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Community Safety Payroll Tax

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1. When will the tax become effective?

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, for calendar year filers.

2. How long will the payroll tax last?

 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.

3. 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 individuals are responsible for paying the self-employment tax.  

4. What is the tax rate for each tax?

Employer Payroll 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. 

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.

Employee Payroll Tax

The tax rate will be determined using annualized income tax rate charts divided out by pay period, based on the hourly wage rates provided in the Ordinance.

• An employee who makes more than $15 per hour, the tax is calculated at a rate of 0.0044 (or .44 percent) of total wages.
• An employee who makes between $12.01 and $15.00 per hour, the tax is calculated at a rate of 0.0030 (or .30 percent) of total wages.
• An employee who makes $12.00 per hour (or the minimum wage rate as of July 1, 2020) is exempt from the employee payroll tax. 

Estimate the payroll tax for employers and employees.

5. Are overtime wages used to determine my tax rate?

No, overtime wages are not used to determine the applicable tax rate but are subject to the payroll tax.

Example: Juan is paid $14 per hour and is paid weekly. During the workweek, he worked 50 hours (40 regular hours and 10 overtime hours) and received $770 in wages ($560 (40 hours * $14) plus $210 (10 hours * $21 – Juan’s overtime hourly rate)). Juan’s employer will exclude $210 in overtime wages in determining the applicable tax rate. That rate is then applied to all subject wages, including overtime wages.

Overtime wages should be calculated consistent with the Fair Labor Standards Act (FLSA) and applicable Oregon state law.

6. 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.

7. 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.

8. What if I am employed by an employer that is located in the Eugene city limits, but I do all or part of my work outside the City?

You are taxed on all wages earned while working at an employer’s business location in the Eugene city limits, regardless of where the work is performed. For this purpose, “business location” is defined as any physical location in the Eugene city limits to which an employer conducts business operations, including any real property, building, facility, or office owned, leased, or occupied by the employer. “Business location” does not include temporary job sites generated by customers located in the Eugene city limits, including but not limited to construction sites or plumbing/electrical/landscaping clients.

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 limits 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: 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 is not subject to the employee payroll tax since his employer is located in Indiana.

Client locations and temporary job sites are not considered a “business location” for the purposes of the 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 exempt from the payroll tax because her employer is not located in City limits.
• 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 wages earned while working at client locations outside the City limits.
• 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. All the employee wages are subject to the employee payroll tax, regardless of where the work if performed, since AA industries is located in the City limits.
• 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 employees working in the City limits are not subject to the employee payroll tax since the employer is located in Junction City.

9. What if I my employer has multiple business locations both in and out of the City limits?

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: An employer that supplies online management services is headquartered in the Eugene city limits. The employer has two satellite offices, one in Portland and another in Roseburg. The employees who work at the Portland and Roseburg business locations are not subject to the payroll tax, even though the business is headquartered in Eugene. 
• 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. 
• Example: Insomnia LLC is a business that has 10 drive-through coffee hut locations throughout Lane County. Only the employees working at those huts located in Eugene are subject to the payroll tax.
• Example: All-day Construction is located in Harrisburg. The company also has a supply yard in Halsey and office in Eugene that has four human resource and payroll employees. Only the four employees working at the Eugene office are subject to the payroll tax.

10. How often are returns and payments required to be submitted?

Employer and Employee 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.

Quarter	Due Date
1st quarter (January to March)	April 30
2nd quarter (April to June)	July 31
3rd quarter (July to September)	October 31
4th quarter (October to December)	January 31

Self-employment Tax

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. 

11. What wages are subject to the payroll tax?

Employer Payroll Tax

The employer payroll tax is applied to the total wages paid by the employer all for services performed by an employee for an employer, including the cash value of all renumeration 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.

Employee Payroll Tax

For the employee payroll tax, the tax is applied to total wages, after pre-tax deductions. 

12. Are there any exempt wages?

For the purposes of the payroll taxes, “wages” does not include renumeration:  

• For domestic service in a private home
• For casual labor not in the course of the employer’s trade or business
• To an employee whose services to the employer consist solely of seasonal labor in connection with the planting, cultivating or harvesting of agricultural crops
• That is not subject to withholding under Oregon Revised Statute (ORS) Chapter 316

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. 

13. 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 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. 

14. If I’m a self-employed person 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.

15. 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.

16. Are estimated payments required?

No, you do not need to submit estimated payments for the payroll taxes or self-employment tax.

17. Are extensions allowed to file a return?

Employer or Employee Payroll Taxes

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. 

Self-employment Tax

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.

18. 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).

19. Am I required to register with the City for the payroll tax if I’m an employer or self-employed?

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.  

20. Have questions or want to learn more?

• Email us with any questions or call 541-682-5053.
• Read the Community Safety Payroll Tax Ordinance or Administrative Order 44-20-05-F.
• Join the Payroll Tax Interested Parties email list to get updates on the payroll tax.
• Watch your mailbox – information will be sent to local employers.