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Community Safety Payroll Tax - For Employers about Employer Tax

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 new tax will be effective based on pay period as opposed to pay day since the January 1 start date may fall in the middle of a pay period. We understand that there would be a significant burden to withhold for only part of a pay period. Therefore, the payroll tax withholding requirement only applies to pay periods starting on or after January 1, 2021.

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

The payroll tax is paid by employers and employees.

The employer payroll tax is applied to subject wages paid by an employer with a physical address in the Eugene city limits.
The employee payroll tax is applied to subject wages paid to an employee working for an employer located in the Eugene city limits.

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

Note – if you are self-employed, you may be subject to the self-employment tax. See the self-employment tax FAQ for more information.

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. Our business is an S corporation and our owners work as employees. Are those wages subject to both the employer and the employee payroll taxes?: No. Owners that work for an S corporation as employees and receive reasonable compensation are not subject to the employee payroll tax. The S corporation will be subject only to the employer payroll tax for the subject wages paid to the owners.

6. Am I required to register with the City for the payroll tax as an employer?: Yes. If you are an employer with a physical address in the Eugene city limits and have employees subject to the Community Safety Payroll Tax, 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.

7. 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.

8. What is a business location for the purposes of the payroll tax?

The employer payroll tax is applied to total subject wages paid to employees 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, client locations, temporary job sites, or where the employee lives.

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.

9. 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.

10. 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.

11. I have a business location in Eugene with employees that work from home outside the city limits. Are those wages subject to the 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.

12. My business is located outside of Eugene, but my employees travel to Eugene to meet with clients. Am I 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 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 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.

13. My company has project sites located in the City, but my business is located outside of the City. Am I subject to the tax for my time at those sites?

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.

14. I have multiple business locations both in and out of the City limits. Am I subject only for the Eugene locations?

Yes. 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.

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 in 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, Oregon. The company also has a supply yard in Halsey, Oregon and an 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.

15. 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.

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

The payroll tax is 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

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

17. What do I need to file for the employer payroll tax?

The employer payroll tax has one form that needs to be submitted quarterly:

Form EUG-PY-1, Employer Payroll Tax Quarterly Return

18. What wages are subject to the payroll tax?

The payroll tax is applied to the total subject wages paid by the employer all for services performed by an employee for an employer located in the Eugene city limits, 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.

“Subject wages” are those wages subject to Oregon Revised Statue (ORS) Chapter 316 withholding, or wages after pre-tax deductions.

19. Are there any exempt wages?

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

That is not subject to withholding under Oregon Revised Statute (ORS) Chapter 316.
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.

20. How do I calculate the employer payroll tax?

The employer payroll tax rate is .0021, unless the employer had two or less employees during the year, in which the tax rate is .0015 on total subject wages up to $100,000.

You will use the tax rate of .0021 on subject wages for the first three quarters and reconcile on the 4th quarter return (or final return) if you qualify for the reduced tax rate using the worksheet on page 3 of Form EUG-PY-1, Employer Payroll Tax Quarterly Return. The difference will be used to reduce the tax due for the 4th quarter; or if there is an overpayment, the overpayment will be applied as a credit (or prepayment) for the next quarter. You can also request a refund by checking a box on the form.

21. 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.

If filing a final return prior to the 4th quarter, you can apply the reduced tax rate if you qualify. You will count all the active employees subject to the tax each month, totaled for the year, and divide by the number of months in operation.

Example - Liam ceased his business in May. He will count the employees for each month from January through May, total the amount for those months, and divide by 5.

22. 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.

If you file your return more than 30 days after the due date, 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.

23. I’m already paying the Lane Transit District payroll 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.

24. Are estimated payments required?: No, you do not need to submit estimated payments for the payroll taxes.

25. Are extensions allowed to file a return?: 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.

26. 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).

27. Have questions or want to learn more?