This archived Information Release has been superseded by a
later release. It is archived here for historical/reference
purposes ONLY. For the most current Information Releases,
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ST 2000-02 - Employment Service Update Following the
BELLEMAR PARTS Decision - May 15, 2000
The Ohio Supreme Court's decision in Bellemar Parts
Industries, Inc. v. Tracy (2000) 88 Ohio St. 3d 351
rejected the argument that purchases of temporary employment
services are exempt from sales and use tax under either the
purchase for resale exception or the primarily used in
manufacturing exception.1 In light of this
decision, this Information Release addresses the following:
- The disposition of refund claims filed pending the
Bellemar decision;
- Subsequent filing compliance for purchases of temporary
services;
- Resolution of prior liabilities on purchases of temporary
services; and
- Vendor responsibilities.
Disposition of Refund Claims Based on Bellemar
Positions
Many taxpayers filed refund claims based on the positions
taken by the taxpayer in Bellemar. These refund
claims will now be denied at the Sales and Use Tax Division
level. As the claims are processed, taxpayers will receive
notification of the denial together with a form to obtain the
taxpayer's agreement or disagreement. Separate letters will
be sent out for each claim.
Subsequent Filing Compliance for Purchases of
Temporary Services
Taxpayers with Direct Pay Authority should immediately begin
accruing and paying tax on their purchases of employment
services.
All other taxpayers should notify their employment service
vendors to immediately begin collecting tax from them for all
purchases of employment services.
Resolution of Prior Liabilities on Purchases of
Temporary Services
The Department of Taxation will grant a temporary grace
period from penalties to all taxpayers that have failed to
report and remit sales or use tax on purchased employment
services. This temporary grace period begins immediately and
will remain open until December 31, 2000. The grace period
will apply only to purchases of employment services made
prior to June 1, 2000.
Under the grace period, taxpayers will be permitted to report
and pay tax and interest on their pre-June 1, 2000 purchases
of employment services by December 31, 2000 with no
imposition of penalties. The grace period will not apply to
purchases of employment services made after May 31, 2000 and
will not apply to other types of taxable purchases.
Finally, taxpayers assessed after December 31, 2000 for
failure to report and pay tax on purchases of employment
services will be assessed full penalties on all pre-June 1,
2000 purchases.
To assist you in reporting the tax and interest to include
with your payment, an
Excel worksheet is available on the Department's website
[http://tax.ohio.gov/]. (Both
the worksheet and the
instructions for completing it can be accessed directly
from the home page.) We suggest that taxpayers submit a copy
of the worksheet with their payment so that compliance can be
verified upon investigation or audit. If you are unable to
access the website or need some other assistance in computing
the tax and interest due, please contact one of our district
offices.
Checks should be made payable to the Treasurer of State and
mailed with a copy of the worksheet to:
The State of Ohio
Department of Taxation
P.O. Box 530
Columbus, OH 43216-0530
ATTN: Audit Review Section
Sales & Use Tax Division
Vendor Responsibilities
Vendors of employment services are requested to notify their
customers that are currently not being charged sales tax of
the Bellemar decision. If the vendor's client is not
a provider of employment services, then an existing exemption
certificate will most likely be invalid. For example, if a
customer's reason for not paying tax is based on an exemption
certificate claiming that the benefit of the service is being
resold and/or is used primarily in a manufacturing operation,
then the exemption certificate or other documentation will no
longer be valid and tax should be charged. The sooner this
can be accomplished the better. The Department will not
accept as valid a vendor's reliance on such an exemption
certificate for purchases made by a customer after May 31,
2000. Therefore, vendors of employment services continuing to
honor such reasons on or after June 1, 2000 will be subject
to assessment of tax, interest and penalties for erroneously
exempting those sales.
____________________________________________
1To obtain a copy of the Bellemar
decision, go to the Supreme Court’s website at www.sconet.state.oh.us/rod/opinions/list.asp.
The file can be searched by release date (April 12, 2000) or
by caption (name).
If you have any questions regarding this matter, you should
call us at 1-888-405-4039.
OHIO RELAY SERVICES FOR
THE HEARING OR SPEECH IMPAIRED
Phone: 1-800-750-0750