| Withholding/Transit Tax Information: Out-of-state/Nonresident Employers |
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Out-of-state employers working in Oregon
Oregon law requires that every employer withhold income tax from both resident and nonresident employees working in Oregon. The following information explains your responsibilities.
Withholding requirements for out-of-state employers Nonresident employers of Oregon resident employees
You must withhold tax from all wages paid to Oregon resident employees working in Oregon, regardless of whether they work out of your physical location in Oregon or work/telecommute from their residence.
If you pay wages to Oregon residents, out-of-state employers may be relieved of the duty to withhold where it can be shown to the satisfaction of the department that each individual employee working in Oregon will receive $300 or less in wages from that employer within a calendar year.
The Oregon Department of Revenue cannot require withholding for Oregon resident employees when the services are performed for an employer who does not have employees working in Oregon. However, we ask employers to register and withhold tax on wages paid to Oregon residents as a convenience to the employee.
Nonresident employers of Oregon nonresident employees
You must withhold Oregon income tax from all wages earned by nonresident employees for services performed in Oregon, unless their Oregon earning for the year will be less than their standard deduction amount for their filing status. However, wages are still reported as Oregon-source income on the form W-2. Nonresident employees with wages greater than their standard deduction amount are required to file an Oregon nonresident return.
Note: These figures change each year. Contact the department to obtain the latest figures.
Nonresident employees with Oregon wages less than their standard deduction may still request that you withhold tax; usually they have additional Oregon income from other sources.
Transit district excise taxes
These tax programs are administered by the Oregon Department of Revenue for the TriCounty Metropolitan Transit District (TriMet) and the Lane County Mass Transit District (LTD). They provide revenue for the two major mass transit districts, (ORS 267). Transit payroll tax is imposed on nearly every employer who pays wages for services performed in the TriMet or LTD districts regardless of whether those services are performed by resident or nonresident employees. Also included is work performed in areas where salespeople conduct business or the homes of Oregon resident employees who telecommute.
The TriMet district includes parts of three counties in the Portland metropolitan area: Multnomah, Washington, and Clackamas counties. LTD serves the Eugene-Springfield metropolitan area as well as several rural cities.
For additional information on transit taxes, see Mass Transit District Payroll/Excise Tax.
Reporting requirements
All employers with resident or nonresident employees working in Oregon must register with the Oregon Department of Revenue before issuing their first paychecks. Use the Combined Employer’s Registration. Mail completed form to the address at the bottom of the form. Within three weeks the department will assign an Oregon business identification number (BIN) and will send the forms needed to pay and report payroll taxes.
Oregon income tax on nonresident employees
The income earned from services performed in Oregon by a nonresident is subject to Oregon income tax. A nonresident with Oregon income is required to file a nonresident tax return (Form 40N) before April 15 following the year they earned income in Oregon.
A credit is allowed for employees who are taxed on the same income by more than one state. Depending on the employees home state, the credit may reduce the tax paid to Oregon or may reduce tax paid to the employee’s home state.
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