Ohio State Tax Blog

Current developments, commentary and helpful resources regarding Ohio state and multistate taxes from attorneys Steven A. Dimengo and Richard Fry. We concentrate on all aspects of Ohio state taxation, including sales/use tax, income tax and commercial activity tax, from audits to appeals before the Ohio Board of Tax Appeals and Ohio Supreme Court, and have significant experience in multistate tax planning. Contact us.

Home Archives Ohio Sales Tax Are You Paying Ohio Sales Tax on Leased Employees?
Are You Paying Ohio Sales Tax on Leased Employees? PDF Print E-mail
Friday, 04 December 2009 00:00

Otherwise taxable “employment services” are exempt if the personnel are assigned to the purchaser on a permanent basis under a one-year contract. This does not mean the individuals must work for the purchaser forever (or even continuously during the one-year term), but only that each leased employee is intended to be used for an indefinite period of time (i.e., no contemplated ending date).  Thus, the employee cannot be provided as a substitute for an individual on leave or for seasonal or project work.  This issue is particularly relevant in the construction industry since the Ohio Tax Commissioner assumes all construction work is seasonal, precluding permanent assignment of such employees.  However, there clearly is permanent assignment in the construction industry when the leased personnel are intended to move from project to project. 

In order to qualify for this exception, a written contract must reflects the necessary “permanent assignment” language.  The contract must have a one-year term, preferably with annual renewals.  However, the authorities have respected contracts as being one-year contracts even though they are terminable upon 30 days’ notice (and possibly even if they do not last for a year as long as the termination was not contemplated from the beginning of the arrangement). 

Additionally, performance under such contracts must be consistent with permanent assignment.  Manifestations of such an intent are typically illustrated with a graph of the total number of leased employees, reflecting a constant or increasing level of employment of leased employees during the relevant time period.  Each employee’s employment would also be charted to illustrate consistent assignment (with an allowance for natural turnover). 

Finally, if any leased employees are contemplated to be provided on a non-permanent basis, a separate contract can be used for their retention so as not to taint the exempt, permanently assigned employees.  The Ohio Tax Commissioner has taken the position that non-permanently assigned employees provided under a “permanent assignment” contract makes the entire contract taxable.  Although this position has been met with opposition, the issue has not been addressed by an Ohio court yet. Nonetheless, one can simply avoid the issue by having two separate contracts. 

Last Updated on Tuesday, 08 December 2009 19:33



Ohio State Tax Attorney, Steven A. Dimengo

Steve Dimengo is recognized as one of the leading tax attorneys in Ohio, where he has been serving clients for over twenty-five years. Full Profile. Cases. Email.


Ohio State Tax Attorney, Richard B. Fry III

Richard Fry is an Associate focusing on business law, specifically taxation. He holds a J.D. and Masters of Taxation from the University of Akron. Full Profile. Email.



Steve will be speaking at the Lorman Sales and Use Tax in Ohio Seminar to be held in Akron on January 21, 2014.  He will be discussing Manufacturing Exemptions, Transfer of Business and Personal Liability for Sales tax.  Click here to see more (and register).



Steven Dimengo has been named the Best Lawyers' 2012 Akron Tax Law Lawyer of the Year