Are you an employer in Oregon? If so, you should familiarize yourself with state-specific taxes, including the statewide Oregon transit tax. This tax applies to all businesses with employees working or living in the state of Oregon.
The Oregon statewide transit tax is separate from Oregon district transit taxes. Confused yet? You’re not alone. Read on for the scoop.
What is the statewide Oregon transit tax?
The Oregon transit tax is a statewide payroll tax that employers withhold from employee wages. Oregon employers must withhold 0.10% (0.001) from each employee’s gross pay.
Withhold the state transit tax from Oregon residents and nonresidents who perform services in Oregon. If an employee is an Oregon resident but your business isn’t in Oregon, you can withhold the tax as a courtesy.
Employees are not exempt from the statewide transit tax withholding, even if they are exempt from federal income tax withholding.
As the employer, you do not pay the Oregon transit tax. You are only responsible for withholding, reporting, and remitting withheld taxes to the state government.
The statewide Oregon transit tax goes to the Statewide Transportation Improvement Fund. Funds cover public transportation-related investments and improvements.
Check out Oregon’s website for more information on the statewide transit tax.
Paying and reporting the statewide tax
After withholding the Oregon transit tax from employee wages, you must remit the funds to the state of Oregon. You need to report the transit tax, too.
How to pay
You can pay the withheld Oregon transit tax by:
- EFT: You can pay the statewide transit tax via an electronic funds transfer
- Cash: You can only make a cash payment in person (955 Center Street NE in Salem, Oregon)
- Check or money order: You must file Form OR-OTC-V, Oregon Combined Payroll Tax Payment Voucher
How to report
To report the collected tax, you must file an Oregon transit tax form and a detail report. You can file an electronic or paper return and report. You must set up a Revenue Online account to file electronically.
So, what forms do you need to report the withheld tax on? Use Forms:
- OR-STT-1 or OR-STT-A
- OR-STT-2
- W-2
If you are a quarterly filer, you must report the tax using Form OR-STT-1, Oregon Quarterly Statewide Transit Tax Withholding Return. If you are subject to the tax, you must file Form OR-STT-1—even if you didn’t have a payroll during the quarter—and enter $0 in the subject wages box.
If you are an annual filer, report the tax using Form OR-STT-A, Oregon Annual Statewide Transit Tax Withholding Return.
In addition to the transit tax return, you must also file Form OR-STT-2, Statewide Transit Tax Employee Detail Report. Use the detail report to list employee names, wages, and withheld transit tax. Send Form OR-STT-2 when you send either Form OR-STT-1 or Form OR-STT-A.
You must also report the withheld transit tax on each employee’s Form W-2, Wage and Tax Statement. Enter the amount of the transit tax in Box 14, Other.
Filing and payment due dates
If you are a quarterly filer, Forms OR-STT-1 and OR-STT-2 are due, with payments, by the following due dates:
- Quarter 1: April 30
- Quarter 2: July 31
- Quarter 3: October 31
- Quarter 4: January 31
If you are an annual filer, Forms OR-STT-A and OR-STT-2 are due by January 31.
Failing to file and pay the statewide transit tax can result in hefty penalties and interest. You may also owe $250 per employee, up to $25,000 per tax period.
Oregon local transit taxes
In addition to the statewide Oregon transit tax, some employers must also handle local transit taxes. The following districts have a local transit tax:
Unlike the statewide Oregon transit tax, local transit taxes are employer taxes. Instead of withholding these taxes from employee wages, you pay them.
Not all Oregon employers have to pay district taxes. You must pay the tax on your employees’ wages if you’re located in the defined transportation district. You’re still responsible for withholding the statewide Oregon transit tax from employee wages even if you owe local transit taxes.
The Oregon Department of Revenue administers the TriMet and Lane County transit taxes. Canby, Sandy, South Clackamas, and Wilsonville districts/cities handle their transit taxes, so you must register and file with your district/city.
This article has been updated from its original publication date of October 22, 2018.
This is not intended as legal advice; for more information, please click here.