§ 60.5. Employment agency services.
(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:
Administrative supplies—(i) Tangible personal property which is consumed in one of the following manners:
(A) Used but not transferred by a vendor in the performance of this service.
(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.
(ii) Examples of the property include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items.
Employe—A person who performs work for an employer and is paid for the performance of work or services, including persons on the payroll or independent contractors.
Employer—A person who hires an individual for the performance of duties as an employe.
Employment agency—A vendor engaged in the business of providing employment agency services.
Employment agency services—The service of attempting to procure or procuring temporary or permanent employment for prospective employes or employers. Examples of employment agency services include executive placing services or labor contractor employment agencies.
Employe costs—Payments made or withheld by a vendor to an employe, including wages, salaries, bonuses, commissions, employment benefits, expense reimbursements, payroll, withholding taxes, employer paid social security tax or Federal and Pennsylvania unemployment taxes. The term does not include employe recruiting, training, liability insurance, bonding expenses and other costs.
Gross fee—Total amount charged by the seller excluding sales tax.
Service fee—Gross fees less separately stated employe costs.(b) Scope. Effective October 1, 1991, the sale at retail or use of employment agency services is subject to tax.
(1) An employe reporting to work at a location in this Commonwealth is subject to tax.
(2) An employe reporting to work at a location outside of this Commonwealth is not subject to tax, unless the employe is assigned to work in this Commonwealth.
(3) If the employe is located in this Commonwealth, it is presumed that the employment agency service is subject to tax unless documentation supports the reporting to a location outside of this Commonwealth.
(c) Examples of taxable services. The following are examples of taxable employment agency services:
(1) A Pennsylvania resident contacts a Pennsylvania vendor and is placed with an employer at a location in this Commonwealth.
(2) A Pennsylvania resident contacts an Ohio vendor and is placed with an employer at a location in this Commonwealth.
(3) A Pennsylvania employer contacts a vendor outside this Commonwealth and accepts an employe for its location in this Commonwealth.
(4) A New York resident contacts a New York vendor and is placed with an employer at a location in this Commonwealth.
(5) A Pennsylvania vendor paid on an hourly rate interviews and recommends a potential employe to an employer.
(d) Examples of services which are not employment agency services. The following are examples of services which are not employment agency services:
(1) A Pennsylvania resident contacts a Pennsylvania vendor and is placed with an employer at a location outside of this Commonwealth.
(2) A Pennsylvania resident contacts a New York vendor and is placed with an employer in New Jersey.
(3) A New York resident contacts a Pennsylvania vendor and is placed with an employer at a location in New York.
(4) A Pennsylvania employer contacts a vendor outside of this Commonwealth and accepts an employe for its out-of-State location.
(e) Purchase price.
(1) Effective October 1, 1991, through December 31, 1991, the purchase price of employment agency services subject to tax is the gross fee.
(2) Effective January 1, 1992, the purchase price of employment agency services subject to tax is the service fee if the employe costs are separately stated; otherwise, the gross fee is subject to tax.
(3) If the purchase price is canceled or renegotiated, tax is due on the adjusted purchase price. If an adjustment to the tax occurs, the vendor is permitted to offset the adjustment against current tax liabilities.
(4) If the purchase price is paid on an installment basis, the tax is due on the full purchase price and is payable at the time the purchaser accepts the contract or within 30 days of acceptance of the contract.
(f) Exclusions.
(1) Employment agency services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions including public school districts. The manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusion does not apply.
(2) Employment services provided by theatrical employment agencies or motion picture casting bureaus.
(3) Farm labor.
(4) A vendor of employment agency services may claim the resale exemption upon its purchase of tangible personal property which is transferred to its purchaser or a third party in the performance of its employment agency services. The vendor may also purchase employment agency services from another provider which the vendor resells to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of another taxable service which it may use in the performance of its employment agency services.
Source The provisions of this § 60.5 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 182.
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