Sales Tax and Services: Manpower Overcomes "Look Through" Position (Wisconsin)
- Manpower is selling the skill-related services of its employees and Manpower receives compensation in exchange for the services performed by its employees.
- the term “services” in the sales and use tax statutes is not limited to those provided by “conventional service providers.”
- “services” must be construed very broadly and that the case law and statutes do not support Manpower.
- Manpower's position is a matter of semantics, not substance.
- the Wisconsin Legislature has acted to exempt only the sale of services by one identified type of service provider—veterinarians—from the imposition of sales and use tax under Wis. Stat. § 77.52(2)(a)10 and it has not acted to do so in reference to “temporary help companies.”
- temporary help services are not taxable under Wis. Stat. § 77.52. Manpower makes a number of claims in support of this argument.
- unlike goods, only services that are specifically listed in Wis. Stat. § 77.52 are subject to the sales and use tax, and “temporary help services” is not generically listed there.
- under Wisconsin law, tax liability cannot be imposed without clear and express language and ambiguities must be resolved against taxability.
- temporary help services are distinguishable in certain respects from the list of taxable services in Wis. Stat. § 77.52, in that (i) Manpower does not supervise or direct the workers, (ii) Manpower does not define the scope of the work, (iii) Manpower does not warrant a specific outcome or result, (iv) Manpower does not provide tools or equipment or training to the workers, and (v) Manpower does not control the location of the work.
- for purposes of the sales and use tax, workers placed by Manpower are employees of Manpower's clients, not Manpower.
- the Department has historically accepted Manpower's position.
- the Department's theory of liability has not been accepted by other states.
- the Department's construction would lead to inequitable results.
- the Department audited Manpower three previous times and did not issue a similar assessment; therefore, the Department should be equitably estopped from pursuing this assessment.
- the workers that Manpower sends out are in many ways essentially substitutes or stand-ins for the purchaser's own work force, and the wages of one's own workforce, as the Department agrees, are clearly not subject to sales and use tax.
- once at a job site, a Manpower employee may wind up doing tasks that are clearly non-taxable based on the purchaser's needs on that particular day, which calls into question the nature of the original transaction itself.
- the minute-by-minute recordkeeping requirements suggested by the Department are significantly more burdensome than those normally required of a seller subject to sales tax.
- there are at least two major differences between a taxable service and a service provided by a temporary help company: (1) Manpower does not control the employee performing the taxable service; and (2) Manpower does not guarantee a particular result.
An examination of the substance and realities as suggested by the litigants led the commission to the conclusion that there is a reasonable doubt that temporary help services and the taxable services listed in the statute are the same thing.
Therefore, the commission concluded that “temporary help services” are not the same as the services that the legislature has enumerated in Wis. Stat. § 77.52, and “temporary help services” are not taxable.
- If you are a "temporary staffing company," then you should review your taxability situation in Wisconsin and other states.
- Be aware of what services are taxed in the states in which you operate.
- Be aware of what positions your state(s) is taking toward your industry. Wisconsin, like other states, tax specific services. Services that are not specifically listed as taxable, are generally assumed to be nontaxable. In this case, Manpower's services were not listed as taxable, but Wisconsin was attempting to invoke their "look-through" position; which the commission struck down.
- Be aware of the lack of uniformity among states. The service your company provides could be taxable in one state, and not be taxable in another.
- Be alert for states changing their tax laws to tax more services.
- This is another example of how service companies are becoming a target for additional sales tax revenue.
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