When were hotel housekeepers supplied by a staffing company nontaxable temporary help, and were permanent-placement fees taxable?

Plain-English summary

Housekeepers supplied to replace an absent permanent worker or help a hotel through a peak period were nontaxable temporary manpower services.

Providing a hotel with housekeepers as an ongoing daily, weekly, monthly, or annual contracted staff was taxable. The letter treated that as a continuing housekeeping service rather than temporary fill-in help.

The charge for permanently placing a professional employee was not taxable.

Common questions

Was an absent employee's temporary replacement taxable? No.

Was an ongoing contracted housekeeping staff taxable? Yes.

Was a permanent professional-placement fee taxable? No.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8811L0909A01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

November 8, 1988

Dear ***** :

Mrs. Dieck has asked me to respond to your letter requesting further
clarification regarding temporary hotel housekeepers and placement fees.

First, let me explain what is meant by the term "temporary services
personnel". This term refers to temporary manpower services. These services
will provide a customer with a temporary helper when a permanent employee is
out. or, they may provide a
temporary employee to help the client get through a peak period.

If the hotel housekeepers you provide fill in while a permanent worker is
out or fill in only during peak periods, then the charge for their services
would not be subject to tax. However, if you provide housekeepers to a hotel
on a contractual basis, for
example a staff of housekeepers on a daily, weekly, monthly or annual
basis, then this charge would be subject to tax.

Your second question involves the taxability of permanent placement fees
for professional positions. The charge to a client for a permanent placement
fee would not be subject to tax.

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 our toll-
free number 1-800-531-5441. The regular number is 512/463-4502.

Sincerely,
Gilbert Zamora
Taxability Section,
Legal Division

August 18, 1988

TO: Dan Pearson

From: Al Van Allen

Subject: Charges by Temporary Services Used to Perform Normally
Taxable Services

Charges by temporary services to provide skilled individuals to replace
employees who are sick or on vacation are not taxable. By the same token, a
firm may use temporary manpower to supplement their existing full time staff on
a seasonal or temporary basis to get them through peak periods without
incurring a tax liability. The temporary service would be required to obtain an
exemption certificate from their customer or collect the tax.

To qualify, the functions must be of a type that are done by company
employees on a day to day basis. For example, word processing or janitorial
services in an office would qualify while re-roofing the building would not.

A firm that hired a janitorial service to clean their building would be
required to pay sales tax on their monthly billing. If the same firm had a
janitorial staff but simply hired a temporary service to do windows or carpet
cleaning, the charges would also
be taxable. However, if the firm brought in a temporary service to
assist their existing staff in their regular duties, they could give the
temporary service an exemption certificate in lieu of tax.

INTEROFFICE BOB BULLOCK
MEMORANDUM COMPTROLLER OF
PUBLIC ACCOUNTS

August 15, 1988

To: Dan Pearson, Deputy Comptroller
From: Tom Soto, Tax Correspondence
Subject: Temporary help services

The previous agency position regarding temporary help services has been
to give them special treatment, but not exempt them totally. They don't have to
collect tax when they provide a range of services including taxable and
non-taxable services as in the
example of the Kelly girl who does word processing among other
secretarial duties.

The legislature imposed sales tax on certain types of activities. We
recognize that they did not intend to target manpower services as one of those
taxable services. However, they only exempted an activity performed by an
employee for an employer. No exemption was provided for temporary help
services when they engage in activities that are taxed.

If we attempt to re-define a taxable activity to include only those
where the person performing the service provides the tools, facilities,
equipment, and supplies such definition cannot be applied only to temporary
help services. Any person providing services can claim that they are only
providing manpower services. Labor or manpower is the essence of a service.
If we attempt to simply exclude temporary help services from the tax, we become
vulnerable to charges of unequal treatment. The tax can be found
unconstitutional as was the Admission Tax in the late 70's and the Franchise
Tax more recently. It was how these were administered that made them unequal,
not how they were written.

** , in his letter, asks us to agree to situation (4) that
would allow a service provider to separately bill for other taxable items
(which could include supplies, tools, etc.) and not collect tax on the service.
We have successfully argued for years in hearings and court that providers of
services cannot classify themselves as retailers for only a portion of the
transaction by separately stating or contracting separately certain charges.
** , in his example of this situation, poses two different services
being provided. But his disclaimer states that his examples are not intended
to be all-inclusive.

Many services require only a warm body and no supplies, tools or
equipment. It is not uncommon for the customer to provide all the necessary
items. We have long held that fabrication labor is taxable given when the
customer provides all the necessary tools, materials, and other items needed.
Many services that do not currently structure their transactions so that the
tools, etc. are provided by the customer, will do so to avoid collection of
tax. In taxable well service jobs, the customer often rents equipment, tools,
etc. from one company and provides it to another company who actually performs
the service or provides the manpower. In these situations we could lose the
tax on all but the equipment rental and be forced to make refunds on past
transactions. We can
not argue that if the customer rents the tools, etc., the transaction is
taxable unless we also say that if the temporary help customer leases the
equipment, etc., the transaction is also taxable.