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Ruling 93-21, Sales and Use Taxes / Personnel Services

This Ruling is cited in Ruling 97-5


The Company contracts with law firms in Connecticut to provide law library contract services. Such services vary from firm to firm, but frequently include providing temporary professional, technical or clerical personnel, such as librarians, paraprofessionals or clerks (hereinafter referred to as "library personnel"), to client firms. The Company may also provide looseleaf filing services to its clients, involving the periodic removal and insertion of pages into looseleaf volumes as directed by the publisher.

The Company charges flat hourly rates which are set according to the type of service being provided, with the lowest charges being for looseleaf filing services and the highest being for administrative/supervisory time.


Whether the Company is an agency providing personnel services whose charges are taxable under Conn. Gen. Stat. § 12-407(2)(i)(C) when it provides library personnel to its clients.

Whether the Company is an agency providing personnel services whose charges are taxable under Conn. Gen. Stat. § 12-407(2)(i)(C) when it provides looseleaf filing services to its clients.


Conn. Gen. Stat. § 12-407(2)(i)(C) includes in the definition of "sale" and "selling" "services by employment agencies and agencies providing personnel services." Subdivision (c) of Conn. Agencies Regs. § 12-426-27(b)(3) describes personnel services as meaning and including "furnishing temporary or part-time help to others by means of employing such temporary and part-time help directly."

Personnel services involve the placing, for a consideration, of an agency's own employee with a service recipient for the purpose of having that employee act as the employee of the service recipient during the time the employee is so placed. Typically, such temporary employees are provided in order to support or supplement the workforce of a service recipient.

The applicability of sales and use taxes to any service depends upon a determination of the true object of the underlying transaction. Hartford Parkview Associates v. Groppo, 211 Conn. 246, 251, 211 A.2d 993 (1989). Whether the true object of a library services contract between the Company and its client involving the provision of library personnel and looseleaf filing services is taxable personnel services depends upon whether the client seeks to obtain the services of an employee whom the client can treat as its own employee while such employee is under the direction and control of the client, or whether the contract is for no more than to have certain specific library functions carried on without any supervisory discretion on the part of the client.

In the case of the library personnel, there is a direct employer-employee relationship between the Company and such personnel, as required by Conn. Agencies Regs. § 12-426-26(b)(3)(c) (as opposed to a situation where the service provider merely finds an employee or an employer for another, as in an employment agency service). In addition, for there to be a personnel service, the contract between the Company and its client must also contemplate that the Company's library personnel will act, to a meaningful degree, as the employees of the client while such personnel are with the client. Of course, the scope of employment will be predetermined to some degree by the type of employee contracted for: a typist, for example, cannot be expected to wash windows, but may be expected to perform whatever typing the service recipient deems necessary, under such other reasonable conditions as are set by the service recipient.

Since there are no guidelines within the Sales and Use Taxes Act or the regulations thereunder for analyzing when an employee of a personnel service provider is acting as the employee of a service recipient, it is necessary to look to other accepted authority. Under the Internal Revenue Code, an employer-employee relationship exists when a person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished but also as to how that result is to be achieved. 26 C.F.R. 31.3401(c)-1. This method of analysis, known as the "means and methods test," has been used by the Connecticut Supreme Court to determine whether a worker's status is that of employee or independent contractor. See Darling v. Burrone Bros., 162 Conn. 187, 292 A.2d 912 (1972). When applying the "means and methods test" in the context of a personnel service, it must be determined which person -- the service provider or the service recipient -- controls what is to be done and how it is to be done. The element of control should be the standard which is used to differentiate between a service recipient who wishes to receive the services of a temporary or part-time employee, as opposed to a service recipient who wishes to receive a specific service, which may be performed by an employee of the service provider.

While the clients of the Company may choose to refrain from supervising the library personnel in their duties, the clients have the power to control what is to be done and how it is to be done. Each client contracts for the Company's library personnel as a substitute for the staff it would otherwise need to hire to maintain the library collection and assist the client's legal staff in using library resources. Such functions, while generally delineated by category in the Company's contracts (e.g., paraprofessional services are described in one contract as "book ordering and basic reference assistance"), are subject to the control of the client within the bounds of such descriptions. For example, a paraprofessional or librarian would be expected to order books specified by the client, to process billings from publishers for books or periodicals in the law firm collection as directed by the client, or to assist with research under the direction of the client.

The Company is not engaged in employee leasing when it provides library personnel to its clients. Employee leasing, the providing of leased employees for a consideration, is a type of personnel service taxable under Conn. Gen. Stat. § 12-407(2)(i)(C). Charges for employee leasing are given special treatment under Conn. Gen. Stat. § 12-407(8) and (9), as amended by 1993 Conn. Pub. Acts 332, 28, permitting the exclusion of separately stated payroll expenses of leased employees from the sales price or gross receipts. As defined in Policy Statement 93(3), a "leased employee" is

.... an employee of a service provider who provides services to a service recipient, if (a) such services are performed pursuant to an agreement between the service provider and the service recipient, (b) the employee has performed such services for the service recipient (or for the service recipient and related persons) on a substantially full-time basis for a period of at least one year, and (c) such services are of a type historically performed, in the business field of the service recipient, by employees.

Policy Statement 93(3).

The Company's provision of library personnel may be contrasted with its looseleaf filing service. Such a service, involving "replacing looseleaf pages in law books, placing books on shelves, binding miscellaneous publications and occasionally moving books from one library to another," has previously been held by the Department not to be a taxable personnel service. While the client may have some discretion over aspects of this service, such as directing the order in which publications are to be updated, for the most part there is little opportunity or necessity for the client to control the means and methods of the work, and the looseleaf filing service is performed independently by the Company's employees with little if any oversight by the client.

Rather than functioning as the client's employees, the looseleaf filers are on the client's premises to perform a very specific service. Therefore, as long as the Company separately states the charges for looseleaf filing services from the charges for providing library personnel, the looseleaf filing services are not taxable as personnel services.


The Company is an agency providing personnel services whose charges are taxable under Conn. Gen. Stat. § 12-407(2)(i)(C) when it provides library personnel to its clients.

The Company's charges for looseleaf filing services are not taxable as personnel services under Conn. Gen. Stat. § 12-407(2)(i)(C) if they are separately stated.


Issued: October 27, 1993