Pennsylvania’s sales tax is imposed only on the “service fee” portion of charges for “employment agency services,” “help supply services,” and “interior office building cleaning services” (collectively, the “Services”). See 72 P.S. §§ 7201(g)(6), 7204(51). The taxable “service fee” is the total charge for the Services less the “costs” of the supplied employee which are itemized or stated in the aggregate on “billings” from the vendor. Historically, taxpayers requesting a refund of tax paid on the “employee cost” component of the Services were permitted to provide letters from vendors attesting to the cost of the supplied employee(s). In Sales and Use Tax Bulletin 2025-01, the Pennsylvania Department of Revenue (“Department”) announced that, effective March 12, 2025, the Department will no longer accept such letters because “the law requires that the employee costs [be] itemized or stated in the aggregate on the billing….” The Department advises taxpayers seeking refunds “to have the vendor issue a revised invoice with the employee costs specifically itemized or stated in the aggregate.”
It appears that the Department will continue to accept vendor attestation letters when auditing purchasers of such Services. However, the Bulletin specifies that, if a taxpayer receives relief based on a letter from the vendor, “the vendor may be assessed a tax deficiency, plus interest and penalties if it is determined that the employee costs are inaccurate.”
If you have any questions about the Department’s Bulletin, or any state or local tax issue, please feel free to contact Sharon Paxton (717-237-5393) or any member of the McNees SALT Group.