Pennsylvania clarifies supply service sales and use tax


On Sept. 16, 2021, the Pennsylvania Department of Revenue (Department) issued Sales and Use Tax Bulletin 2021-03 (Bulletin), which clarifies the sales and use tax treatment of remote help supply services.1 The Department released the updated guidance in recognition of the fact that technological advances have allowed more help supply service employees to work remotely and provide services without being on-site at the purchaser’s place of business. Effective immediately, the Department considers help supply services to be subject to tax if the delivery or use of the service is being provided to a location within Pennsylvania, regardless of whether the work is performed at an on-site location or from a remote location.






Pennsylvania imposes sales tax on the sale of certain enumerated services, including help supply services.2 Pennsylvania law defines a “sale at retail” to include the rendition for a consideration of help supply services, and “use” to include the obtaining by the purchaser of help supply services.3 Help supply services are defined as “[p]roviding temporary or continuing help where the help supplied is on the payroll of the supplying person or entity, but is under the supervision of the individual or business to which help is furnished.”4 Help supply services are subject to sales tax if the delivery or use of the service occurs at a location within Pennsylvania.5

A Department policy statement, promulgated under Title 61, Section 60.4 of the Pennsylvania Code, provides relevant definitions and traditional taxability determinations related to help supply services provided in person by employees reporting to the customer’s physical location.6 “Delivery” is defined in the policy statement as an employee reporting for work at a location in Pennsylvania, and “use” is defined as an employee performing work at a location in Pennsylvania.7 Looking to whether an employee is reporting for work at a Pennsylvania location, the policy statement provides four examples of an employee of a vendor reporting to the purchaser’s location to illustrate the sales tax treatment of traditional help supply arrangements where help supply employees are physically working at a purchaser’s location.8




Sales and Use Tax Bulletin 2021-03


In distinguishing its historic policy statement on traditional help supply arrangements, which was published and became effective in 1991, the Bulletin notes that there are growing instances where help supply employees may no longer be physically working at the purchaser’s location due to technological developments that have allowed some help supply employees to work remotely. Regardless, the Department announced that the same principles to determine traditional delivery or use of help supply services also apply to remote work arrangements.

In applying existing principles to remote help supply services, the Department cites the Pennsylvania Commonwealth Court’s decision in Commonwealth v. A.J. Wood Research Company for the proposition that the law’s concepts have “sufficient vital capacity for growth” to accommodate technological evolution.9 In applying this concept to remote help supply services, the Department determined that such services remain subject to tax if delivery or use of the service occurs within Pennsylvania, regardless of whether the help supply employee reports in person or remotely. Instead, “where delivery or use occurs controls under both traditional and remote arrangements.”

The Bulletin next provides four examples to illustrate the sales tax treatment of specific remote help supply arrangements. The first example features a purchaser located in Pennsylvania and engaging a help supply services vendor located in New Jersey. In this example, all services provided are subject to Pennsylvania sales tax as the vendor’s employee reports to the purchaser’s location in Pennsylvania. However, the second example focuses on a non-Pennsylvania purchaser engaging a help supply services vendor located in New Jersey. Under this example, the New Jersey vendor provides an employee at the purchaser’s data center located outside Pennsylvania, and therefore the services are not subject to Pennsylvania sales or use tax.

Examples three and four present alternative fact patterns, with the purchaser having its headquarters in Delaware. In example three, the purchaser engages a help supplier vendor, located in New Jersey, to provide services for their call center, which is located in Pennsylvania. Even though the help supply employee is working remotely from home in New York, the benefit of the services is ultimately delivered to the location of the call center, and thus the service is subject to sales tax. Finally, example four contains a similar set of facts to that of example three, adding that the purchaser’s employees and supervisor may also work remotely from their homes. However, with the help supply services still being delivered to the location of the call center within Pennsylvania, the services are again subject to tax.






The sales tax treatment of help supply service arrangements in Pennsylvania has historically caused confusion and controversy for both vendors and customers, given that Pennsylvania is one of the few states that defines help supply as an enumerated taxable service. The Department’s new guidance indicates a policy change that seeks to expand the scope of taxable help supply services to now include “inbound” arrangements that are performed by remote employees. Although the Department maintains that it is adhering to the same historical market-based sourcing approach applied to help supply transactions, the Department’s existing policy statement does not account for situations where employees of help supply vendors are working remotely outside the state.

As noted in the Bulletin, Pennsylvania has historically been a destination-based state for purposes of sourcing sales of tangible personal property and services. However, the Department’s reinterpreted sourcing rules will significantly impact help supply vendors providing inbound help supply services since taxability is focused on transactions where the benefit or use of the service is provided to a location within Pennsylvania. The new guidance also raises additional sourcing questions for vendors providing remote help supply services to purchasers operating in multiple states for purposes of understanding where the benefit of the service is received and what portion of the sale is sourced to Pennsylvania.

The Bulletin poses additional compliance challenges for impacted businesses. The recent (and perhaps permanent) rise in remote work for service providers will likely result in additional customers needing to accrue use tax to comply with use tax obligations in the case of unknowing help supply vendors that fail to collect tax on inbound sales transactions. This may present challenges (and additional tax cost) for customers when computing the taxable purchase price of help supply services in that they may not know the help supply employee costs, thereby increasing the likelihood of paying tax on the gross fee as opposed to the net fee or margin.10

From an enforcement perspective, the Bulletin once again raises the question of whether the Department has the authority to issue guidance that effectively expands the sales tax base without explicit statutory support. In recent years, the Department has taken the approach of announcing policy changes by simply releasing administrative guidance rather than promulgating regulations or pronouncements through a defined rulemaking process. For example, the Department recently adopted of an economic nexus standard with a $500,000 gross receipts threshold for corporate net income tax purposes instead of deferring to the state legislature to amend the existing statute or promulgating a formal regulation.11 The Department’s adoption of policy positions via administrative guidance raises the question of whether such positions will withstand scrutiny if challenged in court.

In the meantime, it is important for customers and vendors alike to understand what constitutes a service arrangement that may be classified as help supply and that Pennsylvania will seek to tax such services if the benefit or use occurs at a location within the state’s borders, even if the help supply employee performs the work remotely. With respect to service transactions delivered to Pennsylvania, the scope of such deliverables should be carefully reviewed in order to properly determine whether a service arrangement is in fact considered help supply as defined under Pennsylvania law.


1 Sales and Use Tax Bulletin 2021-03, Remote Help Supply Services, Pennsylvania Department of Revenue, Sept. 16, 2021.
2 72 PA. STAT. § 7202(a).
3 72 PA. STAT. §§ 7201(k)(15), (o)(13).
4 72 PA. STAT. § 7201(cc); 61 PA. CODE § 60.4(b).
5 61 PA. CODE § 60.4(b).
6 61 PA. CODE § 60.4.
7 61 PA. CODE § 60.4(b).
8 61 PA. CODE § 60.4(b)(1)-(4).
9 431 A.2d 367 (Pa. Cmwlth. 1981).
10 The taxable purchase price for help supply services is computed using either a gross fee method, service fee method or average employee cost method. Under the service fee and average employee cost methods, employee costs are deducted from the gross fee to arrive at the taxable service fee and must be itemized on the vendor’s invoice. 61 PA. CODE § 60.4(c)(2).
11 Corporation Tax Bulletin 2019-04, Nexus for Corporate Net Income Tax Purposes, Pennsylvania Department of Revenue, rev. Aug. 6, 2020.





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