Was a custodial staffing arrangement taxable when the provider remained the workers' employer but the customer trained and supervised them?

Plain-English summary

The first custodial staffing arrangement was taxable as a real property service. The provider recruited the workers and treated them as its employees for payroll taxes, workers' compensation, and benefits, while the customer handled training and supervision.

The Comptroller did not decide the second arrangement. There, the workers would be employees of the customer and the provider would perform payroll processing. The letter said the description was insufficient to determine the employer and asked for the contract.

What this means for you

The historical letter treated employee status and contractual responsibility as central. Customer supervision did not prevent taxation when the provider remained the employer, while a payroll-only arrangement required more facts.

Common questions

Was the first arrangement taxable? Yes, as a real property service.

Did customer training and supervision change that answer? No. The provider still treated the workers as its employees.

Was the payroll-processing arrangement taxable? The letter did not decide. It requested the parties' contract.

Citations and references

• No statute or rule number is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8710L0840B10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

October 14, 1987

Dear ****:

Thank you for your letter concerning janitorial services.

In the first situation, your client will provide recruiting services for
their customer. Training and supervision would be the customer's
responsibility. The workers would be treated as employees of your client
for
all purposes including payroll taxes, workers compensation and employee
benefits.

This service is taxable as a real property service. Your client must
collect
tax from their customer.

In the second situation, you state that the worker would be treated as
employees of the client's customer. Your client would provide payroll
processing service.

This situation is more difficult to determine whether or not your client
is
performing a real property service. The description given above is not
sufficient to determine who is the employer. Please provide any contract
between your client and the customer.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
Curt Swenson
Tax Policy Division