Are a company's charges for supplying temporary environmental field technicians to prime contractors subject to New York sales tax?

Plain-English summary

An environmental-services company ran a "Rent-A-Tech" program: it supplied its own salaried field technicians on a temporary basis to prime contractors — engineering and environmental consulting firms doing site assessments, soil and groundwater sampling, site cleanup, and hazardous-waste work under contracts with agencies and private clients. It billed the prime contractors an hourly rate and asked whether those charges are subject to sales tax.

The Department applied its temporary-service-contractor rule (TSB-M-87(13)S). When a temporary-service contractor supplies personnel to perform a taxable service (here, potentially "maintaining, servicing, or repairing real property" under Tax Law § 1105(c)(5)), the fee the client pays is a taxable receipt — and the temp contractor must collect tax regardless of how the charge is figured or how much it pays its own workers.

But there is a key exception, and it decided this case. Where the taxable service the supplied worker performs is purchased by the client for resale, or is performed in connection with a capital improvement to real property, the service is not taxable under § 1105(c). Because the company's field techs were furnished to prime contractors who were themselves performing the work under their own contracts (i.e., reselling the service or building toward a capital improvement), the charges are not subject to sales tax — provided the prime contractor gives the company a timely, properly completed Contractor Exempt Purchase Certificate (Form ST-120.1).

What this means for you

Temporary-staffing and labor-supply companies

The taxability of your staffing charge follows the service the worker performs, not the fact that you are "just supplying labor." If your personnel perform a taxable service (like servicing or repairing real property), you must collect tax on the full fee — your markup and payroll are irrelevant. The escape hatch is a customer who is buying the service for resale or for a capital improvement; get the exemption certificate before relying on it.

Prime contractors buying temporary field staff

If you engage temporary technicians to help perform work you are reselling to your own customer, or work that results in a capital improvement, you can buy that labor exempt — but you must furnish the staffing company a properly completed Contractor Exempt Purchase Certificate (Form ST-120.1), timely (within 90 days of the services).

Accountants and tax professionals

The controlling authority is TSB-M-87(13)S read against § 1105(c)(5): temporary-service-contractor charges are taxable when the underlying service is taxable, but the resale and capital-improvement exceptions apply, documented by Form ST-120.1. The certificate, and its timeliness, are what convert an otherwise-taxable staffing charge into an exempt one.

Common questions

Q: Are the temporary field-staff charges taxable?
A: They are taxable if the workers perform a taxable service, but not when the prime contractor buys the services for resale or in connection with a capital improvement to real property — in which case a Contractor Exempt Purchase Certificate (Form ST-120.1) is required.

Q: Does it matter how the staffing fee is calculated?
A: No. Under the temporary-service-contractor rule, the fee is taxable (when the service is taxable) regardless of how the charge is arrived at or how much the contractor pays its personnel.

Q: What documentation is needed for the exemption?
A: The prime contractor must give the staffing company a timely and properly completed Contractor Exempt Purchase Certificate, Form ST-120.1 (within 90 days of when the services were performed).

Q: Which taxable service is at issue here?
A: The field work can fall under § 1105(c)(5) — maintaining, servicing, or repairing real property. The resale and capital-improvement exceptions are what keep these particular charges out of tax.

Q: Can another staffing company rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described. It illustrates the Department's reasoning, but your facts may differ.

Citations and references

Statutes and authorities:

• Tax Law § 1105(c) (tax on enumerated services)
• Tax Law § 1105(c)(5) (maintaining, servicing, or repairing real property; capital-improvement distinction)
• TSB-M-87(13)S (Taxability of Services Provided By Temporary Service Contractors)
• Form ST-120.1, Contractor Exempt Purchase Certificate

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_19s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (19)S
Sales Tax
March 22, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S921008A

On October 8, 1992, a Petition for Advisory Opinion was received from J & L Environmental
Services, Inc., 542 Union Avenue, New Windsor, New York 12553.
The issue raised by Petitioner, J & L Environmental Services, Inc., is whether the charges for
the services provided by its field staff professionals on a temporary basis through its "Rent-A-Tech
Program" to prime contractors in need of field staff are subject to New York State and local sales
and use taxes.
The Rent-A-Tech Program staff are full-time, salaried employees of Petitioner. When a
prime contractor has a need of the Rent-A-Tech services, they call Petitioner's office with a request.
Petitioner will provide the field tech to the client and bill the client for those services based on an
hourly rate. The Rent-A-Tech staff member receives his regular salary which is independent of the
agreements between Petitioner and its clients.
Petitioner's clients are engineering and environmental consulting firms that perform
environmental field work as part of their scope of work as the primary contractors for projects.
These projects result from contracts between these firms and municipalities, government regulatory
agencies such as the New York State Department of Environmental Conservation and the United
States Environmental Protection Agency, or private industrial or corporate clients requiring
environmental field work. Petitioner does not act in the capacity of a primary contractor with the
Rent-A-Tech Program.
Petitioner's field techs are available to provide professional field assistance in areas such as
Environmental Auditing (i.e., site visits and assessments, real estate acquisitions and transfers and
report preparation assistance); Remedial Investigations (i.e., site delineation, soil and groundwater
sampling, sample field screening, site cleanup and site supervision); and Hazardous Waste Sites (i.e.,
health and safety trained and certified, regulatory agency coordination, oversight supervision and
field documentation).
Petitioner's charges a portal-to-portal fee of $65.00 per hour for field technicians for one day
or any part thereof. Reduced hourly rates are available for multiple days and full week project
assignments. Clients will receive copies of the field log, chains of custody, manifests and other field
forms related to the project at no additional cost. Project-related expenses such as (but not limited
to) sampling equipment, travel, report preparation field instruments, photo documentation, etc. will
be billed to the client at Petitioner's cost, plus 15%.
Section 1105 of the Tax Law states, in part:
Imposition of sales tax.-- ... there is hereby imposed and there shall
be paid a tax ... upon:

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TSB-A-93 (19)S
Sales Tax
March 22, 1993
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(c) The receipts from every sale, except for resale of the following
services:
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(5) Maintaining, servicing, or repairing real
property, property or land, as such terms are defined
in the real property tax law, whether the services are
performed in or outside of a building, as distinguished
from adding to or improving such real property,
property or land, by a capital improvement as such
term capital improvement is defined in paragraph nine
of subdivision (b) of section eleven hundred one of
this chapter, but excluding services rendered by an
individual who is not in a regular trade or business
offering his services to the public. (emphasis added)
Taxability of Services Provided By Temporary Service Contractors, TSB-M-87(13)S, issued
by the Department of Taxation and Finance states, in part, that:
Section 1105(c) of the Tax Law imposes a tax on certain services. (A partial list of
taxable and nontaxable services is included in this memorandum.) When a temporary
service contractor provides personnel to perform such taxable services for its client,
the fee paid by the client for these services constitutes a receipt subject to tax.
Accordingly, the temporary service contractor is required to collect sales tax on the
fee charged to the client for such taxable services, regardless of how the charge is
arrived at or how much the contractor is required to pay its personnel.
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Where the taxable service performed by the individual supplied by the temporary
service contractor to the client is purchased by the client for resale, or results in a
capital improvement to real property, such service is not subject to tax under
section1105(c) of the Tax Law. The temporary service contractor will not be
required to collect a sales tax on the fee charged to the client if a properly completed
exemption certificate is provided by the client within 90 days of the date of the
services were performed ...
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TSB-A-93 (19)S
Sales Tax
March 22, 1993
Example 4. X Company contracts with a customer to repaint the
customer's office building. XYZ, a temporary service contractor, is
requested by X Company to furnish X Company with painters to
assist in performance of the contract. Since the services being
furnished by XYZ are for resale by X Company, such services are not
subject to tax under Section 1105(c} of the Tax Law, provided that
a timely and properly completed Contractor Exempt Purchase
Certificate, Form ST-120.1, is furnished to XYZ by X Company.
(emphasis added)
Accordingly, pursuant to Section 1105(c) of the Tax Law and TSB-M-87(13)S, supra, where
the services of the temporary field staff professionals provided by Petitioner to the prime contractor
are purchased by the prime contractors for resale, or in connection with the performance of a capital
improvement, the charges for such services are not subject to sales tax under Section 1105(c) of the
Tax Law. A timely and properly completed Contractor Exempt Purchase Certificate, Form ST­
120.1, should be furnished to Petitioner by the prime contractor.

DATED: March 22, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.