Most states can set their own local income taxes to help them meet their needs. Oregon utilizes this privilege in the form of transit payroll taxes, which are used to fund public transportation across the state of Oregon. There are several types of transit tax, and employers may be responsible for collecting and remitting them depending on the circumstances.
Compliance with state tax rules can be complicated, but Mosey is here to make things easy. Here’s what Oregon employers need to know about the state transit tax and how Mosey can help with business compliance.
How Does the Oregon Transit Payroll Tax Work?
There are several unique Oregon payroll tax scenarios. In fact, even among just the Oregon Transit Payroll Taxes, there are three distinct types.
The base tax is called the Statewide Individual Transit Tax (STT). There are also two additional transit taxes at the local level: the Lane County Mass Transit District (LTD) tax and the Tri-County Metropolitan Transportation (TriMet) district tax, which affect people living in certain areas of Oregon.
Everyone is responsible for the statewide tax, but the local taxes differ slightly. Depending on where an employer or employee is located and the classification of their work, they may be subject to one, both, or neither.
Every employer (including nonresident employers) who operates within a taxable transit zone is responsible for paying transit payroll tax. This tax applies to everyone working within an eligible district, even if the employer is not in the district.
Employees who work in satellite offices or from home must have transit payroll tax deducted from their earnings, even if employees who work on location outside of the district do not.
For tax purposes, “wages” refer to hourly pay or salary plus additional compensation like bonuses, tips, or commissions. Tax must be paid on the total income earned while working for the employer, no matter the nature of the income.
Employers must withhold 0.10% of each employee’s gross pay and remit it to the state as transit tax. Municipal transit taxes come in addition to the statewide payroll tax rather than instead of it. The required withholding percentage varies by zip code where work was performed, even if your business isn’t based in that zip code.
Who Is Exempt From the Oregon Transit Payroll Tax?
Nearly every Oregon employee is subject to transit payroll tax, with some exceptions, such as domestic service workers.
STT Exemptions
Statewide transit tax applies nearly everywhere, while additional types of transit tax only apply to work performed in certain jurisdictions. Some employees may be eligible for one type of transit tax or exempt from another, while others will be exempt from both.
Common exemptions include:
- Tax-exempt organizations or institutions, including 503(c) nonprofits
- Insurance companies (except for domestic insurers)
- People who perform domestic service in a private home (i.e., privately hired care providers, home cleaners, and cooks)
- Public school districts
LTD and TriMet Exemptions
Additionally, there are specific exemptions for the Lane County Mass Transit District Tax. These exemptions apply to LTD but are still subject to TriMet:
- Fire districts
- Special public service districts
- Utility districts
- Government officials
- Port authorities
For the TriMet tax, all of Clackamas, Multnomah, and Washington counties are subject to it. Employers and employees outside these counties will not need to pay or remit an additional transit tax to satisfy the TriMet requirement.
It’s wise to double-check with local laws to ensure exemptions apply to you. Reaffirming ahead of time can spare you tax penalties in the future or prevent you from making unnecessary tax contributions.
Is Deferred Compensation Subject to Transit Tax?
Some deferred compensation, like contributions to a 401k plan, are sometimes exempt from certain taxes. In Oregon, deferred compensation is still subject to transit payroll taxes. Taxes are always paid on the full wages and compensation earned, even if compensation is deferred.
What Happens if an Employee Works in Multiple Locations?
Compliance with transit tax can get tricky if an employee works at different job sites, like a construction worker, electrician, or plumber. They may work at a new location every week or even every day.
Any work they perform in a district subject to transit tax must be taxed appropriately, while work they perform outside of a zip code eligible for transit tax doesn’t require a transit tax deduction. Transit tax contributions should be made only on total compensation earned when an employee performs duties in a transit tax area.
Employers must carefully track employees who often work outside of the office, travel to job sites, or make house calls. These occasions may be the only ones when an employee’s earnings are subject to TriMet or Lane County Mass Transit district taxes.
It’s important to understand how much compensation was earned within an eligible district and make contributions compliant with the withholding percentage for appropriate zip codes.
Your tax forms will list a physical location for tax withholding, and you must have an accurate address and zip code for each location where work was performed. You may need to include multiple locations, especially if your employee performed work in zip codes with different required withholding rates.
When Do Oregon Transit Payroll Taxes Have To Be Remitted?
All employment-related tax reports and payments are due on the last day of the month following the end of the quarter.
Each quarter, employers are required to file three tax reports:
- The Oregon Quarterly Tax Report (Form OQ)
- The Employee Detail Report (Form 132)
- The Oregon Quarterly Statewide Transit Tax Withholding Return Form
You may be able to ask for an extension if you believe you’ll need one, but you cannot ask at the last minute. It can take several weeks to approve an extension request, and you must have a valid justification (like being affected by a natural or technological disaster).
It’s better to ask for an extension and not use it than to need an extension and not receive approval before the due date. The moment you feel an extension may be necessary, it’s best to make the request while you continue to work on preparing your quarterly tax reports.
Failure to file reports and remit taxes on time can result in hefty fines or interest for a first offense. Additional fees and fines could financially devastate a small or young business. Prepare your reports and remit your required withheld taxes as soon as possible to avoid non-compliance consequences or unnecessary expenses.
Stay Compliant With Mosey
The rules surrounding Oregon transit taxes can be somewhat complex, making compliance requirements difficult to follow. Mosey is here to simplify the process. Our compliance management platform makes it easy for employers to track state compliance matters like Oregon transit taxes. You can automate registration for Oregon’s transit taxes when you open payroll accounts through Mosey.
Mosey can keep you moving in the right direction by clarifying rules, reminders, and filing dates, which helps you stay compliant with state tax rules. Schedule a demo with Mosey to learn how our tools can work for your business.
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