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Ruling 2018-2 - Sales and Use Taxes, Personnel Services


The Company recruits healthcare professionals, such as registered nurses and physical therapists, from outside the United States (“Practitioners”) to be placed with healthcare providers (“Clients”) throughout the country. The Company hires the Practitioners as its employees and trains them at its headquarters to prepare them to practice in the United States. After a Practitioner has passed through this orientation period, the Company assigns the Practitioner to a Client under a contract between the Company and the Client, which has a term of two to three years.

After the Company places a Practitioner with a Client, the Client assigns a patient caseload to the Practitioner. Each Practitioner engages in the following activities:

  • Provides treatment for physical or functional deficiencies that are due to injury, disease, or other malady;
  • Conducts treatment at the patient’s home or, upon occasion, at the Client’s facility;
  • Provides treatment under a physician’s orders, which act as the equivalent of a prescription and specify physical and functional milestones for the patient’s treatment;
  • Uses his or her professional judgment in the design and implementation of the best course of treatment to achieve the milestones; and
  • Modifies the treatment based on the patient’s progression within the recognized methodology of the Practitioner’s profession and the Practitioner’s professional judgment.
Each Practitioner must adhere to the following directives of the Client:
  • Accept assignments of patients for treatment based on physician orders;
  • Accept the location of treatment;
  • Follow the Client’s code of conduct and ethics;
  • Use the documentation systems of the Client;
  • Use any timekeeping devices required by the Client;
  • Report patient status in records;
  • Accept training on healthcare-specific policies and procedures provided to the general employee population pursuant to regulatory requirements; and
  • Accept training on Client-specific policies and procedures provided to the general employee population.

While the Practitioner is with a Client, the Company does not advise or control the Practitioner’s professional services or treatment methods. Instead, the Client is solely responsible for providing each Practitioner such day-to-day guidance, assistance, and other information as is necessary for the successful and timely completion of the Practitioner’s responsibilities while engaged by the Client.

The Client is responsible, under its contract with the Company, to monitor the quality of the Practitioners provided to the Client through: direct observation of services provided by the Practitioners; audits of their documentation; and reviewing incident reports, performance data, input from the Client’s staff, patient satisfaction surveys, and/or results of risk management activities. If the Client notifies the Company that any Practitioner is not meeting the requirements set forth in the contract, the Company will cooperate with the Client in developing and implementing a corrective action plan.


Is the Company providing personnel services that are subject to Connecticut sales and use taxes?


Yes, the Company is providing personnel services that are taxable under Conn. Gen. Stat. § 12-407(a)(37)(C).


Connecticut generally imposes sales tax on retail sales of tangible personal property, whereas sales of services are not subject to sales tax unless specifically enumerated as taxable in Conn. Gen. Stat. § 12-407. 

Agencies providing personnel services are specifically enumerated as subject to sales and use tax. Conn. Gen. Stat. § 12-407(a)(37)(C). 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 Limited Partnership v. Groppo, 211 Conn. 246, 251, 558 A.2d 993 (1989). When the service recipient has a degree of control over the service provider’s employees similar to that found in an employer-employee relationship, the true object of the transaction is more likely to be the provision of personnel services. The two necessary elements of a taxable personnel service are:

  • A service provider must directly employ employees who will furnish temporary or part-time help to a service recipient; and
  • While an employee is with the service recipient, the service recipient must have control over the work the employee does as well as how the work is done within the general parameters of the type of personnel service contracted for (for example, clerical or accounting).

Conn. Agencies Regs. § 12-426-27(b)(3)(c); Policy Statement 2007(7), Taxation of Services by Employment Agencies and Agencies Providing Personnel Services.

The Company is in the business of employing Practitioners to provide their services to the Clients. Under Connecticut law, Practitioners such as physical therapists and registered nurses are required to have education and training in their areas of expertise and hold valid state licenses in Connecticut in order to perform their services in this state. Although the Practitioners are required to exercise a degree of professional judgment, the Clients assign the patients for whom, and the location at which, the Practitioners perform the work, provide the physician’s orders and administrative rules that they must follow, and assess the quality of their work. Accordingly, the Practitioners are working under the direction and control of the Clients.

Based on these facts, the Clients have direct control over the Practitioners. The Clients determine what work is to be done by the Practitioners and how it is to be done, even though the specific methods of performing services on the patients are based on the Practitioners’ specialized training. The true object of the contracts is for the Company to furnish qualified, trained, and licensed staff to the Company’s Clients.

Connecticut does not set a time limit for contracts under which personnel are furnished to be considered personnel services. Therefore, the fact that the contracts between the Company and the Clients have a two- or three-year term does not prevent the services provided by the Company from being taxable as personnel services.

June 28, 2018