) will be held responsible for the payment of the tax, in an amount equal to the amount which should have been withheld from the employee’s wages. The penalty within the legislation is determined at $250 per employee, with a maximum penalty being $25,000 (if the employer consciously fails to withhold and remit the tax).

Oregon residents who work for an out of state employer who does not do business within the State of Oregon will still be required to report and pay the tax in the same fashion, and at the same time, as is required for in-state employers.

Employers will need to adjust their payroll systems to consider this new withholding beginning with the 3rd quarter of 2018, and include the additional tax (when making required payroll deposits to the State of Oregon). Remember to do this for all resident employees and out of state employees performing services inside the state of Oregon.

If you have questions about this new law, please contact our office.