Did a staffing company provide taxable nonresidential cleaning services when temporary employees performed cleaning under the customer's direction?

Plain-English summary

Cleaning performed by genuine temporary employees under the customer's discretion and direction was not a taxable nonresidential cleaning service sold by the staffing company. The staffing company supplied personnel, while the customer controlled how they performed their duties.

Employee treatment had to be supported by the usual payroll indicators: wage or salary payment, income-tax withholding, FICA and Medicare withholding, and unemployment-insurance contributions when required. The ruling recognized that the staffing company could handle those responsibilities directly or indirectly while the customer functioned as the temporary employer.

The result changed if the staffing company provided more than labor. Supplying on-site supervision, cleaning process know-how, or cleaning implements such as vacuums, mops, brooms, pails, sponges, or soaps made the company a taxable cleaning-service provider.

What this means for you

Florida looked at operational control and the substance of the service, not the staffing company's industry label. A personnel supplier can remain outside cleaning-service tax when the customer directs employees, but a managed cleaning operation is taxable.

Independent-contractor facts also matter. A person paid on a fee basis without employer control, withholding, or unemployment contributions may be treated as an independent contractor whose cleaning services are taxable.

Common questions

Q: Can a temporary employee perform cleaning without making the staffing fee taxable? Yes, when the worker is an employee acting under the customer's direction.

Q: What facts supported employee status? Wage or salary payment, required withholding, FICA and Medicare treatment, and unemployment-insurance contributions where required.

Q: When did the staffing company become a cleaning contractor? When it furnished labor together with on-site supervision, cleaning know-how, or cleaning tools and supplies.

Q: Could a taxable cleaning service be purchased for resale? The ruling allowed that possibility with a proper resale certificate and the specified cleaning-service dealer registration indicated in the source.

Citations and references

• Fla. Stat. § 212.05(1)(k) — tax on nonresidential cleaning services
• Fla. Admin. Code r. 12A-1.0091 — taxable cleaning services and employee exclusion
• Fla. Admin. Code r. 12A-1.0161(3) — employee and independent-contractor indicators
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-048

Original ruling text

SUMMARY

The taxpayer is seeking advice on whether "staffing
services" that include cleaning services can be construed

as taxable nonresidential cleaning services.

The taxpayer is in the business of offering staffing
services to its customers. Based on the facts presented,
companies in this industry offer temporary staffing or
personnel services to a variety of businesses in numerous
SIC classifications. These business most often use staffing
services to efficiently expand and contract their labor
supply to staff their operations. Depending upon the
customer's nature of business, persons supplied as
temporary employees may perform any number of duties,
including cleaning duties. Staffing services, or temporary
help services as they are more commonly known, service a

vital part of today's competitive corporate climate.

The taxpayer receives a fee for supplying its customer with
qualified persons who are hired as temporary employees.
The taxpayer advertises and interviews perspective
temporaries, as well as handle the customer's payroll and
related responsibilities. The industry's fees are based on
costs related to the specific types of services. The wages
paid to the temporary employees are competitive, and may be

higher than the average wage paid to permanent employees.

We concluded that any cleaning services performed by a
person hired as a temporary employee, when performed at the
discretion and under the direction of the customer (i.e.,
temporary employer), would not be construed as taxable
nonresidential cleaning services. To evidence that the
person is an employee, the employer must, directly or
indirectly, pay a wage or salary, withhold income tax,
F.I.C.A., and Medicare tax from the person's wage or
salary, and make unemployment insurance contributions on
behalf of the person (if required). [see Paragraph (1)(c)

of Rule 12A-1.0091, F.A.C., and Rule 12A-1.0161, F.A.C.]

Jul 11, 1997

Re: Technical Assistance Advisement 97(A)-048
Nonresidential Cleaning Services
Section 212.05(1)(k), F.S., and
Rule 12A-1.0091, and
Rule 12A-1.0161(3), F.A.C.

Dear:

This is our response to your letter of January 9, 1997,

requesting a Technical Assistance Advisement on the application
of the Sales and Use Tax to the above referenced matter. This
response to your request constitutes a Technical Assistance
Advisement under Chapter 12-11, Florida Administrative Code, and
is issued to you under the authority of s. 213.22, Florida

Statutes.

STATED FACTS

In your letter you state that you are requesting advice on the
taxability of staffing services involving nonresidential

cleaning services. More specifically, you seek advice on

whether staffing services can be construed as nonresidential
cleaning services when temporary personnel/employees are used to
render this service for clients. The facts are presented in

your letter as follows:

The staffing services industry was recently made aware of
Rule 12A-1.0091, promulgated by your department to
implement the expansion of the state sales tax to
nonresidential cleaning services as approved by the
Legislature in 1992. This rule, we believe, was
inadvertently written in a way that impacts the staffing
services industry to a degree greater than intended by the
Florida Legislature. Pursuant to Chapter 12-11, we request

a technical assistance advisement.

Staffing services or temporary help services as they are

more commonly known, service a vital part of today's
competitive corporate climate. Staffing services provide
temporary employees to a wide variety of businesses in
numerous SIC classifications. Our clients most often use
our services to efficiently expand and contract their labor
supply to staff their operations. We advertise for and
interview perspective temporaries, as well as handle their
payroll and related responsibilities. Our industry's fees
are based on costs related to these types of services. The
wages to the temporary employees are competitive, if not
higher than the average wage paid by employers to permanent

employees.

... Our industry's SIC classification is 7363, Help Supply
Services. Staffing services do not provide nonresidential
cleaning services; they provide personnel. They do not

have the supplies or equipment, supervisory personnel or
process "know-how" necessary to operate as a nonresidential
cleaning service and do not compete with non-residential
cleaning services for contracts. We do not believe the
Legislature intended staffing services in SIC 7363 to be

included in the rule.

Where a staffing service actually provides nonresidential
cleaning services, i.e., personnel, cleaning supplies and
equipment, as well as on-site supervision and process
"know-how," we believe that your department could make a
strong argument that the staffing service is a cleaning
service provider despite under which name they operate.

Our industry would not contest such classification.

STATUTORY AUTHORITY

Section 212.05(1)(k), F.S., and Rule 12A-1.0091(1)(a), F.A.C.,

provide that nonresidential cleaning services are subject to

sales tax. This provision in the Florida Statutes became

effective on September 1, 1992.

Paragraph (1)(c) of this Rule provides that the services are not

taxable when provided by employees to their employers. Rule

12A-1.0161, F.A.C., provides in part:

(3) Services by employees to their employers are exempt.
(a) In determining whether a person is an employee, the

Department will consider the following indicia:

1. Whether the person is paid a wage or salary;

2. Whether the "employer" is required to withhold income

tax from the person's wage or salary;

3. Whether F.1.C.A. is required to be paid by the

"employer"; or

4. Whether the "employer" is required to make unemployment

insurance contributions on behalf of the person.

(b)1. However, if all of the indicia mentioned above are
present, the person is nevertheless not an employee if he
is acting in the capacity of an independent contractor. A
person may be an employee even if one or more of the
indicia are not present and he is not acting as an

independent contractor.

2. Example: D is a detective who works for Agency A. Agency
   A pays him $30.00 per hour. Agency A withholds income tax
   from the money paid to D. Agency A treats D as an employee
   and controls the details of his work. D is covered by

Agency A's workers' compensation insurance. D is an
employee working for wage or salary. His services rendered

to Agency A are not subject to sales tax.

(c)1. A person who provides services for a company on a fee
basis is not an employee of the company where the company
exercises no direct control over the details of performance

of that person's duties beyond general statements about the
scope and nature of that person's obligations under the
contract between that person and the company. In addition,
where fees paid to that person are not subject to

withholding taxes or social security taxes, that person is

not considered an employee of the company. Therefore, that

person's taxable services are subject to sales tax.

2. Example: B and Company X are cleaning service
   contractors. B provides cleaning services for Company X's
   customers, all of which are located in Florida. Company X
   does not control the details of B's work, pays B a fee, and
   is not required by applicable law to make unemployment
   insurance contributions on behalf of B. B is not an
   employee. B is an independent contractor in business for
   himself. B's cleaning services are subject to tax. B would
   be required to register as a dealer, to collect the tax

from Company X, and to remit the same to the state, unless
Company X is purchasing B's services for resale. See

subsection (5) below.

DETERMINATION

Based on the facts presented, companies in your industry offer
staffing or personnel services to a variety of customers. These
companies receive a fee for supplying their customer with
qualified persons for temporary employment. Depending upon the
customer's nature of business, persons supplied as temporary
employees may perform any number of duties, including cleaning

duties.

Cleaning services performed by a person hired as a temporary
employee, which are performed at the discretion and under the
direction of the customer (i.e., temporary employer), would not
be construed as taxable nonresidential cleaning services. To
evidence that the person is an employee, paragraph (1)(c) of
Rule 12A-1.0091, F.A.C., and Rule 12A-1.0161, F.A.C., provide
that the employer must, directly or indirectly, pay a wage or
salary, withhold income tax, F.I.C.A., and Medicare tax from the
person's wage or salary, and make unemployment insurance

contributions on behalf of the person (if required).

Conversely, if a temporary staffing company provides the labor,
on-site supervision and process "know-how", and/or the
implements (vacuums, mops, brooms, pails, sponges, soaps, etc.)
necessary to accomplish the cleaning activities, the company is
engaged in the business of providing a cleaning service. The

company would be performing a taxable cleaning service and must

charge tax to the purchaser, unless the purchaser provides a
resale certificate and the purchaser's sales tax number ends in
digits 92 and 93, indicating that they are in the business of

providing the taxable cleaning services.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than

expressed in this response.

You are further advised that this response and your request are
public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or

this response.

If you have further questions with regard to this matter and
wish to discuss them, you may contact Technical Assistance and
Dispute Resolution, Department of Revenue, P.O. Box 7443,

Tallahassee, Florida 32314-7443.

Sincerely,

Joseph D. Franklin III

Tax Conferee

Technical Assistance and Dispute Resolution
Ph. (904)922-4833

JDF3\
Control No. 27573

Enclosures