Ohio Repeals Sales and Use Tax on Employment Services and Employment Placement Services

Governor DeWine recently signed Ohio’s biennium budget, which in part repeals the sales and use tax on employment services and employment placement services. Pursuant to the legislation, “employment services” and “employment placement services,” are no longer subject to Ohio sales and use tax beginning on October 1, 2021. Under the Ohio Revised Code, “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 health care 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; and
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.

Additionally, “employment placement service” means locating or finding employment for a person or finding or locating an employee to fill an available position.  If an employment services provider or employment placement service provider performed these taxable services or billed for the taxable services prior to October 1, 2021, the sales or use tax should still be applied, collected, and remitted. Note that this change is effective for the State of Ohio only. Other State’s laws will dictate whether employment services and employment placement services are subject to sales and use tax in that jurisdiction, and before assuming one way or another, businesses potentially subject to these taxes should consult with professional legal counsel well-versed in local (state) tax laws. For more information or to seek counsel from our Taxation group, please reach out to request a consultation or call us at 216-696-1422. _____ This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.