Oregon payroll taxes come in two stacks. You withhold some from each employee’s paycheck (state income tax, the Statewide Transit Tax, and the employee share of Paid Leave Oregon), and you pay others out of the business (unemployment insurance, the employer share of Paid Leave, the Workers’ Benefit Fund assessment, and possibly a TriMet or Lane Transit district tax). All of them are reported together on one quarterly return filed through Frances Online.
What You Withhold From Employee Paychecks
State Income Tax
Oregon has four income tax brackets: 4.75%, 6.75%, 8.75%, and a top rate of 9.9%. You calculate the amount to withhold from each paycheck using the withholding tax tables or the percentage formula published by the Department of Revenue, both updated each year.1Oregon Department of Revenue. Withholding and Payroll Tax
Employees set their withholding on Form OR-W-4, which uses an allowance system rather than the federal credit-and-deduction approach.2Oregon Department of Revenue. Oregon Withholding Statement and Exemption Certificate If an employee never turns in an OR-W-4, withhold at the single rate with zero allowances. If the Department of Revenue tells you not to honor an employee’s claimed allowances, withhold at 8% of wages instead.3Oregon Department of Revenue. 2026 Oregon Combined Payroll Tax Report
Nonresidents owe Oregon tax on wages earned for work performed in the state, and you must withhold on those wages unless the employee’s total Oregon earnings for the year will fall below the standard deduction for their filing status.3Oregon Department of Revenue. 2026 Oregon Combined Payroll Tax Report
Statewide Transit Tax
Every employer withholds the Statewide Transit Tax at 0.1% of gross wages, or one dollar per $1,000 earned. It applies to Oregon residents no matter where they work and to nonresidents performing services in the state. There is no minimum employer size and no wage cap.4Oregon Department of Revenue. Statewide Transit Tax
The 2025 legislature passed a bill that would have doubled the rate to 0.2% on January 1, 2026, but a referendum petition put that increase on hold. Keep withholding at 0.1% until voters weigh in.4Oregon Department of Revenue. Statewide Transit Tax
Paid Leave Oregon — Employee Share
Paid Leave Oregon is funded by a total contribution of 1% of gross wages, up to the Social Security wage base ($184,500 in 2026). The employee share is 60% of that, or 0.6% of wages, and you withhold it from every employee regardless of your headcount.5Paid Leave Oregon. Contributions Calculator You can voluntarily cover part or all of the employee’s share, but you cannot legally charge an employee more than 0.6%.
What You Pay as the Employer
Unemployment Insurance
UI is funded entirely by employers and applies only to the first $56,700 of each employee’s wages in 2026. New employers with fewer than 12 months of reported payroll start at a base rate of 2.4%. Once you have enough payroll history, the Employment Department assigns an experience-based rate reflecting your claims history and the health of the state trust fund. Experienced-employer rates currently run from 0.9% to 5.4%.6State of Oregon. Current Tax and Contribution Rates
Rate notices go out each year, usually in late November, showing your assigned rate for the coming year.
Paid Leave Oregon — Employer Share
If you average 25 or more employees, you are a “large employer” and owe the remaining 40% of the Paid Leave contribution: 0.4% of each employee’s wages up to $184,500.7Paid Leave Oregon. Employers – Paid Leave Oregon Employers with fewer than 25 employees do not owe the employer portion but still must withhold and remit the employee’s 0.6%.
Workers’ Benefit Fund Assessment
This one is calculated per hour worked, not as a percentage of wages. For 2026, the combined rate is 1.8 cents for each hour or partial hour an employee works.8Oregon Secretary of State. Oregon Administrative Rules Chapter 436 – Division 70 Workers Benefit Fund Assessment You must pay at least 0.9 cents per hour yourself; the rest can be withheld from the employee’s wages.9Oregon Department of Consumer and Business Services. Workers Compensation and Workers Benefit Fund Rate Notice 2026
Local Transit District Taxes
Two regional districts levy their own employer payroll taxes on wages paid for work performed inside their boundaries. These are on the employer, not withheld from employees.
The Tri-County Metropolitan Transportation District (TriMet), covering most of the Portland metro area, taxes gross wages at 0.8237%. The tax follows the location of the work, not the location of the business, so an employer based outside the district still owes it on wages paid to workers performing services inside.10TriMet. Payroll and Self-Employment Tax Information11Oregon Department of Revenue. TriMet Transit Payroll Tax
The Lane Transit District (LTD), covering the Eugene-Springfield area, taxes wages at 0.80% for services performed inside the district.12Lane Transit District. Payroll and Self-Employment Tax Information Both rates are subject to periodic adjustment by their boards, so verify the current figure at the start of each year.13Oregon Department of Revenue. Lane County Transit District Payroll Tax
Registering Your Business
Before you can report anything, you need a Business Identification Number (BIN).1Oregon Department of Revenue. Withholding and Payroll Tax Get a federal EIN from the IRS first, then file the Combined Employer’s Registration (Form OR-CER, form number 150-211-055), which asks for the legal business name, the Oregon operations address, the date wages were first paid, and identifying details for owners, partners, or corporate officers.14Oregon Department of Revenue. Form OR-CER Oregon Combined Employers Registration Submit online or by mail.
Once processed, the state issues one BIN that serves as your account number across all three payroll tax agencies. Updates you submit to the Department of Revenue are shared automatically with the Employment Department and the Department of Consumer and Business Services.
Out-of-state employers are not exempt. If any employee works from Oregon, including a remote worker, you must register and withhold Oregon income tax on those wages. If you fail to withhold, the Department of Revenue can pursue the tax from you or from the employee. Having a worker in Oregon can also create nexus for corporate income tax.
Filing and Deposit Schedule
Oregon uses a combined reporting system. All payroll taxes are reported together on a single quarterly return, the Oregon Quarterly Combined Tax Report (Form OQ), filed through Frances Online.1Oregon Department of Revenue. Withholding and Payroll Tax Quarterly due dates:
- First quarter (January–March): April 30
- Second quarter (April–June): July 31
- Third quarter (July–September): October 31
- Fourth quarter (October–December): January 31
Reporting is quarterly, but income tax withholding deposits follow the same schedule as federal deposits, based on the size of your payroll:3Oregon Department of Revenue. 2026 Oregon Combined Payroll Tax Report
- Under $2,500 for the quarter: pay by the quarterly report due date.
- $50,000 or less in the lookback period: deposit by the 15th of the month following payroll.
- Over $50,000 in the lookback period: semi-weekly deposits.
- $100,000 or more in a single pay period: deposit within one banking day.
Payments go through Electronic Funds Transfer or the Frances Online payment portal. The system issues a confirmation receipt; save it.
Every employer also files an Annual Withholding Reconciliation Report (Form WR) by January 31 of the following year, even if W-2 information is submitted electronically. If you close the business mid-year, Form WR is due within 30 days of your final payroll.1Oregon Department of Revenue. Withholding and Payroll Tax
Penalties and Personal Liability
A missed payment triggers a 5% late-payment penalty on the unpaid tax. If the quarterly return is still unfiled more than one month past the due date, a 20% failure-to-file penalty is added. Ignore a notice and demand for 30 days and the penalty jumps another 25% of the assessed deficiency.15Oregon State Legislature. Oregon Code 314.400 – Penalty for Failure to File Report or Return or to Pay Tax When Due Intentional evasion can carry a penalty equal to 100% of the deficiency.
The bigger risk for owners is personal exposure. Withheld income tax and the Statewide Transit Tax are trust funds belonging to the state the moment they come out of an employee’s paycheck. If the business fails to remit them, the Department of Revenue can go after the individuals with financial authority, not just the entity. You can be held personally liable if you had the authority to sign checks, make fiscal decisions, direct tax payments, or hire and fire, and you knew or should have known the taxes were not being paid.16Legal Information Institute. Oregon Admin Code 150-316-0243 – Personal Liability of Responsible Officers, Members, or Employees for Taxes Withheld Handing payroll to a bookkeeper or outside accountant does not shift that liability.
Records You Have to Keep
Oregon law requires payroll records to be kept at least three years. Time records must be kept two years. Because wage claims have a six-year statute of limitations, the state recommends retaining records for at least seven years.17State of Oregon. Access to Employee Records