What is the law?
The Community Safety Payroll Tax Ordinance (No. 20616) enacts a new payroll tax for the city of Eugene, Oregon in order to provide faster, more efficient safety responses, deter crime, connect people to services, engage and help at-risk youth, support more investigations and court services, and add jail beds to reduce capacity-based releases and hold those who commit crimes accountable. The payroll tax is paid by both employees and employers.
The Community Safety Payroll tax rate for employers located within the city limits of Eugene is 0.21% on total wages paid including tips, service charges, commissions, and bonuses paid to employees. A small business rate exists for employers with two or fewer employees, these employers will pay a tax rate of 0.15% on the first $100,000 of total wages paid and then 0.21% on wages above $100,000.
The tax rate for an employee working within the city limits of Eugene is determined by their wages earned each week including tips, service charges, and commissions but not overtime wages. An hourly employee that makes more than $601 a week, not including overtime, pays the Community Safety Payroll Tax at a rate of 0.44% of total wages. An employee who makes at least $481 per week but less than $601, pays the Community Safety Payroll Tax at a rate of 0.30% of total wages. An employee who makes $480 or less per week is exempt from the employee payroll tax. These amounts will be applied proportionately for payroll cycles longer than a week.
Employers must report wages subject to the payroll tax with regard to employees’ Form W-2, Wage and Tax Statement, Box 18, Local wages, tips, etc.; and Box 19, Local income tax, with EUG as the locality listed in Box 20,
What is the rollout timing?
Payroll tax deductions will begin for all checks dated after January 1, 2021. The first quarterly tax return and payment for the employer portion of the payroll tax and the employee withholding portion of the payroll tax are due on April 30, 2021.
What are the penalties if not followed?
If the tax due is paid or remitted after the due date, a penalty of 5% of the tax due would be applied. If a return is filed more than 30 days after the due date, an additional penalty of 20% of the tax due will be applied. If the required tax returns are not filed for three consecutive years, the tax administrator may impose a penalty equal to 100% of the tax due.
If an employer fails to withhold the payroll tax from employees, the business would be deemed responsible for the payment of the tax obligation in an amount equal to the amount that should have been withheld. In addition to paying the full amount of tax that should have been withheld a business would also be subject to a fine of $250 per employee, up to a maximum penalty of $25,000, if the employer knowingly fails to withhold the payroll tax from employees’ wages.
How can RSI assist?
For business located in the city of Eugene, OR RSI’s payroll service will begin deducting the Community Safety Payroll Tax from employees’ checks beginning in January of 2021. Filing the quarterly returns and remitting the tax due is provided in RSI’s service and will begin in April of 2021 so that the task of running your restaurant is still at the top of your to-do list.
The city of Eugene has provided a great resource that can be found at https://www.eugene-or.gov/4281/Community-Safety-Payroll-Tax
If you have any questions, please send a support request to Compliance or an email to Compliance@rsiaccounting.com