Were long-term employee-leasing charges taxable personnel services, and how were truck-driver services performed outside Connecticut allocated?

Note -- partially obsolete historical guidance. DRS marks this ruling "not current" and says it was obsoleted in part by Policy Statement (PS) 93(3).

Plain-English summary

An employee-leasing company supplied truck drivers on open-ended assignments, paid wages and required payroll-related taxes and assessments, and considered expanding to lease customers' entire employee groups.

DRS treated the arrangement as a taxable personnel service. Total gross receipts were taxable, including reimbursements for employee expenses.

For truck-driver services, the ruling allowed an out-of-state allocation under Conn. Gen. Stat. § 12-412(36). The exempt percentage equaled miles driven outside Connecticut divided by total miles driven.

What this means for you

The historical tax base included pass-through employment costs, not merely the leasing company's markup. Multistate driving required mileage records to support the exempt share. PS 93(3) later obsoleted part of the ruling.

Common questions

Were reimbursed wages and payroll costs taxable? Yes, as part of total gross receipts under the ruling.

How was out-of-state driving excluded? By the ratio of out-of-state miles to total miles.

Citations and references

• Conn. Gen. Stat. § 12-407(2)(i)(C).
• Conn. Agencies Regs. § 12-426-27(b)(3).
• Conn. Gen. Stat. § 12-412(36).
• PS 93(3) -- identified by DRS as obsoleting the ruling in part.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 90-58

Original ruling text

Ruling 90-58, Employee Leasing

This information is not current and is being provided for reference purposes only

Ruling 90-58

Employee Leasing

This Ruling has been obsoleted in part by   PS 93(3)

ISSUE:

Whether employee leasing services are subject to sales and use tax and, if so, what portion of the bill to the customer is taxable?

FACTS:

Taxpayer's business is not the traditional employment agency or other agency providing personnel services. Rather, it is part of the employee staff leasing industry and is engaged in the business of long-term leasing of truck drivers on open-end assignment to its customers. These individuals operate motor vehicles (tractor-trailer) owned or leased by the customers. Taxpayer anticipates expanding its business to include staff leasing programs covering a customer's total employee group.

Under its agreement with the customer, the Taxpayer is responsible for the payment of all wages to the drivers, some of whom are provided by the customer and other are furnished by Taxpayer, along with any taxes and assessments required under unemployment compensation, disability, old age pension, social security or any similar laws.

RULING:

Taxpayer is performing employee leasing services which are subject to sales and use tax as a personnel service pursuant to Section 12-407(2)(i)(C) of the General Statutes and Section 12-426-27(b)(3) of the Regulations of Connecticut State Agencies. Therefore, the total gross receipts, including all reimbursable employee expenses, received by taxpayer in the performance of its employee leasing services are subject to sales and use tax.

Section 12-412(36) provides for an exemption for motor vehicle driving services performed out of state so that the proportionate percentage of gross receipts based on the miles driven outside of Connecticut to the total miles driven are not subject to tax.

LEGAL DIVISION

August 7, 1990