The Bulletin

The Bulletin explicitly addresses the provision of remote help supply services and signals a change in policy by the Department. In the Bulletin, the Department states that the “delivery or use” of remote help supply services occurs where the purchaser receives the benefits of the services. Specifically, the Department says “[w]hether the help supply employee is reporting in person or remotely is not determinative.” Instead, providers of help supply services should look to the location to which the work is delivered in determining the location of delivery or use. Curiously, the Department’s Bulletin points to a Commonwealth Court decision that long predates the current remote work trend for the premise that the law’s “capacity for growth” supports this new interpretation of the Department’s own, old policy.⁶ It uses that logic to conclude that anytime a purchaser receives the benefit of the service in Pennsylvania, the service is taxable in Pennsylvania.

The remote economy has taken another leap forward as a result of the global COVID-19 pandemic, and it’s reasonable to assume that remote help supply will be replacing on-location temporary help for the foreseeable future. However, the Bulletin adds uncertainty to the application of what was once a fairly straightforward bright-line sourcing rule for help supply services. The Department’s attempt to expand the scope of the tax on help supply services to cover services provided from outside Pennsylvania without amending its current policy statement (61 Pa. Code § 60.4) creates ambiguity around the meaning and vitality of the phrase “at a location in [the] Commonwealth”⁷ and tension between a plain reading of the policy statement and the new interpretation offered by the Bulletin. It also raises the question – in a world where many employers operate in multiple states, and where work is becoming increasingly decentralized, virtual, and “gig” oriented – what factors should a purchaser and service provider consider in determining where the benefits of work are received? Unfortunately, the Bulletin doesn’t answer this question beyond reaffirming its presumption that the benefits of work are received in Pennsylvania if the purchaser is located in the state.

Further, the Bulletin arguably exceeds the Department’s statutory authority by expanding the sales tax base to include services previously determined by the General Assembly to be nontaxable. For example, if applied as written, the Bulletin could apply to some remote help desk or call center services that the General Assembly has specifically excluded from tax. Under 72 P.S. § 7201(m), separately-invoiced help desk or call center support services are not taxable. In many cases, those services are performed by remote agents. If a Pennsylvania purchaser of those services exercises sufficient “supervision” over the agents, the Bulletin suggests that the services could be a taxable help supply service. According to Department policy, “supervision” means directing the work activities of the vendor's employee either directly or through a supervisor provided by the vendor.⁸ That definition seems broad enough to cover some typical help desk and call center support services, especially in situations where software companies provide support solutions that cater to the needs of clients with large, complex IT networks. It remains to be seen whether the Department will actually use this Bulletin as a means of recharacterizing other nontaxable services as taxable help supply.

In the meantime, purchasers and service providers, especially those with locations in Pennsylvania, should review their contracts to make sure they understand the service model and tax implications.

Additionally, the Bulletin may create a refund opportunity for certain taxpayers, because it upends prior guidance, which sourced help supply services based on the physical location of the worker. Prior to the Bulletin, many remote help supply service providers sourced their sales of services to Pennsylvania because the services were provided by the workers from a physical location in Pennsylvania. However, according to the Bulletin, the Department no longer considers the remote worker’s physical location to be determinative. If taxpayers paid Pennsylvania sales tax on help supply services where the benefits of the work were received outside Pennsylvania, they may be entitled to a refund.

1. Available at www.revenue.pa.gov.
2. 72 P.S. §§ 7201(k)(15); (o)(13).
3. 72 P.S. § 7201(cc).
4. 61 Pa. Code § 60.4.
5. Id.
6. Commonwealth v. A.J. Wood Research Company, 431 A.2d 367 (Pa. Commw. Ct. 1981).
7. 61 Pa. Code § 60.4(b).
8. 61 Pa. Code § 60.4(a).

Client Alert 2021-251