Tax Type
BPOL Tax
Description
Staffing firm entitled to treatment under Va. Code § 58.1-3732.4.
Topic
Basis of Tax
Local Taxes Discussion
Date Issued
10-05-2004
October 5, 2004
Re: Appeal of Assessment: Final Local Determination
Taxpayer: *****
Locality Assessing Tax: *****
Business, Professional and Occupational License (BPOL) Tax
Dear *****:
This final state determination is issued upon the application for correction filed by you on behalf of ***** (the "Taxpayer"), with the Department of Taxation. You appeal a final local determination by the ***** (the "County") in which it refused to classify the Taxpayer's business as a professional employer organization (PEO), or a provider of temporary help services under the County's BPOL ordinance.
The following determination is based on the facts presented to the Department as summarized below. The Code of Virginia sections cited are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us.
FACTS
The Taxpayer provides temporary home nursing services for critically ill children upon their discharge from a hospital. The Taxpayer states that these children cannot be discharged from the hospital unless there is qualified nursing care available in the home. Insurance carriers and state agencies will not continue coverage in the home absent such home nursing care.
When a critically ill child is ready to be released from a hospital, the hospital contacts the Taxpayer for the provision of skilled nursing care at the child's home. The Taxpayer and the parents of the child then enter into a contract that provides for direct invoicing for the care of the child to the insurance provider. The employment agreement entered into by the Taxpayer and the parents contains the following documents:
-
- Authorization for Assignment of Benefits. This document authorizes the taxpayer to invoice the insurance provider or medical benefits payor.
-
- Client's Bill of Rights and Responsibilities. This document sets forth the relationship between the Taxpayer and the parents of the critically ill child as to the care provided to the child.
-
- Consent to Release Information. This document authorizes the Taxpayer to secure and disseminate medical information about the patient necessary to provide him with the proper level of care.
-
- Client's Informed Consent. Executed by the parents and the Taxpayer, this document authorizes the care to be given by the Taxpayer, and authorizes the Taxpayer to bill these services directly to the insurance company or the medical benefits payor.
-
- Physician's Plan of Treatment. This document identifies the care the supervising physician expects the Taxpayer to provide upon a patient's release from a hospital into a home care situation.
The Taxpayer contends it is a staffing agency and under the provisions of Va. Code § 58.1-3732.4, it should be treated as a staffing firm for BPOL tax purposes. The County disagrees, stating that because the staffing is provided to an individual rather than to a business entity, the Taxpayer does not come under the provisions of Va. Code § 58.1-3732.4.
ANALYSIS
BPOL Tax Treatment of PEOs and Staffing Firms
Virginia Code § 58.1-3732.4 A addresses the unique treatment afforded to staffing firms for purposes of BPOL taxation.
-
- Gross receipts for license tax purposes under this chapter shall not include employee benefits paid by a staffing firm to, or for the benefit of, any contract employee for the period of time that the contract employee is actually employed for the use of the client company pursuant to the terms of a PEO services contract or temporary help services contract. The taxable gross receipts of a staffing firm shall include any administrative fees received by such firm from a client company, whether on a fee-for-service basis or as a percentage of total receipts from the client company.
In order to understand the dispute between the Taxpayer and the County over the Taxpayer's assertion that it should be classified as a staffing firm, it is necessary to highlight a few definitions concerning PEOs and staffing firms in Va. Code § 58.1-3732.4 B.
· "Client company" means a person, as defined in § 1-13.19, that enters into a contract with a staffing firm by which the staffing firm, for a fee, provides PEO services or temporary help services.
· "PEO services" or "professional employer organization services" means an arrangement whereby a staffing firm assumes employer responsibility for payroll, benefits, and other human resources functions with respect to employees of a client company with no restrictions or limitations on the duration of employment.
· "Staffing firm" means a person, as defined in § 1-13.19, that provides PEO services or temporary help services.
· "Temporary help services" means an arrangement whereby a staffing firm temporarily assigns employees to support or supplement a client company's workforce.
· "Temporary help services contract" means a contract pursuant to which a staffing firm provides temporary help services for a client company. [Emphasis added.]
The Taxpayer asserts that it is a staffing firm, as defined above, providing temporary help services. Therefore, the Taxpayer believes it qualifies for treatment under Va. Code § 58.1-3732.4. The County maintains that the Taxpayer fails to qualify as a staffing firm providing temporary help services because it enters into agreements with individuals rather than business entities. The County's position is not supported by the statute. The definition of a "client company" includes a person that enters into contract with a staffing firm. The term "person" in Va. Code § 58.1-3732.4 is specifically defined by reference to Va. Code § 1-13.19 as "any individual, corporation, partnership, association, company, business, trust, joint venture or other legal entity." Therefore, a firm can qualify for treatment under Va. Code § 58.1-3732.4 when providing temporary help services to individuals, provided the other requirements are satisfied. In other words, the fact that the Taxpayer provides services to individuals rather than business entities does not, by itself, disqualify it from treatment as a staffing firm under Va. Code § 58.1-3732.4.
The Taxpayer is not furnishing "PEO services" or "temporary help services," within the meaning of the statute. The fact that the Taxpayer is temporarily assigning employees that do not support or supplement a client company's workforce precludes the Taxpayer from achieving status as a provider of "temporary help services" for BPOL tax purposes. In this case, the "client company" is the family of the individual requiring nursing services, as evidenced by the fact that the contract for nursing services is between the Taxpayer and the individual's family. The Taxpayer is supplying a new service to an individual (i.e., the client company) that, at the time the contract is executed, has no workforce, rather than supporting or supplementing a service provided by an existing workforce.
Similarly, Taxpayer cannot qualify as a provider of "PEO services" because the individuals providing home nursing services are not "employees of [the] client company." Va. Code § 58.1-3732.4 B. The nursing care professionals are employees of the Taxpayer.
It is important to note that if it were the case that the Taxpayer had a contractual arrangement with the hospital to provide these supplemental services for the clients, it would be supplementing the hospital's (i.e., the client company's) workforce. Under that scenario, the Taxpayer would be properly classified as a staffing firm under the provisions of Va. Code § 58.1-3732.4, but those are not the facts here.
DETERMINATION
Based on the information provided, the County correctly determined that the Taxpayer's business does not qualify as a staffing firm under Va. Code § 58.1-3732.4. If the Taxpayer can provide documentation showing it has a contractual relationship with the hospital and the Taxpayer's temporary help services are required to support or supplement the hospital's services, it may qualify as a staffing firm entitled to treatment under Va. Code § 58.1-3732.4. Absent such evidence, the County's final local determination stands.
If you have any questions regarding this determination, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
-
-
-
-
-
-
AR/49759H
Rulings of the Tax Commissioner