The Oregon statewide transit tax is a payroll tax of 0.1% (0.001) withheld from the wages of nearly every worker earning money in Oregon, used to fund public transportation across the state. It has been in place since July 1, 2018, and applies with no wage cap. The Legislature voted in 2025 to double the rate to 0.2% starting January 1, 2026, but a voter-referral petition has frozen that increase, so employers should keep withholding at 0.1% until voters decide.
The Current Rate and the Paused Increase
The rate is 0.001 of taxable wages. In a 2025 special session, the Legislature passed HB 3991 to amend ORS 320.550 and raise the rate to 0.002 starting January 1, 2026. Petitioners then submitted signatures to the Oregon Secretary of State to refer the bill to voters. While those signatures are being validated, the Oregon Department of Revenue paused implementation and directed employers to continue withholding at 0.001.1Oregon Department of Revenue. Department of Revenue Provides Update on Statewide Transit Tax The rate stays at 0.1% until voters weigh in. Watch for updates from the Department of Revenue before changing any payroll settings.2Oregon Department of Revenue. Statewide Transit Tax – Businesses
Who Pays
This is an employee-paid tax. Employers do not owe it out of their own funds; they withhold it from each paycheck and send it to the state. Two groups of workers are covered:
- Oregon residents, on wages regardless of where the work is performed, including remote work done from another state.
- Nonresidents, on wages earned while performing services inside Oregon.
A common surprise: employees who are exempt from regular Oregon income tax withholding, whether because of high exemptions or low wages, are still subject to the statewide transit tax. Federal withholding exemption does not get you out of it either.2Oregon Department of Revenue. Statewide Transit Tax – Businesses
Self-employment income is not subject to the tax. Sole proprietors, partners, and members of LLCs taxed as partnerships or sole proprietorships owe nothing on their business earnings.2Oregon Department of Revenue. Statewide Transit Tax – Businesses The wage definition under ORS 316.162 also excludes certain categories of workers, including domestic workers in private homes and clergy performing religious duties.3Cornell Law Institute. Oregon Administrative Code 150-320-0520
Oregon takes an aggressive posture toward nonresident withholding. The state effectively has a one-day threshold, so a single day of work inside Oregon can trigger withholding obligations for a nonresident’s employer. A convenience-of-the-employer rule can also apply to nonresidents in managerial roles for Oregon-based employers, requiring withholding even when the employee works remotely from outside the state.
How Much It Costs You
Multiply taxable wages by 0.001. That is the whole calculation. An employee earning $50,000 in a quarter owes $50. An employee earning $150,000 in a year owes $150. There is no cap, so the tax applies to every dollar of taxable wages no matter how high the total.2Oregon Department of Revenue. Statewide Transit Tax – Businesses
Taxable wages include hourly pay, salary, bonuses, tips, and commissions. Certain pre-tax deductions, such as contributions to qualified retirement plans and cafeteria plan benefits, reduce the wage base before the tax is calculated.
Not the Same as TriMet or Lane Transit
If you work in the Portland metro area or the Eugene-Springfield area, you may see additional transit-related items on your pay stub. Those are separate taxes. The TriMet payroll tax is an employer-paid tax of 0.8237% on wages for services performed within the TriMet district, paid out of the employer’s own funds rather than withheld from the employee.4TriMet. Payroll and Self-Employment Tax Information The Lane Transit District imposes a similar employer-paid payroll tax in the Eugene-Springfield area. Workers inside those districts still pay the 0.1% statewide transit tax on top.
Where the Money Goes
Revenue flows into the Statewide Transportation Improvement Fund, which finances bus services, operational costs, and infrastructure improvements. The fund does not finance light rail projects.2Oregon Department of Revenue. Statewide Transit Tax – Businesses
W-2 Reporting and Federal Deductibility
Employers report the amount withheld in Box 14 of the W-2 using the designation “ORSTT W/H.” That label lets employees and tax preparers identify it at filing time.
For federal purposes, the tax counts as a state tax withheld from wages. If you itemize on Schedule A, you can include it in your state and local tax deduction. For 2026, the SALT cap is $40,000 for most filers ($20,000 if married filing separately), with a phase-down beginning at $500,000 in modified adjusted gross income. For most Oregon workers, the transit tax amount is small enough that the more consequential question is whether your other state income and property taxes already push you past the cap.
Employer Filing Deadlines
Most employers file quarterly using Form OQ and Form 132. The statewide transit tax is included on the combined Form OQ rather than filed separately. Returns and payments are due by the last day of the month following each quarter:2Oregon Department of Revenue. Statewide Transit Tax – Businesses
- Q1 (January–March): due April 30
- Q2 (April–June): due July 31
- Q3 (July–September): due October 31
- Q4 (October–December): due January 31 of the following year
Employers must file a return even if no payroll was processed during the quarter. Agricultural employers may report annually instead, using Form STT-A and Form STT-2, with a January 31 deadline for both the return and the annual reconciliation.2Oregon Department of Revenue. Statewide Transit Tax – Businesses A small number of individuals must pay the tax directly using Form OR-STI, but the Department of Revenue notes this applies to a limited group.
Penalties Employers Should Know About
Enforcement is harsh relative to the size of the tax. If an employer fails to file a delinquent report and pay within 30 days of a written request from the Department of Revenue, the state can assess a penalty of $250 per employee, up to $25,000 per tax period. Those penalties stack on top of standard late-filing penalties and interest.2Oregon Department of Revenue. Statewide Transit Tax – Businesses
The $250-per-employee penalty is triggered when the Department determines that an employer “knowingly” failed to withhold. Under the administrative rules, that standard is met when an employer misses filings for two or more consecutive tax periods, or has a pattern of repeatedly filing or paying late. These penalties cannot be waived at the Department’s discretion, so the Department cannot reduce or forgive them even if the employer later comes into compliance.5Cornell Law Institute. Oregon Administrative Code 150-320-0510 – Statewide Transit Tax Employer Penalty
An employer with 100 employees who misses two quarters could face $50,000 in penalties on what might have been a few thousand dollars of actual tax. For employers, the compliance case is about the penalties, not the tax.