Absence of “Magic Permanent Assignment Language” does not Preclude Leased Employee Exception
R.C. 5739.01(JJ)(3) provides an exception to otherwise taxable employment services for leased employees provided under a contract “that specifies that each employee covered under the contract is assigned to the purchaser on a permanent basis.” In A.M. Castle and Company v. Testa, Ohio BTA Case No. 2013-5851 (March 9, 2015), the taxpayer received leased employees “as required.” The Tax Commissioner asserted this contract language was insufficient to support their permanent assignment since it did not specifically state the number of provided personnel. Consistent with most recent Supreme Court precedent, the BTA found that the personnel were provided on a permanent basis in the absence of “magic” permanent assignment language. This was based upon the following:
- The course of action under the contract supported the personnel were intended to be permanently assigned and were not seasonal, temporary, or short-term; and
- The individuals were not provided to other clients of the provider.
The BTA noted the number of permanently assigned employees need not “be a static, specific number, which cannot be varied or adjusted based upon extrinsic factors, such as changes in business/operating conditions or employee performance.”
This case highlights the ability to support permanent assignment through the parties’ course of dealings reflective of such intent that the personnel are provided for an indefinite period. This case is on appeal to the Ohio Supreme Court.