HR Alert

Oregon Enacts New Withholding Tax on Employee Wages

New Withholding Tax Applicable to Tax Periods Beginning On or After July 1, 2018

A new law in Oregon requires employers to withhold a statewide tax of 0.1% on employee wages. The funds will be deposited into a Statewide Transportation Improvement Fund.

New Withholding Tax
The new law imposes a tax of 0.1% on, among other things, the wages of an employee who is an Oregon resident (regardless of where services are performed) or not an Oregon resident (for services performed in the state).

Employer Withholding
At the time of the payment of wages, every employer must deduct and withhold from the total amount of the wages paid an amount equal to the total amount of wages--without exemption or deduction--multiplied by 0.1%.

An employer must report and pay the tax to the state Department of Revenue (DOR) at the time and in the manner expected to be determined by DOR rules. An employer must submit an annual return under state law (section: 316.202) to the DOR. The amounts deducted from the wages during any calendar year in accordance with the law will be considered to be in payment of the new tax. The return submitted by the employer will be accepted by the DOR as evidence in favor of the employee of the amounts deducted from his or her wages.

The law does not prohibit the DOR from including the new tax in the combined quarterly tax report required under state law (section: 316.168).

Note: In addition to employees' wages, the 0.1% tax also applies to periodic payments under state law (section: 316.189) (e.g., certain distributions or payments from or under an employer deferred compensation plan or an individual retirement plan).

The new tax is applicable to tax periods beginning on or after July 1, 2018. Click here (section: 122a) to read the text of the law.

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