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The Community Safety Payroll tax will be effective January 1, 2021. The first quarterly tax return and payment for the employer payroll tax and the employee payroll tax will be due on April 30, 2021. The first annual return and payment for the self-employment tax will be due April 15, 2022.
After seven years, the City Council must refer the continuation of the payroll tax to a public vote, or the tax will be terminated. If the Council does not refer the continuation to voters or the voters reject the continuation, the payroll tax will end on Dec. 31, 2028.
The Community Safety payroll tax will become effective January 1, 2021.
The City is currently drafting administrative rules that will provide the more detailed instructions for how the tax will be administered and collected.
The draft rules will be available for a public comment period for people and businesses to provide feedback. These comments will help inform any further revisions to the rules that will be considered by the City Manager.
The payroll tax is paid by employers, employees, and self-employed persons.
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 individuals are responsible for paying the self-employment tax.
The employer payroll tax is calculated at a tax rate of 0.0021 (or .21 percent) of total wages paid by an employer. For employers with two or less employees, the tax rate is 0.0015 (or .15 percent) for the first $100,000 of wages paid.
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.
The tax rate for the employee payroll tax is based on the hourly rate of the employee:
Estimate the payroll tax for employers and employees.
Public employers are exempt from the employer payroll tax because intergovernmental taxation is prohibited. Without express authority, one government entity cannot tax another. However, public employees are subject to the employee payroll tax if they work at a public employer located in the Eugene city limits.
Nonprofit 501(c)(3) organizations are subject to the employer payroll tax and their employees are subject to the employee payroll tax.
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.
No, the hourly rate is calculated without adjusting for overtime.
Example: Maggie receives $13.00 per hour. Maggie occasionally works overtime and is paid time-and-a-half, or $19.50 per hour. To determine the applicable employee tax rate, Maggie’s employer will use her base wage rate of $13.00 per hour.
Even though overtime wages are not used in establishing the hourly rate for determining the applicable tax rate, overtime wages are subject to the employee payroll tax if the employee earns more than the minimum hourly wage.
To calculate the hourly rate for an employee that is paid wages by a means other than hourly, the employer will divide the total wages received during the pay period, excluding overtime pay, by the total hours worked in earning those wages, excluding overtime hours. The hours worked should include paid leave hours.
If an employee is paid by the hour, but the hourly rate changes during a pay period, the hourly rate is computed as the total wages paid (excluding overtime pay) to the employee divided by the hours worked in earning those wages (excluding overtime hours). This will provide an average hourly rate that can be used to determine a single tax rate, rather than applying multiple tax rates to wages earned during a pay period. Wages and hours worked at the minimum wage rate are excluded in the calculation.
Example: Ellie rotates between a day shift, swing shift, and graveyard shift and receives an hourly wage of $12.00, $13.00, and $14.00, for each shift respectively. Her employer will exclude the wages and hours at the minimum wage rate and overtime in calculating her hourly wage rate. She worked a total 112 hours (excluding overtime hours) with total wages of $1,512 (excluding overtime wages) at the hourly wage rates of $13.00 and $14.00 for the pay period. Ellie’s hourly wage rate is $13.50 ($1,512 divided by 112 hours) and she will only be taxed on the taxable wages received above minimum wage.
You are taxed on all wages earned while working at an employer located in the Eugene city limits, regardless of where the work is performed. Therefore, if you work from home (or telecommute) or work at a job site outside of the City limits, but work for an employer located in the City, those wages are subject to the employee payroll tax.
If an employer with a physical address in the City has one or more business locations outside the City, no tax is owed by the employer or employee for those hours an employee works at an employer’s business location that is outside the City, even if the employee lives in the City limits.
Example: Mark works for an employer that has two separate business locations, Eugene and Junction City. Mark rotates between each business location, working 20 hours per week at each location. Only Mark’s wages earned at the Eugene location are subject to the employer payroll tax and employee payroll tax. The wages earned at the Junction City business location are not subject to the payroll taxes.
The employer payroll tax and the employee payroll tax are paid on a quarterly basis. Quarterly returns and payments of tax are due on or before the last day of the month following the end of the quarter.
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.
The employer payroll tax is applied to the total gross wages paid by the employer all for services performed by an employee for an employer, including the cash value of all remuneration paid in any medium other than cash. This includes, but not limited to, salaries, fees, tips, bonuses, or commission on sales. If services are paid for in a medium other than cash, the fair market value of the thing taken in payment is the amount to be included as wages.
For the employee payroll tax, the tax is applied to total taxable wages, after pre-tax deductions.
For the purposes of the payroll taxes, “wages” does not include renumeration:
Wages earned at minimum wage (or $12 per hour as of July 1, 2020) are exempt from the employee payroll tax. This is true even if the employee receives overtime pay.
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 for the self-employment tax.
If you file your return more than 30 days after the due date (including an extension for the self-employment tax return), a 20 percent late-filing penalty will be added, and you’ll owe a total penalty of 25 percent of any tax not paid.
If returns are not filed for 12 consecutive quarters, or three years for annual returns, you may be subject a 100% penalty.
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.
No, a self-employed individual that 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.
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.
No, you do not need to submit estimated payments for the payroll taxes or self-employment tax.
You are not allowed an extension to file quarterly returns for the employer payroll tax or employee payroll tax. You must file the quarterly return and pay the tax by the due date to avoid penalty and interest.
For the self-employment tax, if you are allowed an extension for federal or Oregon purposes, you are allowed the same extension. 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.
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).
Yes, if you are an employer or self-employed person with a physical address in the Eugene city limits and subject to the community safety payroll tax, you’ll need to register with the City. The City is currently working with a tax administration service, MUNIRevs, that will provide online tools for registering, filing tax forms, and submitting payments. The City will post more information as that service is implemented and should be ready to start accepting registrations around July 2020.