Sales and Use Tax | Temp Agency Fees No Longer Taxable in Ohio
Ohio Governor Mike DeWine signed the Ohio biennium budget, Am. Sub. House Bill 110, earlier this summer providing funding to the state for the next two years. Included in the bill was the repeal of sales tax on employment service provider (“temp agency”) fees beginning October 1, 2021 in Ohio.
If a temp agency performed services or billed for services by September 30, 2021, then these services will be considered taxable for sales and use. Invoices issued by temp agencies for employment services performed on or after October 1, 2021 should exclude sales tax.
This could potentially result in a lower cost for using temp agencies to fill staffing needs. If you currently are using a temp agency or plan to utilize temp agencies soon, keep this in mind as your organization sources its needs and when invoices are received.
Expected impact for Ohio businesses
According to the Ohio Chamber of Commerce, repealing the tax could mean more than $300 million in savings over the next two years; the organization also notes that eliminating the tax will make Ohio more competitive with neighboring states.
The change comes at a welcome time as businesses and organizations in virtually every industry struggle to fill open positions and retain current employees in a historically tight labor market.
Additional budget provisions that could benefit businesses
The new Ohio budget also includes other provisions that could benefit businesses in the state:
- New tax deductions for capital gains received from the sale of a business as well as certain other capital gains
- Increase in the number of years transformational mixed-use development credits will be available to developers
- New tax credits for “megaprojects” that have at least $1 billion in fixed-asset investments or generate at least $75 million in Ohio employee payroll
- Removal of language that would have changed rental property valuations eligible for federally-assisted and low-income housing
Questions on sales and use tax?
Have a question about how these changes may affect your business, sales tax compliance, or other sales and use tax questions? The Sales Tax Compliance Management team at Barnes Dennig is here to help. Contact us for your free consultation.