When were charges for temporary technical personnel nontaxable staffing rather than taxable identifiable services?

Plain-English summary

Temporary technical-personnel charges were nontaxable when the contract truly supplied employees rather than identifiable services. If the customer lacked its own staff to perform the work, Texas presumed the contract was for services instead.

Billing had to be based on employee or man-hours, not completion of a specific job. The customer also needed the right to request replacement of an unsatisfactory worker.

The customer in the ruling supplied the workplace, tools, and supervision and bore the risks and rewards of the work, supporting temporary-help treatment on the stated facts.

Common questions

Could the contract promise completion of a specific job? No.

How did billing need to work? By employee or man-hour.

Did the customer need replacement rights? Yes.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8903L0933C01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

March 28, 1989

Dear ****:

Thank you for your letter regarding taxability of temporary employment
services.

As I understand, your client (Firm C) employs technical personnel (P)
and, as their line of business, provide their employees as temporary technical
personnel to their customers (Firm D). Some of the temporary employees
assigned may be performing services which may be defined as "taxable services."
Firm C charges Firm D for P's services and Firm C pays P a salary. All tools,
working place, and supervisory control is supplied by Firm D, and Firm D
assumes all risk and is entitled to all rewards. If, at some later date, Firm
D employees P, no employment fee is charged by Firm C; however, Firm C does
request that P be employed on a temporary basis for a reasonable time (usually
6 months).

You asked if due to the various types of services which may be assigned
to employees of Firm C by customers, and the fact that Firm C receives
compensation for providing such personnel whether any of the charges made by
Firm C to its customers may conceivably
be subject to Texas sales and use tax.

Charges by Form C to their customers are not subject to sales and use tax
if the following requirements are met:

1. The agreement must be for furnishing temporary employees, and not
   for identifiable services. If the customer does not have a staff to
   provide these services, then the contract will be presumed to be for
   services and not for temporary employees.

2. Billing must not be for the completion of a specific job, but on
   an employee/man-hour basis.

3. The customer has the right to ask that a temporary employee be re-
   placed if their performance is not satisfactory.

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 toll-
free 1-800-252-5555. My extension is 3-4666. You may write to Tax
Correspondence, Comptroller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence