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APA Requests Further Guidance on City of Eugene Payroll Tax

BY: Alice P. Jacobsohn, Esq. | 07/14/20

In June, APA offered two recommendations to improve the administrative feasibility of the payroll tax and withholding requirements in Eugene, Oregon, calling for the city to:

  1. Adopt a withholding calculation that mirrors the calculation required by the IRS
  2. Base the employer tax rate on known facts rather than results that can change throughout a tax period

Following APA’s comments, Eugene reissued its implementation plan for comment by July 27. APA previously asked Eugene for a delay in implementation of the tax. The city agreed, pushing the effective date from July 1, 2020, to January 1, 2021.

Employers with a physical address in Eugene will pay 0.0021 times gross payroll earned within the city. Employers with two or fewer employees will pay 0.0015 on the first $100,000 in wages. Based on a biweekly pay period, employees will pay 0.0030 times wages between $961 and $1,201, and 0.0044 times wages of more than $1,201. Employees with wages below $960 are exempt (Ord. 20616, L. 2019). The way the Eugene tax tables are written using the employee’s hourly rate of pay requires further clarification. Employers are more familiar with the tax tables designed by the IRS.

Optimally, the city of Eugene should base the employer tax rate on known facts rather than results that can change throughout a tax period. The city ordinance provides for a reduced payroll tax rate on the first $100,000 in wages paid by employers with no more than two employees. Because employers hire or terminate employees during the year, they may apply a particular rate for most of a year only to discover later in the year that they are subject to a different rate.

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Alice P. Jacobsohn, Esq., is Senior Manager of Government Relations for the APA.