Why the answer is different here than in New York
Several states apply a convenience of the employer rule: if you work remotely for your own convenience rather than because the employer requires it, the employer’s state taxes the wages anyway. New York is the notorious example, and it is why remote-work tax advice from the internet is so often wrong in this region.
Oregon does not have such a rule. Oregon sources wage income to where the services were physically performed. Work performed at a home in Vancouver, Camas or Battle Ground is not Oregon-source income, regardless of where the employer sits, where the paycheque originates, or why you are working from home.
Why the withholding happens anyway
- The employee was hired pre-2020 as an in-office Oregon worker and the payroll record was never updated
- The payroll system defaults to the employer’s registered state unless someone changes it
- HR is being cautious, because under-withholding creates an employer problem and over-withholding does not
- Nobody involved has been asked the question, because the employee assumed it was correct
How to fix it going forward
- 1Establish the facts. Are you fully remote, or hybrid? Fully remote is a clean position. Hybrid needs day allocation.
- 2Document your work location. A home office in Washington, a Washington address on file, and a calendar showing no Oregon workdays.
- 3Ask payroll to stop Oregon withholding for wages earned outside Oregon. Some employers will need this in writing.
- 4Watch for Washington-side obligations. Washington has no income tax, but Paid Family and Medical Leave and workers’ compensation may apply to your employment — those are the employer’s to handle.
- 5File the non-resident return for the year the withholding occurred, and check the prior open years.
The local taxes follow the same logic
If you never enter the Metro district or Multnomah County for work, income is not sourced there and the Metro SHS and Preschool for All taxes should not apply to your wages. Employers withhold these too, and they get it wrong for exactly the same reason.
How much can I get back?
Where no work at all was performed in Oregon, the answer is generally all of the Oregon tax withheld, for each open year. On a Portland-market salary that is frequently a five-figure number across three years.
Will this trigger an audit?
Filing a correct non-resident return claiming a refund of tax you did not owe is a routine filing, not an aggressive position. Keep documentation of your work location and the position is straightforward.
My employer refuses to change the withholding.
Frustrating, and survivable. You still file the non-resident return each year and recover it. It is a cash-flow problem rather than a tax problem — but it is worth escalating, because a payroll system that is wrong for you is usually wrong for colleagues too.
What if I move to Washington mid-year?
Then you are a part-year Oregon resident and the analysis splits at the move date. See moving between Oregon and Washington.
Does this apply to independent contractors too?
The same physical-performance principle applies to self-employment income, though the mechanics of sourcing business income differ. Bring the specifics.
Get the sourcing right before you file
Cross-border returns turn on facts nobody asks you about until it is too late. An appointment settles which state taxes what.
Written by
Enrolled Agent, Oregon Licensed Tax Consultant
License number: Enrolled Agent 00160070-EA · Oregon Licensed Tax Consultant 35746-C
Heather has spent more than a decade preparing individual and business returns across the Portland metro and the Columbia Gorge, and holds unlimited rights to represent taxpayers before the IRS.
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This page is general information about Oregon, Washington and federal tax rules, not advice about your own return. Thresholds and rates change every year. Figures were verified as of August 2026 — check the linked official sources, or talk to us about your situation.