Repeal of Ohio Sales and Use Taxes on Employment Services and Employment Placement Services

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Effective October 1, 2021, the Ohio sales and use taxes on employment services and employment placement services are repealed. These services remain taxable through September 30. These taxes have been very controversial, and the repeal is most welcome.

Businesses that have been charging for these services and businesses that have been paying these taxes should change their billing and payment systems for any transactions occurring on or after October 1, irrespective of the date of the billing.

This amendment does not exempt wages from income tax withholding.

“Employment service” means providing or supplying personnel, on a temporary or long-term basis, to perform work or labor under the supervision or control of another, when the personnel so provided or supplied receive their wages, salary or other compensation from the provider or supplier of the employment service or from a third party that provided or supplied the personnel to the provider or supplier. “Employment service” does not include:

(1) Acting as a contractor or subcontractor, where the personnel performing the work are not under the direct control of the purchaser.

(2) Medical and healthcare services.

(3) Supplying personnel to a purchaser pursuant to a contract of at least one year between the service provider and the purchaser that specifies that each employee covered under the contract is assigned to the purchaser on a permanent basis.

(4) Transactions between members of an affiliated group….

(5) Transactions where the personnel so provided or supplied by a provider or supplier to a purchaser of an employment service are then provided or supplied by that purchaser to a third party as an employment service, except “employment service” does include the transaction between that purchaser and the third party.

“Employment placement service” means locating or finding employment for a person or finding or locating an employee to fill an available position.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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