Sales Tax on Temporary Staffing: What do you think?
In early November, we had the chance to discuss an important issue to staffing and manufacturing: sales tax on temporary labor.
As many of our clients that utilize temporary staffing know, when a staffing agency places someone in a temporary assignment, the agency is serving as their employer. Ultimately the agency’s client reimburses them with some extra money to cover things like Unemployment, Social Security, FICA, Workman’s Comp, etc. There’s also, of course, a little money to the agency for their services.
Currently the State of Ohio asks that agencies charge sales tax on that whole lump sum of money being invoiced to the client. Now stop and think about that. We’re putting sales tax (and in many cases Ohio’s CAT tax) on someone’s wage and employment taxes that have to be paid just because the client chose to use a temporary agency. Ohio’s argument is that the temporary employment is a service, not just simply labor.
We, along with our industry peers, have begun to address this issue with our elected officials. Estimates are that these unreasonable sales tax charges take away up to $250 million in dollars from Ohio businesses every year. Imagine how far that money could go if it were applied to capital investments, R+D, wages, etc.