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Pa Sales Tax On Staffing

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Pa Sales Tax On Staffing

Postby Shelby » Tue Sep 23, 2014 4:01 pm

Is there a PA sales tax that should be invoiced when a staffing company bills its customers?  Thank you.

ANSWER: Sue,

Absolutely......  read the following:

EMPLOYMENT AGENCIES SERVICES(61 PA Code §60.5)http://www.pacode.com/secure/data/061/chapter60/s60.5.html

The amount of sales tax would be the total gross fee plus taxes if the amount billed to a client is not itemized.

If the temp agency does itemize the amount of employee and employer payroll taxes versus the agencies fees with line items(itemized) , then the sales tax only applies to the fee portion.

I see you are in New Jersey and asking questions about Pennsylvania sales tax... so this is another nuance that will determine how tax status applies here.   For example,if the temp is not working in PA, the tax may not apply.

It's all in the link I provided.

If anything else, just ask.

Brian Phillips

Harvis, Inc.

Human Resource and Employment Serviceshttp://www.HARVIS.org

---------- FOLLOW-UP ----------

First of all thank you for the previous answer.  

My next question is in reading the link, do you pay PA sales tax on permanent placement of staff that you will make a commission on for that placement? So this question if just for a permanent placement only.  

And second would you be exempt from this tax if your candidate was a temp and then was hired as a permanent employee.  We receive commission on both?  

Thank you again for all of your help. I tried to rate your answer and thank you but could not find the link.
Shelby
 
Posts: 43
Joined: Sat Jan 18, 2014 3:45 pm

Pa Sales Tax On Staffing

Postby darik » Tue Sep 23, 2014 4:02 pm

Sue,

I charge clients sales tax on the fee associated with Employment Agencies Services as per the referenced section of the PA Code.   Whether they are a temp or a permanent placement it is the same 6% sales tax that applies to the fee.

In other words, If I charge a client $15,000  for a placement,  the sales tax is:  6% x 15,000  or  $ 900   total invoice is $ 15,900.

If it is $ 1,000 placement fee-  then sales tax is $ 60  for an invoice total of $ 1,060.00.   I never pay for my clients' ads, so, I don't need to worry about the tax being paid 2x.    The time spent on the services of placing and screening and interviewing is all sales taxable.

If I was a staffing agency assigning temporary employees and even had these temps on my company's payroll, sales tax would still apply to a portion of the FEE PORTION  of the total bill I send my clients.    Not everything a staffing agency does can be taxable -- for example, the agency will run help wanted ads and pay tax to the newspaper- so that is not taxed 2x.   In the staffing agency case, the client is billed for gross wages plus employer taxes---- then the fee is added last.   The fee is the portion of the markup over and above the employer's payroll and tax burden.   Since the agency pays for ads and "shares" services in-house to serve all their clients, the sales tax may not apply to the whole fee and is likely only about 40 to 60% of the fee then the sales tax would apply to the component of the markup that is the work being done for interviewing and placing employees and not paying for ads that are generally placed in newspapers for the benefit of the agency as a whole  -   opposed to one client in particular.   

Whether a commission is paid to an employee is irrelevant to the employer's sales tax obligation.   Agency/ Employer must assess and collect sales tax then send to the state.  There is no sales exemption for any "temps".

Thanks for the follow up.

Brian Phillips

Harvis, Inc.http://www.HARVIS.org

Human Resource and Applicant Screening Services  
darik
 
Posts: 42
Joined: Thu Mar 31, 2011 1:00 pm


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