TAA 22A-004 Cleaning Services
QUESTION: Does the revised contract between Taxpayer and Contractor involve taxable housekeeping services?
ANSWER: The revised contract between Taxpayer and Contractor does not involve taxable housekeeping services.
February 3, 2022
Technical Assistance Advisement 22A-004
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Sales and Use Tax
Taxability of Cleaning Services Performed by Cleaning and Staffing Contractor
Section: 212.05(1)(i), Florida Statutes (F.S.)
Rule: 12A-1.0091, Florida Administrative Code (F.A.C.)
Dear XXX XXXXXXXX:
This letter is in response to your request dated November 16, 2020, for issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., concerning the taxability of cleaning services provided to a resort hotel. An examination of your request has established you complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.
On May 29, 2020, the Department issued TAA 20A-009 to Taxpayer regarding the issue presented. After the issuance of TAA 20A-009, Taxpayer and Contractor revised their Contractual relationship such that the facts presented here are different from those presented in TAA 20A009. Rather than withdrawing TAA 20A-009, the Department stands by the conclusion reached in TAA 20A-009 based on those facts presented. Again, the facts presented in the present TAA request differ and as such the conclusion reached below differs.
STATEMENT OF FACTS
Taxpayer is a Delaware company and is incorporated in the State of Florida. Its business involves providing sleeping accommodations to transient guests at a resort hotel located in Orlando, Florida [hereinafter “Hotel”]. During peak occupancy periods, Taxpayer needs to augment its own staff in order to maintain a high level of quality for all types of services expected by guests at the resort hotel (not only housekeeping needs but also such things as golf course attendants, prep cooks, and laundry washers). Taxpayer entered into a contractual agreement with XXXXXXXXXXX XXXXXXXXXXXXXXXXXX (hereinafter “Contractor”) for additional staff during those periods. Taxpayer believes the contract with Contractor achieves its intent to purchase temporary employees or staff to supplement its workforce. Taxpayer does not believe the contract with Contractor involves services (e.g., nonresidential cleaning services) subject to sales tax.
To provide evidence for its assertions, Taxpayer submitted a final drafted and fully executed written contract between Taxpayer and Contractor. Pertinent excerpts from the contract read as follows:
Recitals
A. [Taxpayer] . . . owns the [Hotel];
B. Given the seasonality of the Florida hospitality industry, fluctuating business levels, and the efficiencies typically yielded from the use of trained outsourced labor, it is not uncommon for hotels and resorts to engage staffing companies such as Contractor to provide skilled hospitality labor on an as-requested basis;
C. [Taxpayer] desires to engage Contractor to assign employees, on an as-requested basis, who are able to fulfill those positions described in Appendix “A” attached hereto (the “Services”); and
D. Contractor has skilled and experienced employees that it can provide for [Taxpayer] on the terms set forth herein.
Agreement
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1. Term
This Agreement shall commence January 1, 2021 and end December 31, 2021. In the event that [Taxpayer] continues to retain Contractor for Services and Contractor continues to provide such Services for [Taxpayer] beyond the initial period set forth above, the terms of this Agreement shall continue in effect until the Agreement is renewed on terms agreed by the Parties or terminated as set out below . . ..
2. Provision of Labor
The Contractor shall, throughout the term of this Agreement and on an as-needed basis, provide employees who are able to fulfill the positions outlined in Appendix “A” attached hereto.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Contractor agrees that it, and each person assigned by it to perform Services at the Hotel, shall at all times conduct themselves in a manner conforming with the image and quality of service, cleanliness and professional standards of [Taxpayer], and shall comply with the Rules for Contractors attached as Appendix “B.”
In addition to the foregoing, Contractor represents and warrants that it will comply with the following requirements:
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- Contractor will ensure each of its employees is adequately trained, skilled, and experienced to ensure they are suitable for assignment at the Hotel;
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3. . . ..
4. Relationship Between Parties
It is expressly agreed that neither Contractor nor any employee of Contractor is or shall be deemed an employee of [Taxpayer] for any purpose whatsoever, but instead Contractor is and shall be deemed an independent contractor. It is expressly agreed that Contractor will select, designate and assign all personnel who may perform the Services required under this Agreement. Each of Contractor’s employees shall sign an acknowledgement outlining Contractor’s role as his/her employer and recognizing that [Taxpayer] is not their employer, as set out in Appendix “F” attached hereto. [Taxpayer] may, from time to time, make available certain facilities and amenities (e.g., employee parking lot, dining area and staff meals, and access/security cards) for use by Contractor and Contractor’s employees. Regardless of whether such facilities and/or amenities are provided by [Taxpayer] for a fee or gratis, the provision of such facilities and/or amenities shall in no manner be construed to create an employee-employer relationship nor otherwise jeopardize the independent contractor relationship. . ..
Contractor acknowledges that it has the sole responsibility for the payment of its employees’ compensation and the withholding and payment of all required taxes, including state unemployment insurance. Contractor shall maintain all employee records and is responsible for tax-related questions, unemployment inquiries and the production and mailing of all applicable tax forms.
5. . . .
6. Invoicing and Fees
a. Contractor will invoice [Taxpayer] on a weekly basis for the Services performed by the employees its supplies to work at the Hotel. . . [Taxpayer] will approve the daily billing units using the Contractor’s XXXX system. [Taxpayer] shall designate one or more persons to serve as a “Hotel Authorized Representative” to approve and sign documentation of the daily billing units through Contractor’s XXXX System.
b. The hourly rates for the Contractor’s employees are set forth by job categories and scope of work on Appendix “A” attached hereto. [Taxpayer] acknowledges that unforeseen events may require additional time to complete tasks, under the advance approval of [Taxpayer], [Taxpayer] will be billed at premium rates.
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e. Contractor shall be permitted, at its sole cost, to install a time capturing system at the Hotel for the purpose of recording the worked time of Contractor’s employees. Notwithstanding anything in this Agreement to the contrary, if such time capturing system is implemented, the Parties agree it shall be the exclusive method of recording the work time of the Contractor’s employees. Any other instruction on fees and billing procedure are found either in this Section 6 or in Appendix “A” attached hereto, which is incorporated herein by reference.
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23. Non-Solicitation
[Taxpayer] agrees that, during the Term of this Agreement and for a period of one year following the termination of this Agreement for any reason whatsoever, it shall not, either directly or indirectly, on its own behalf or on behalf of others, encourage or induce the voluntary termination of any of Contractor’s employees that performed any of the services hereunder (the Restricted Employees”) and shall not solicit any Restricted Employee to become an employee of the [Taxpayer] and/or an employee of any vendor other than Contractor. . ..
24. . . ..
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The following excerpts taken from “Appendix A” attached to the contractual agreement read as follows:
APPENDIX “A”
1. Contractor shall supply its employees (“Assigned Employees’”) to fulfil the positions outlined below at the Hotel (the “Services”) upon request by [Taxpayer].
2. . . ..
3. . . ..
4. The hourly rates set forth below shall be fixed through July 2021, but may be modified by Contractor thereafter. Contractor, with proper written notice, may adjust the rates on an annual basis if there is an increase in payroll taxes or a legislative mandated increase in worker’s compensation cost, or to respond to any increases as a result of legislative, regulatory, taxes or judicial action.
. . . The Assigned Employees are not eligible to receive free meals or parking on any days other than those in which they are scheduled to perform the Services hereunder.
5. Notwithstanding any other provision of this Agreement, if [Taxpayer] terminates this Agreement or notifies Contractor of its intent to terminate this Agreement and [Taxpayer] desires to have all or some of the Assigned Employees continue to work at the Hotel’s facilities, [Taxpayer] shall have the following options:
a. To pay Contractor a XXXXXX per employee flat fee in exchange for [Taxpayer] directly hiring the employee during the restricted period mentioned in Section 23 of the Agreement; or
b. To continue to pay Contractor for such Assigned Employee’s services at Contractor’s then current billing rate for as long as the Assignment Employee(s) continue to perform services for [Taxpayer].
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6. Pricing by Available Position:
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REQUESTED ADVISEMENT
[Taxpayer] asks whether housekeeping services performed by Contractor’s employees are subject to sales tax.
APPLICABLE LAW AND DISCUSSION
Section 212.05(1)(i)1.b., F.S., and Rule 12A-1.0091(1)(a), F.A.C., provide that nonresidential cleaning services, as enumerated in NAICS National Number 561720 of the North American Industry Classification System published in 2007, are subject to tax. Nonresidential cleaning services are those services rendered to maintain the clean and sanitary appearance and operating condition of nonresidential building interiors. NAICS National Number 561720, janitorial services, includes cleaning offices, shopping centers, and restrooms.
Rule 12A-1.0091(1)(a), F.A.C., provides the following illustrative examples of taxable services:
1. Acoustical tile cleaning services;
2. Building cleaning services, interior;
3. Custodial services;
4. Deodorant servicing of restrooms;
5. Disinfecting services;
6. Floor waxing services;
7. Housekeeping (cleaning services);
8. Janitorial services;
9. Maid services;
10. Maintenance of buildings (except repairs);
11. Office cleaning services;
12. Restroom cleaning services;
13. Service station cleaning and degreasing services;
14. Venetian blind cleaning;
15. Washroom sanitation service; and
16. Window cleaning (interior or exterior).
The NAICS Industry Code No. 561320 provides the following description for Temporary Help Services:
This industry comprises establishments primarily engaged in supplying workers to client’s businesses for limited periods of time to supplement the working force of the client. The individuals provided are employees of the temporary help service establishment. However, these establishments do not provide supervision of their employees at the client’s work sites. [emphasis supplied]
Section 212.05(1)(i)4., F.S., requires a separate identification of taxable services from nontaxable services, and other items that are not taxable, if the seller or service provider intends to avoid collecting and remitting sales or use tax on the nontaxable portion of the total invoice amount.
ANALYSIS
Taxpayer utilizes Contractor for temporary employment services to secure additional housekeeping staff needed to supplement Taxpayer’s workforce, all of which are engaged for a limited duration. As clarified in Rule 12A-1.0091(1)(a), F.A.C., housekeeping services are considered taxable cleaning services when performed on a nonresidential building, such as a Hotel.
Charges for nonresidential cleaning services are subject to sales tax. Typically, cleaning service providers supply the labor and personnel, supplies, and the supervision or management over the activities that are being performed when providing this service.
Charges for staffing services are not subject to sales tax. The NAICS code number 561320, entitled, Temporary Help Services is not included under the taxable NAICS codes. However, temporary help service providers do not provide direct supervision of the employees at the client’s work site(s). Therefore, nontaxable staffing services are those services provided as temporary or continued help provided to another business on a contract or fee basis, and does not include direct supervision or management of a service taxable under s. 212.05(1)(i), F.S.
The contract between Taxpayer and Contractor does not involve management and supervision over the temporary employees or staff provided by Contractor. A determining factor for the nature of the services performed by Contractor rest with whether management/supervision is provided. Contractor does not have any physical presence at the Hotel other than the temporary employees or staff. As demonstrated in the above excerpts from the contract, Taxpayer engages Contractor’s employees to supplement the labor force of the Hotel and the employees are paid based on hourly wages. Appendix “A” of the contract lists various positions which are filled by Contractor’s employees. Each position has a job description and a pre-determined hourly rate. There is a time capturing system to record the time worked by the employees, and Contractor is paid based on the hourly rate and hours worked by each employee. Moreover, Contractor is not responsible for any equipment, tools, supplies, chemicals, uniforms, or any other items necessary to perform the duties at the resort/hotel. Taxpayer provides all essential tools and supplies necessary for the employees to perform their duties. The terms and conditions stated in the contract supports that Taxpayer provides the management and control over each employee.
CONCLUSION
Based on the terms and conditions of the contract between Taxpayer and Contractor, housekeeping services performed by temporary employees and staff are not subject to sales tax.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is binding on the Department only under the facts and circumstances described in the request for this advice, as specified in Section 213.22, F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised that subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this advice is based may subject similar future transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of Section 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this response, deleting names, addresses and any other details which might lead to identification of the [Taxpayer]. Your response should be received by the Department within 15 days of the date of this letter.
Joseph D. Franklin III
Tax Law Specialist
Technical Assistance and Dispute Resolution
