Pennsylvania Sales Tax Guidance

On September 22, 2021 the Pennsylvania Department of Revenue (Department) issued guidance on the correct taxation of remote help supply services for sales tax purposes. Help supply services are defined as:

“…providing temporary or continuing help where the help supplied is on the payroll of the supplying person or entity, but is under the supervision of the individual or business to which help is furnished.”

Typically, for sales tax purposes, sales should be sourced to the location where the employee/provider physically performs the service when not dealing with remote services. However, since the sales tax sourcing rule dictates that we look to where the benefit is received, temporary help services provided remotely present more complicated situations for consideration. This can present compliance issues (for those who may owe tax) or potential refunds (for those who have paid tax when not due/should be sourced to another state).

The Department provides the following examples and explanation in the guidance:

• “A purchaser located in Pennsylvania engages a help supply services vendor located in New Jersey. The New Jersey vendor provides an employee who both (a) reports to the purchaser’s location in Pennsylvania in-person and (b) works remotely from her home in New York. All of the services are subject to Pennsylvania tax. The work undertaken by the help supply employee is delivered and used where the purchaser is located.
• A non-Pennsylvania purchaser engages a help supply services vendor located in New Jersey. The New Jersey vendor provides an employee to configure hardware at purchaser’s data center located outside the Commonwealth. The vendor’s employee works remotely from her house in Pennsylvania. The services are delivered to a location outside the Commonwealth and are not subject to Pennsylvania tax. If the employee subsequently remotely works upon the purchaser’s hardware located in the Commonwealth, that portion of the transaction is taxable.
• A purchaser has its headquarters in Delaware. The purchaser engages a help supply services vendor located in New Jersey to provide services for the purchaser’s call center. The call center and associated equipment is located in Pennsylvania. The help supply employee works remotely from her house in New York. Notwithstanding the “technological evolution” of remote work, the help supply service was delivered to the location of the call center and is subject to Pennsylvania tax.
• A purchaser has its headquarters in Delaware. The purchaser engages a help supply services vendor located in New Jersey to provide services for the purchaser’s call center. The call center and associated equipment is located in Pennsylvania, though the employees and supervisor that are directly employed by the purchaser may work remotely from their homes. Likewise, the help supply employee works remotely from her house in New York. Notwithstanding the “technological evolution” of remote work, the help supply service was delivered to the location of the call center and is subject to Pennsylvania tax.”

According to the Department,

“Whether the help supply employee is reporting in person or remotely is not determinative. Rather, where delivery or use occurs controls under both traditional and remote arrangements. As illustrated in the examples above, the difference is that where the work is delivered to is not where the work is conducted at if the help supply employee is not physically working at a location of the purchaser. If the purchaser is located in this Commonwealth, the Department will continue to presume that delivery occurred at a location in this Commonwealth unless otherwise documented for both traditional and remote help supply services. Purchasers or vendors of help supply services may contact the Department for questions regarding how these principles apply to their particular arrangement.”

https://www.revenue.pa.gov/TaxLawPoliciesBulletinsNotices/TaxBulletins/SUT/Documents/st_bulletin_2021-03.pdf

In light of our new remote work environment and the nature of how certain services are delivered, this is welcome guidance for understanding a company’s associated sales and use tax obligations. If you have any questions on the Pennsylvania guidance or associated sales tax ramifications, please reach out to your Citrin Cooperman advisor or State and Local Tax Practice Principal Jaime Reichardt at jreichardt@citrincooperman.com or 215.545.4800 x4520.