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Community Safety Payroll - Self-Employment

1. When will the tax become effective?: The Community Safety Payroll tax will be effective January 1, 2021. The first annual return and payment for the self-employment tax will be due April 15, 2022, for calendar year filers.

2. What is a payroll tax and who is responsible for collecting and remitting the tax?

The payroll tax is paid by employers, employees, and self-employed persons.

The employer payroll tax is applied to total wages paid by an employer with a physical address in the Eugene city limits.
The employee payroll tax is applied to total wages paid to an employee working at an employer located in the Eugene city limits.
The self-employment tax is applied to the net earnings from self-employed persons with a physical address in the Eugene city limits.

An employer is responsible for paying the employer payroll tax as well as withholding and remitting the employee payroll tax on behalf of all employees with subject wages.

Self-employed persons are responsible for paying the self-employment tax. If they have employees, they are also responsible for filing and remitting the employee payroll tax on behalf of employees.

3. What is a self-employed person?: You’re self-employed if you are a sole proprietor (including an independent contractor), a partner in a partnership, a member of a multi-member limited liability company (LLC) that is treated as a partnership for federal tax purposes or are otherwise in business for yourself. Sole proprietor also includes the member of a single member LLC that’s disregarded for federal income tax purposes and a member of a qualified joint venture.

4. If I’m self-employed with employees, do I have to pay both the employer payroll tax and self-employment tax?: No. A self-employed individual who also has employees is not subject to the employer payroll tax, only the self-employment tax. However, as an employer you may be required to withhold and remit the employee payroll tax on behalf of your employees.

5. Am I required to register with the City for the payroll tax as a self-employed person?: Yes. If you are self-employed with a physical address in the Eugene city limits, you’ll need to register. You can register quickly and easily through MUNIRevs. See the “REGISTER” tab on our Community Safety Payroll Tax web page for more information.

6. I am already registered with the State of Oregon. Do I need to register again?: Yes. The City of Eugene’s payroll tax is not connected with the State of Oregon, so you cannot use that registration. Each business will be given an account number to use exclusively for the payroll tax.

7. What is a business location for the purposes of the payroll tax?: For this purpose, “business location” is defined as any physical location in the Eugene city limits to which a self-employed person conducts business operations, including any real property, building, facility, or office owned, leased, or occupied by the self-employed person.

8. How do I determine if my address is in the Eugene city limits?: Use our online Search by Address tool to see if an address is in the city limits. The Eugene city limits is not the same as the Eugene urban growth boundary or determined by certain ZIP codes. Your address may contain “Eugene,” but still be outside the Eugene city limits. If the address is listed as “unincorporated,” it is not in the City limits.

9. My business does not have a physical location in Eugene, but I have employees that work from home in Eugene. Are those wages subject to the payroll tax?

No. The key factor is the physical location of the employer, not where the work is performed, client locations, temporary job sites, or where the employee lives.

Telecommuters (or remote workers) are not subject to the payroll tax if they work for an employer located outside the Eugene city limits, even if working from home within the City limits.

Example – Terrance works for an IT security company located in Indiana. He telecommutes from his home in Eugene and meets with various clients located in Eugene. Terrance’s wages are not subject to the payroll tax since his employer is in Indiana.
Example – Sam works for an employer in Roseburg doing accounting work. He does all his work remotely from home in Eugene. Sam’s wages are exempt from the payroll tax since his employer is located in Roseburg, even though he lives and works in Eugene.

10. I have a business location in Eugene with employees that work from home outside the city limits. Are those wages subject to the employee payroll tax?

Yes. The key factor is the physical location of the employer, not where the work is performed, client locations, temporary job sites, or where the employee lives.

Telecommuters (or remote workers) are subject to the employee tax to the extent that they work for an employer located in the Eugene city limits, even though the work may be performed outside the City limits.

Example - Alicia works for an employer located in the City three days a week and works from her home in Springfield two days a week. The payroll tax applies to all of Alicia’s wages including her wages earned while working from home.
Example – Jose has a computer service and repair business located in Eugene. He has two employees that work remotely from home in Portland, Oregon. The payroll tax applies to all those wages paid to the remote employees since Jose’s business is located in Eugene.

11. My business is located outside of Eugene, but my employees travel to Eugene to meet with clients. Are my employees subject to the tax?

No. The payroll tax is applied to wages paid to an employee working for an employer located in the Eugene city limits. The key factor is the physical location of the employer, not where the work is performed or the location of clients. Client locations do not qualify as a “business location” for the purposes of the employee payroll tax.

Example - Maggie works for a tax preparation service located in Junction City. She often comes to Eugene to meet with clients at their homes. Maggie’s wages are not subject to the employee payroll tax because her employer is not located in City limits.
Example – Edward runs a landscaping business in Springfield and provides services for various clients in Eugene. His employees are not subject to the employee payroll tax.
Example – Laura has a catering business in the Eugene city limits. She provides catering services for clients throughout Lane and Douglas counties. Her employees are subject to the payroll tax, even for those wages earned while working at client locations outside the City limits.

12. My company has project sites located in the City, but my business is located outside of the City. Are those wages subject to the employee payroll tax?

No. The payroll tax is applied to wages paid to an employee working for an employer located in the Eugene city limits. The key factor is the physical location of the employer, not where the work is performed or the location of temporary job sites. Temporary job sites are not treated “business location” for the purposes of the employee payroll tax.

Example – CC Electric is located in Junction City. They are contracted by a client in Eugene to do all the electrical work on a new building in the City limits. The CC Electric is not subject to the payroll tax since they are located in Junction City.
Example – AA industries is a construction company located in the Eugene city limits. Employees are sent out in teams to various construction sites located both in and out of the City limits. AA industries is subject to the payroll tax, regardless of where the work if performed, since it is in the City limits.

13. Does the payroll tax apply to government agencies and their employees? How about nonprofit 501(c)(3) organizations?

Public employees are subject to the employee payroll tax if they work at a public employer located in the Eugene city limits.

Public employers are exempt from the employer payroll tax because intergovernmental taxation is prohibited. Without express authority, one government entity cannot tax another.

Nonprofit 501(c)(3) organizations are subject to the employer payroll tax and their employees are subject to the employee payroll tax.

14. When are the return and payment required to be submitted?

The self-employment tax is paid on an annual basis and is due the same day as your federal and Oregon individual income tax returns which is April 15 for calendar year filers. For individuals filing a fiscal year return, the return is due on the 15th day of the fourth month following the end of the fiscal year.

When the due date falls on a Saturday, Sunday, or legal holiday, the due date will be the next business day.

15. What do I need to file for the self-employment tax?

The self-employment tax one form that needs to be submitted annually:

Form EUG-SE, Self-Employment Tax Return

This form will be posted on our website in Fall of 2021.

16. What earnings are subject to the self-employment tax?: Net earnings from self-employment as defined in IRC section 1402. This includes the $400 exclusion allowed for federal and state purposes.

17. How do I calculate the self-employment tax?: The self-employment tax is calculated at a tax rate of 0.0021 (or .21 percent) of net earnings from self-employment. For self-employed individuals with two or less employees, the tax rate is 0.0015 (or .15 percent) for the first $100,000 of net earnings from self-employment.

18. How do I determine if I had two or less employees?

If you employed two or less employees during the year, the first $100,000 of annual wages paid or self-employment earnings are taxed at a reduced rate of .0015

“Two or less employees” will be determined using average annual employment. This will be a count of all active employees subject to the tax (including all full-time, part-time, temporary, and seasonal employees) for each month, totaled for the year, and divided by 12. You will only count active employees that worked for a business location in the Eugene city limits.

‘Employees’ does not include temporary employees contracted through professional employment organizations or staffing services.

19. Are there penalties for filing or paying late?

Yes. You’ll owe a 5 percent late-payment penalty on any tax not paid by due date of the return, even if you’ve filed an extension.

If you file your return more than 30 days after the due date, including an extension, a 20 percent late-filing penalty will be added, and you’ll owe a total penalty of 25 percent of any tax not paid.

Employers who knowingly fail to deduct and withhold the tax may be subject to a penalty of $250 per employee, up to $25,000 for each tax period, in addition to any other penalties or interest.

Interest is charged on any unpaid tax if you don’t pay the tax by the due date. The interest period begins the day after the tax is due on all unpaid tax from the due date until the tax is paid.

20. I’m already paying the Lane Transit District payroll or self-employment tax. Do I need to pay the Community Safety Payroll Tax as well?: Yes. The Lane Transit Tax and Community Safety Payroll Tax are separate taxes and not connected. Therefore, if you are subject to both taxes, you must pay both taxes.

21. Are estimated payments required?: No, you do not need to submit estimated payments for the self-employment tax.

22. Are extensions allowed to file a return?: Yes. If you are allowed an extension for federal or Oregon purposes, you are allowed the same extension for the self-employment tax. If you have been granted an extension, you must make your payment by the original due date of the return to avoid a penalty and interest charge. An extension doesn’t mean more time to pay.

23. As an employer, am I required to report the payroll tax on a Form W-2? If so, how is that reported?: Yes. You are required to report the subject wages and tax withheld for each employee. Report the subject wages on Form W-2 provided to an employee in box 18 (local wages, tips, etc.), the payroll tax paid in box 19 (local income tax), and “EUG” in box 20 (locality name).

24. Have questions or want to learn more?