In a case of first impression, a panel of the Commonwealth Court concluded that a professional employer organization (PEO) did not sell help supply services within the meaning of the Sales and Use Tax. All Staffing, Inc. v. Commonwealth, No. 325 F.R. 2006 (Pa. Cmwlth. Jan. 5, 2010). Therefore, an assessment of Sales Tax was stricken.
The taxpayer provided human resources-related services to clients through the mechanism of placing the clients' employees on the payroll of the PEO. The taxpayer placed the entire payroll of a client on the taxpayer's payroll; it left no one behind and it never added additional employees. The client retained direction and control over the activities of all individuals, made all hiring and related decisions, and always hired additional personnel from sources other than the taxpayer. The court held that the assessment was in error because the Pennsylvania Department of Revenue assessed the charges made by the taxpayer to the client for personnel-related services, not for the reimbursements by the client to the taxpayer for employee-related charges such as payroll, benefits and the like. The statute defines "help supply services" as providing or continuing help, where the help supplied is on the payroll of the supplier but is under the supervision of the client to which the help is furnished. 72 P.S. § 7201(cc). Since the assessment was on the personnel-related services, and not on the purported service of "supplying" the help, the assessment was in error. The court noted, but did not decide, the taxpayer's arguments that in any event, the taxpayer never supplied any help, but simply placed on its payroll all employees already on the client's payroll, and that the services provided by the taxpayer did not fit into the statutory list of services considered to be help supply services.
Your reporters represented the taxpayer.
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