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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.

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. When and how can employers expect to hear from the City about how it will work?

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. 

Learn More

• Join the Payroll Tax Interested Parties email list to get updates on the administrative rules.
• Visit the Community Safety Payroll Tax web page to see the administrative rules once they are published. 
• Watch your mailbox – information will be sent to local employers. 
• Email us with any questions or call 541-682-5053.

4. 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 gross wages paid by an employer with a physical address in the Eugene city limits. 
• The employee payroll tax is applied to total taxable 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.  

5. 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 for the employee payroll tax is based on the hourly rate of the employee:

• An employee that makes more than $15 per hour, the tax is calculated at a rate of 0.0044 (or .44 percent) of total taxable wages.
• An employee that makes between $12.01 and $15.00 per hour, the tax is calculated at a rate of 0.0030 (or .30 percent) of total taxable wages.
• An employee that 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.

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

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.

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. Is overtime pay considered in the calculation of the hourly rate?

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.

9. How is the hourly rate calculated for an employee that is paid by a means other than hourly, such as an annual salary, commissions, or tips?

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. 

• Example: Alicia works full-time, makes an annual salary of $52,000, and is paid bi-weekly. During the pay period she was paid $2,000 in salary and worked 80 hours in earning those wages, which included six hours of paid sick leave and eight hours of paid vacation. Alicia’s employer will divide her wages paid during the pay period by the hours she worked in earning those wages: $2,000 divided by 80 hours equals an hourly rate of $25. The applicable tax rate in this example is 0.0044 and will be applied to Alicia’s taxable wages for this pay period
  
  
• Example: Sam works part-time and is paid a monthly salary of $1,200. During the pay period, Sam worked a total of 86 hours. Sam’s employer will divide his wages paid during the pay period by the total number of hours he worked in earning those wages: $1,200 divided by 86 hours equals an hourly rate of $13.95. The applicable tax rate in this example is 0.0030 and applied to Sam’s taxable wages.
  
  
• Example: Liam receives $12.00 per hour (or the minimum wage rate as of July 1, 2020) as a server in a restaurant and is paid weekly. He also receives tips in addition to his hourly wages. Liam’s employer will include the tips in determining his hourly rate for the pay period. Liam’s employer will divide his wages, including tips, paid during the pay period by the total number of hours he worked in earning those wages: $480 in wages plus $120 in tips divided by 40 hours equals an hourly rate of $15. The applicable tax rate in this example is 0.0030 and applied to Liam’s taxable wages.

10. What if an employee receives multiple hourly rates during a pay period due to a pay increase or shift differential pay? Do I need to apply multiple tax rates?

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.

11. 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 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. 

• 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 employee payroll tax applies to all of Alicia’s wages including her wages earned while working from home.
  
  
• Example: Terrance works for a landscaping business located in the Eugene city limits. He occasionally works at job sites located outside the City limits providing landscaping services for clients. The employee payroll tax applies to all of Terrance’s wages, even though he performs some of his work is outside the City limits.

12. 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: 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. 

13. 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. 

14. What wages are subject to the payroll tax?

Employer Payroll Tax

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.

Employee Payroll Tax

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

15. 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. 

16. 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. 

17. 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 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.

18. 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.

19. Are estimated payments required?

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

20. 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.

21. 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).

22. 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 and should be ready to start accepting registrations around July 2020.