Taxpayer's Contract for Vehicle Drivers Not Taxable Employment Service

Wednesday, March 11th, 2015

 
 
A man driving a car.
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The Ohio Board of Tax Appeals ("Board") ruled that a taxpayer's contract for vehicle drivers was not subject to tax as an employment service.

The taxpayer was a specialty metal products provider with satellite offices in Ohio. The taxpayer contracted with an employment service provider to hire drivers for the taxpayer's vehicles. The taxpayer employed no drivers outside the contract and contracted for drivers for at least one year. The taxpayer was audited for use tax on the contract.

Ohio taxes the sale of employment services. Ohio defines an "employment service" as providing personnel, on a temporary or long-term basis, to perform work supervised by another. The personnel must receive their wages or other compensation from the employment service provider. "Employment services" does not include contracts that are for more than one year and that assign employees on a permanent basis. "Permanent" means that (1) the assignment has no specified ending date and (2) the employee is not being provided either as a substitute for a current employee who is on leave or to meet seasonal or short-term workload conditions.

The Board ruled that this was not a taxable employment service because the drivers were assigned on a permanent basis. The taxpayer provided testimony from three witnesses that (1) the taxpayer employed no drivers outside the contract, (2) the drivers were employed for more than one year, and (3) the drivers were not seasonal or temporary replacements for permanent employees. The Board found that the taxpayer's practices showed the taxpayer intended to keep the workers for more than one year and on a permanent basis. Therefore, the contract was not subject to tax.

http://ttrus.com/sites/default/files/oh/OH_Board_of_Tax_Appeals_2015-03-09.pdf


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