Does an open-ended staffing arrangement with no end date and continuously rotating workers qualify for Texas's sales tax exemption for temporary employment services?

Plain-English summary

A staffing company places housekeeping and hospitality workers with hotels, timeshares, and resorts under an agreement with no fixed end date; staffing levels adjust monthly, and workers can rotate in and out indefinitely. The staffing company asked whether this qualifies as an exempt Texas "temporary employment service" under Tex. Tax Code § 151.3503, since it otherwise met the exemption's structural requirements (client supplies equipment, client supervises the work, workers stay employees of the staffing company).

The Comptroller said no — the arrangement fails on the word "temporary" itself. The exemption exists to let a business supplement its workforce for a limited-time need: an employee absence, a seasonal workload, a skill shortage, or a special project. Because this agreement had no end date and continued in perpetuity, with staff simply rotated as needed to keep housekeeping running indefinitely, the client wasn't supplementing an otherwise-adequate workforce for a limited situation — the staffing company was effectively providing the client's ongoing housekeeping function. That makes it a taxable real property (cleaning/janitorial) service, not an exempt temporary-staffing arrangement, and the staffing company must collect and remit sales tax rather than accept an exemption certificate from the client.

What this means for you

Staffing agencies serving hospitality, cleaning, or similar ongoing-need clients

Meeting the structural checklist in § 151.3503(a)(2) — client supplies equipment, client supervises, worker stays your employee — is necessary but not sufficient. If your placement agreement has no end date and effectively runs the client's cleaning/janitorial function indefinitely, the Comptroller can still find it's not "temporary" and tax it as a real property service. Consider whether your contracts specify a duration, seasonal trigger, or specific project/absence tied to the staffing need.

Hotels, resorts, and other hospitality clients using staffing agencies

If you're providing an exemption certificate to a staffing vendor for what is really a perpetual, indefinite arrangement, that certificate may not hold up — the vendor may need to charge tax, and you (or the vendor) could face liability if the arrangement is later found not to qualify as "temporary."

Accountants and tax professionals

The ruling turns on an undefined term — "temporary" — construed using its ordinary dictionary meaning ("lasting for a limited time") together with the illustrative special-work-situation categories in Tex. Labor Code § 93.001 (absence, skill shortage, seasonal workload, special assignment/project). Compare against Comptroller's Decision No. 108,766 (2019), cited in the ruling, for the same open-ended-arrangement analysis.

Common questions

Q: Does an agreement without a fixed end date always fail the temporary-employment exemption?
A: This ruling strongly suggests so when the staffing continues in perpetuity to fill the client's ongoing operational needs, rather than addressing a specific limited situation (absence, season, project, skill shortage).

Q: What if my staffing agreement met all the other checklist requirements in § 151.3503(a)(2)?
A: Meeting the equipment/supervision/employment-status requirements is necessary but not enough on its own — the arrangement also has to actually be temporary in the ordinary sense of "lasting for a limited time," which an indefinite, continuously-rotating-staff agreement is not.

Q: Can another staffing company rely on this ruling?
A: No. It binds the Comptroller only for the taxpayer and facts in the request. A staffing agreement genuinely tied to a defined seasonal need, absence, or project could reach a different result.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051 (Sales Tax Imposed); § 151.010 (Taxable Item)
• Tex. Tax Code § 151.0101(a)(11) (real property services); § 151.0048(a) (janitorial/cleaning services)
• Tex. Tax Code § 151.3503 (temporary employment service exemption, conditions in (a)(2)(A)-(D)); § 151.3503(c)(3)
• Tex. Labor Code § 93.001 (definition of "temporary employment service")
• 34 Tex. Admin. Code § 3.364(a)(12) (Temporary Employment Services); § 3.356(a)(7) (janitorial real property services)

Cited prior guidance:

• Comptroller's Decision No. 108,766 (2019) — similar indefinite-staffing-arrangement analysis

Source

• Landing page (STAR search): https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202506015L

Original ruling text

June 12, 2025

RE: Private Letter Ruling No. 20241122161856

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE 1] We are responding to your request dated June 5, 2024, and supplemental information received on January 14, 2025. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of temporary employment services provided by ** (Taxpayer), and clarification of the term “temporary.”

Facts Presented

Taxpayer offers temporary employment services across various hospitality industries in Texas, including hotels, timeshares, and luxury resorts (Clients). Taxpayer’s employees (Staff) perform services including housekeeping and other services tailored to Client needs. Taxpayer’s Temporary Labor Services Agreement (the Agreement) with its Clients does not specify fixed timeframes or set staffing levels, but is priced hourly based on defined skill categories. Staffing levels and skill types are adjusted on a weekly or monthly basis.

Client provides all necessary supplies and equipment for completing the work. Tasks performed by Staff are typically duties handled by Client’s own employees. Client does not obtain supplies or equipment from Taxpayer or any entity affiliated with Taxpayer. Client maintains full authority to supervise, direct, and control the work performed by Staff to ensure business operations and compliance with applicable regulations.

Taxpayer’s Agreement states that Taxpayer is responsible for recruiting, interviewing, selecting, hiring, and assigning Staff, whom Taxpayer deems qualified to perform services described within the Agreement.

Taxpayer, as the employer, is also responsible for maintaining Staff personnel and payroll records; withholding taxes, charges, or other deductions from Staff that are legally required by law; remitting taxes and charges to applicable government entities; paying wages and benefits applicable to Staff; providing liability and worker’s compensation insurance, as outlined in the Agreement or law.

Staff assigned to Client under the Agreement will remain employees of Taxpayer throughout the length of their assignment. Staff are not eligible to participate in any of Client’s employee benefit plans and programs and are required to acknowledge this exclusion in writing.

Taxpayer is responsible for advising Staff of work hours, meal and break procedures, and the acceptable dress code when working with Clients. Taxpayer will provide Staff uniforms that are commercially available and industry appropriate. If Clients require uniforms specific to their establishment, Client will furnish uniforms at no cost, but the uniforms must be returned to Client at the end of the Agreement.

The Agreement between Taxpayer and Client does not specify an end date. Staff initially assigned to Client can be rotated throughout the duration of the Agreement. Taxpayer accepts an exemption certificate at the time the Agreement is executed but is unable to verify if the Agreement will be “temporary.”

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Is Taxpayer providing a temporary employment service within the meaning of Chapter 151?

Ruling: No. Taxpayer is not providing a temporary employment service.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state, unless an exemption applies. Section 151.051 (Sales Tax Imposed). The term “taxable item” includes tangible personal property and taxable services. Section 151.010 (Taxable Item). Taxable services include real property services. Section 151.0101(a)(11) (Taxable Services)

Real property services include residential or nonresidential building or grounds cleaning, janitorial, or custodial services, which are defined as, “the activities of keeping the inside and outside premises of a building clean, orderly, and functional.” See Section 151.0048(a) (Real Property Service) and Rule 3.356(a)(7) (Real Property Services).

Section 151.3503 exempts services performed by an employee of a temporary employment service for a host employer to supplement its workforce on a temporary basis, if certain conditions are met. The services must be tasks normally performed by the host employer’s employees. The host employer must provide all necessary supplies and equipment to perform the job, except for personal protective equipment (PPE) supplied by the temporary service due to federal requirements. The host employer must not rent, lease, purchase, or otherwise acquire supplies or equipment (except PPE) from the temporary employment service or its affiliates. The host employer must also retain exclusive rights to supervise, direct, and control the work of the temporary employee as necessary to operate its business or to meet licensing, statutory, or regulatory requirements. See Section 15.3503(a)(2)(A)-(D).

Rule 3.364(a)(12), defines “temporary employment service” based on the definition of that term in Tex. Labor Code Section 93.001 as “a person, corporation, organization, or other legal entity that employs individuals for the purpose of assigning those individuals to a host employer to support or supplement the host employer’s workforce in a special work situation, including an employee absence; a temporary skill shortage; a seasonal workload; or a special assignment or project.” See Section 151.3503(c)(3).

Neither the Labor Code nor the Tax Code define the word “temporary” as it relates to services by employees. Merriam-Webster defines the word “temporary” as, “lasting for a limited time.” This coincides with the terms that are used in the Labor Code such as “special” and “seasonal”.

Taxpayer acknowledges that the Agreement between Taxpayer and Client does not specify an end date for the services performed by Staff and continues in perpetuity. Individual staff members can work for the duration of the Agreement or be rotated out, when necessary. Because Staff is required to perform the services stated within the Agreement at Client establishments on a perpetual basis, Client does not maintain an adequate workforce. Therefore, Taxpayer is not supplementing Client’s workforce on a temporary basis due to an employee absence, a seasonal workload, or for a special work situation. See Comptroller’s Decision No. 108,766 (2019).

Based on this information, Taxpayer is not providing an exempt temporary employment service. Taxpayer, instead, provides a real property service. Real property services are specifically enumerated as taxable services. See Section 151.0101(a)(11). Taxpayer should not accept an exemption certificate from Client for the services provided and must collect tax on these taxable real property services.

The Texas Tax Code and Texas Administrative Code are accessible at: www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20241122161856.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE

1 Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.