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Sales and Use Tax Challenges With Highly Skilled Temporary Workers: Varying States' Treatment of Professional Services

Dealing With Problems of "Employer" Control Test, Underlying Services Test, Remote Workers and Apportionment Questions

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, July 13, 2016

Recorded event now available

or call 1-800-926-7926

This course will provide sales and use tax professionals with a thorough and practical guide to the sales tax issues that arise from the utilization of highly skilled temporary workers. The experienced panel will identify the various taxing schemes states are imposing on services provided by this type of temp worker, focusing on the taxation of temporary services, the taxation of the underlying service provided by the temporary worker, potential liabilities for both the provider and the buyer of those services documentation practices, and audit defense practices.


Many companies are utilizing temporary workers and employment services to fill needs for highly skilled technical and managerial personnel. This creates a significant challenge for state taxing authorities in determining whether the use of highly skilled temporary workers is subject to sales and/or use tax. Various states have different approaches on how to tax these employment arrangements, and the lack of uniformity creates a complex landscape for tax advisers to companies utilizing these workers.

Historically, states based their taxing approach to temporary workers on the assumption that most temporary employment involved lower skilled manufacturing personnel, whose work was closely supervised and controlled by the client company and whose wages were paid by the employment agency. However, as temporary arrangements increasingly involve highly skilled workers who perform tasks under less direct control and supervision, many states are adapting their taxing regimes to subject these temporary employment transactions to sales and use tax.

Other critical questions in determining whether and how temporary employment arrangements are taxed include individual states’ definitions of “professional services,” which states utilize a business classification test to tax underlying services, and how states include remotely provided services in their taxing equation. This dynamic area of sales and use tax is increasingly important due to states’ more aggressive approaches in examining tax returns of companies utilizing highly skilled temp workers.

Listen as our experienced panel provides a comprehensive and practical guide to the various states’ approaches to taxation of highly skilled temporary workers.



  1. Evolution of temporary work
  2. Overview of state transaction tax approaches to highly skilled/professional temporary workers’ services
  3. Distinction between “temporary services” and “professional services”
  4. Taxation of underlying services provided by temporary workers
  5. Sourcing, tax base and resale of services
  6. Audit defense challenges for the buyer and the seller


The panel will discuss these and other critical questions:

  • What states apply an “underlying business character” test to determine whether temporary staffing, co-employment or employee placement services are subject to sales and use tax?
  • How are states defining “control” for purposes of determining whether a temporary employment transaction is subject to tax?
  • How are states looking at services provided remotely by temporary workers to determine sales and use taxability?
  • What are the key issues to be considered in defending a state sales and use tax audit focusing on temporary employment services?


Katherine Gauntt
Katherine Gauntt
Engagement Manager

Ms. Gauntt specializes in consulting and process optimization services for sales and use tax, self-audits, credit and...  |  Read More

Chandra Ford
Chandra Ford

Tax Manager
Allegis Group

Ms. Ford has over 18 years’ experience in sales and use tax in North America and Puerto Rico, twelve of...  |  Read More

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