Are charges for temporary engineering-design and technical staff subject to New York sales tax?

Plain-English summary

A firm asked, on behalf of "XYZ Company," whether the receipts from XYZ's temporary engineering-design and technical services are exempt as services of a temporary service contractor. XYZ supplies its own personnel — engineers, technicians, and other professionals — to customers who pick from a list of available staff; the personnel then help design new products and manufacturing processes in electronics, aerospace, computer hardware and software, and other fields.

The Department explained the temporary-service-contractor rule (TSB-M-87(13)S) but declined to give a final answer on these facts. Under that rule, when a temporary service contractor supplies personnel to perform a taxable service (one of those enumerated in Tax Law § 1105(c)), the fee is a taxable receipt, and the contractor must collect tax regardless of how the charge is computed or what it pays its workers. But if the personnel perform a service that is not taxable under § 1105(c), no tax is collected. The memo's own examples illustrate both sides — a temporary commercial painter's work is taxable, while a temporary secretary's typing and phone work is not.

The Department held that the petition was not detailed enough to classify each temporary service XYZ provides, so the determination must be made by administrative procedure rather than in the advisory opinion (citing Northeastern Computer Services). Its bottom line was the general rule: if XYZ furnishes personnel to perform services enumerated as taxable under § 1105(c), the charge is taxable — unless the customer buys the service for resale or the work results in a capital improvement to real property. And when a bill mixes taxable and nontaxable services, tax applies to the whole amount unless the taxable and nontaxable charges are separately stated.

What this means for you

Temporary-staffing and professional-services firms

Your staffing charge is taxable only if your people perform a service New York actually taxes. Many professional and design services are not enumerated in § 1105(c), but some (like servicing or repairing real property or tangible property) are. When your workers do a mix, separately state taxable and nontaxable charges — otherwise the entire bill is taxable. Where the service is taxable, a customer buying for resale or a capital improvement can still make it exempt with the right certificate.

Businesses hiring temporary technical staff

Whether you are charged sales tax depends on what the temporary workers actually do, not on the "temporary staffing" label. Ask how the vendor is treating the specific services, and keep documentation if you are buying for resale or a capital improvement so the charge can be handled as exempt.

Accountants and tax professionals

This is a general-guidance, non-classifying opinion: the Department set out the TSB-M-87(13)S framework against § 1105(c) but expressly left the taxability of each specific service to administrative procedure because the facts were too general. Treat it as a statement of the test — taxable enumerated service, resale/capital-improvement exceptions, separate-statement requirement — not a holding on engineering-design services.

Common questions

Q: Did the Department rule these engineering-staff charges are exempt?
A: No. It declined to classify each service, saying the petition lacked enough detail and the determination must be made by administrative procedure. It only stated the general rule.

Q: When is a temporary-staffing charge taxable?
A: When the supplied personnel perform a service enumerated as taxable under § 1105(c). If the service is not one New York taxes, the charge is not taxable.

Q: Are there exceptions when the service is taxable?
A: Yes. If the customer buys the taxable service for resale, or the work results in a capital improvement to real property, the charge is not taxed — with the appropriate exemption certificate (e.g., Form ST-120.1 for resale, or Form ST-124 for a capital improvement).

Q: What if a bill mixes taxable and nontaxable work?
A: Tax applies to the total amount unless the taxable and nontaxable charges are separately stated on the bill.

Q: Can another staffing firm rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described — and here it did not reach a final classification. It illustrates the test, but your facts may differ.

Citations and references

Statutes and authorities:

• Tax Law § 1105(c) (tax on enumerated services only)
• TSB-M-87(13)S (Taxability of Services Provided By Temporary Service Contractors; temporary service contractor vs employment agency)
• Northeastern Computer Services, Inc., TSB-A-88(33)S (classification of specific services left to administrative procedure)
• Forms ST-120.1 (Contractor Exempt Purchase Certificate) and ST-124 (Certificate of Capital Improvement)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_14s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (14)S
Sales Tax
February 26, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S921007A

On October 7, 1992, a Petition for Advisory Opinion was received from KPMG Peat
Marwick, 345 Park Avenue, New York, New York 10154.
The issue raised by Petitioner, KPMG Peat Marwick, is whether the receipts derived from
the temporary engineering design and technical services provided by XYZ Company are exempt
from State and local sales and use taxes as services provided by a temporary service contractor.
XYZ Company (hereinafter XYZ) is a provider of temporary engineering design and
technical services in the State of New York. XYZ is contacted by customers who request engineering
design and technical services. These customers include engineers, technicians, and other types of
professionals within various industries.
When contacted, XYZ furnishes the requestor with a list of available XYZ personnel and
their relative experience level. From this list, the customer chooses the individual or individuals
who they feel meet the job requirements. XYZ's personnel then assist the customers in their design
of new products and manufacturing processes in fields such as electronics, aerospace, computer
hardware and software, as well as various other types of industries.
Taxability of Services Provided By Temporary Service Contractors, TSB-M-87(13)S, states,
in part, that:
Section 1105(c) of the Tax Law imposes a tax on certain services ... When a
temporary service contractor provides personnel to perform such taxable services for
its client, the fee paid by the client for these services constitutes a receipt subject to
tax. Accordingly, the temporary service contractor is required to collect sales tax on
the fee charged to the client for such taxable services, regardless of how the charge
is arrived at or how much the contractor is required to pay its personnel ...
Example 1. X Corporation wants the names and titles of its
executives painted on their office doors. X Corporation requests a
commercial painter from Y Corporation, a temporary service
contractor. The painter works for three, 8-hour days at X Corporation.
Y Corporation bills X Corporation $360.00 ($15.00 per hour x 24
hours). Since the service performed by the painter is one of the
services enumerated as taxable under the Tax Law, Y Corporation
must add a sales tax to the $360.00 charge.

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TSB-A-93 (14)S
Sales Tax
February 26, 1993
If the services performed by the temporary service contractor's employee are not
subject to tax under Section 1105(c) of the Tax Law, then no tax is to be collected
on the charge for these services.
Example 2. Y Corporation, a temporary service contractor, is
requested by X Company to furnish X Company with an individual
possessing telephone and typing skills to replace X Company's
secretary for a four-week period. No tax is required to be collected on
the fee Y Corporation charges X Company since the services
provided by Y Corporation's employee to X Company are not taxable
services under Section 1105(c) of the Tax Law.
Where the taxable service performed by the individual supplied by the temporary
service contractor to the client is purchased by the client for resale, or results in a
capital improvement to real property, such service is not subject to tax under section
1105(c) of the Tax Law. The temporary service contractor will not be required to
collect a sales tax on the fee charged the client if a properly completed exemption
certificate is provided by the client within 90 days of the date the services were
performed. It should be noted that when services of both a taxable and nontaxable
nature are performed, tax is required to be charged on the total amount of the bill
unless the charges for taxable and nontaxable services are separately stated.
Example 3. Z company requests XYZ, a temporary service
contractor, to furnish a plumber to install a hot water heater in Z
Company's office building and to make repairs to the building's
plumbing system. The plumber works for an hour on the installation
of the hot water heater and spends an additional 2 hours making
repairs to the plumbing system. When XYZ bills Z Company, the
charge for the installation of the hot water heater (a capital
improvement) and the charge for the repairs to the plumbing system
(a taxable service) must be separately stated on the bill. In addition,
a Certificate of Capital Improvement, Form ST-124, must be received
by XYZ from Z Company within 90 days of the date the work was
completed. XYZ will then charge sales tax only on the portion of the
bill that represents charges for the repair work. If XYZ does not
receive a Certificate of Capital Improvement from Z Company within
the appropriate time period, and/or does not separately state the
charges on the bill, then a sales tax must be charged on the total
amount billed to Z Company.
Example 4. X Company contracts with a customer to repaint the
customer's office building. XYZ, a temporary service contractor, is
requested by X Company to furnish X Company with painters to
assist in performance of the contract. Since the services being
furnished by XYZ are for resale by X Company, such services are not
subject to tax under Section 1105(c) of the Tax Law, provided that a

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TSB-A-93 (14)S
Sales Tax
February 26, 1993
timely and properly completed Contractor Exempt Purchase
Certificate, Form ST-120.1, is furnished to XYZ by X Company.
The Advisory Opinion function is limited to setting forth the applicability of pertinent
statutory and regulatory provisions to a specified set of facts. The information contained in the
Petition is not sufficiently detailed for a final classification, for sales tax purposes, of each temporary
service provided by XYZ. This determination must necessarily be made by administrative procedure.
Northeastern Computer Services, Inc., Adv Op Comm T & F, June 24, 1988, TSB-A-88(33)S.
Accordingly, pursuant to TSB-M-87(13)S, supra, if XYZ provides personnel to perform
services enumerated as taxable under Section 1105(c) of the Tax Law, its charge for such service will
be subject to sales tax, unless, however, such service has been purchased by its customer for resale,
or results in a capital improvement to real property. It should be noted that when services of both a
taxable and nontaxable nature are performed, tax is required to be charged on the total amount of the
bill unless the charges for taxable and nontaxable services are separately stated.

DATED: February 26, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory 0pinions
are limited to the facts set forth therein.