Are the services of procuring temporary workers and management services over the internet subject to Kansas sales tax?

Plain-English summary

A company (called Temp-X in the ruling) that provides a "broad range of services for procuring temporary workers and management services by means of the internet" asked about the Kansas sales-tax implications of its services. It tracks worker hours and expenses that are billed to clients, supplies no equipment or other tangible personal property with the temporary workers, acts as an intermediary (the client pays Temp-X, and Temp-X pays the temporary-service provider or worker), and has no offices in Kansas. The Department ruled the services are not taxable.

Kansas does not tax temporary-staffing services. The Department stated: "The State of Kansas, unlike a number of other States, does not impose sales tax on services provided by temporary service providers." As a result, "for the Temp-X services that you describe, the billings to clients should not have sales tax added."

That is true up and down the chain. The Department added that "the billing to Temp-X from any temporary service provider for services provided within the Kansas should not have sales tax added to it." So neither the intermediary's client billing nor the underlying provider's billing to the intermediary carries Kansas sales tax.

The provider still pays tax on its own purchases. As with any nontaxable service, "Temp-X, like all other non-taxable service providers, must pay sales tax on any property or taxable services purchased in Kansas."

Bottom line: procuring temporary workers and management services - including over the internet - is not a taxable service in Kansas, but the provider owes sales or use tax on the taxable goods and services it buys.

What this means for you

Staffing agencies and temp-service intermediaries

Kansas does not tax the service of providing temporary workers. If you bill clients for temporary staffing (and do not sell tangible personal property along with it), you generally do not add Kansas sales tax to those billings.

The exemption runs through the whole chain

A temporary-service provider billing an intermediary for Kansas services also should not add sales tax. The nontaxable character of the service does not change because there is a middleman.

You still owe tax on what you buy

Being a nontaxable service provider does not exempt your own purchases. You must pay Kansas sales or use tax on any tangible personal property or taxable services you buy in Kansas to run the business.

Common questions

Q: Does Kansas tax temporary-staffing services?
A: No. The Department stated that Kansas, unlike some other states, does not impose sales tax on services provided by temporary-service providers.

Q: Should an online staffing intermediary add sales tax to client billings?
A: No. The billings to clients should not have Kansas sales tax added, and neither should the provider's billings to the intermediary for Kansas services.

Q: Does the staffing company owe any Kansas tax?
A: Yes - it must pay Kansas sales tax on any property or taxable services it purchases in Kansas.

Citations and references

• The Department cited no specific statutory section. Its conclusion is that Kansas does not impose sales tax on the services of temporary-service providers, so neither the intermediary's client billings nor the underlying provider's billings for Kansas services carry sales tax - while the provider must still pay Kansas sales tax on the property and taxable services it purchases in Kansas.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-050

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

May 31, 2001

XXXX
XXXX
XXXX

RE: Your fax inquiry

Dear XXXX:

I have been asked to answer your e-mail. Your company, Temp-X, provides broad range of services for procuring temporary workers and management services by means of the internet.

You ask what the sales tax implications are for services that involve tracking worker hours and expenses that are billed to clients. No equipment or other tangible personal property is supplied with the temporary workers. Temp-X acts as an intermediary, with the client paying Temp-X and Temp-X paying the temporary service provider or the individual worker. Temp-X has no offices in Kansas.

The State of Kansas, unlike a number of other States, does not impose sales tax on services provided by temporary service providers. This means that for the Temp-X services that you describe, the billings to clients should not have sales tax added. Similarly, the billing to Temp-X from any temporary service provider for services provided within the Kansas should not have sales tax added to it. Please note that Temp-X, like all other non-taxable service providers, must pay sales tax on any property or taxable services purchased in Kansas.

This is a private letter ruling and is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 06/25/2001 Date Modified: 10/11/2001

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