Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 211 - Taxable Services › Rule 701-211.23 - Private Employment Agency, Executive Search Agency

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
In
				general.
Private employment agencies engaged in the business of
				providing listings of available employment, counseling others with respect to
				future employment, or aiding another in any way to procure employment are
				selling a service subject to sales tax, regardless of whether the service is
				rendered for a prospective employer or prospective employee.
(2)
Principal place of employment
				outside of Iowa.
Services rendered by private employment agencies
				which place a person and where the person's principal place of employment is
				outside of Iowa are not subject to Iowa sales tax. For purposes of this rule,
				"principal place of employment" means the primary work location of the
				employee.
EXAMPLE 1: Company X contracts with Agency Z, an Iowa
				  employment agency, to secure employment for an employee to work at a production
				  plant in Illinois. Agency Z finds a suitable employee who is hired by Company
				  X. Because the employee's principal place of employment is outside the state,
				  this service is not subject to Iowa sales tax.
EXAMPLE 2: Company B, a sales company, contracts with Agency
				  C, an employment agency, to secure a salesperson to travel throughout Iowa,
				  Missouri, and Nebraska. Both Company B and Agency C are located in Iowa. Agency
				  C is successful in finding a salesperson for Company B. Though the salesperson
				  will be traveling throughout the three states, because Company B, the principal
				  place of the salesperson's employment, is located within Iowa, Agency C's
				  service is subject to Iowa sales tax.
(3)
Executive search
				agencies.
Executive search agencies that are engaged in the business
				of securing employment for top-level management positions are selling a service
				subject to sales tax, regardless of whether the executive search agency is
				licensed under Iowa Code chapter 94A or not. Further, unlike the exclusion
				found in subrule 211.23(2) for private employment agencies, executive search
				agencies' services performed in Iowa are subject to Iowa sales tax regardless
				of whether the principal place of employment for the person the agency placed
				into employment is located within Iowa.
(4)
Private employment versus
				executive search agencies.
To determine if an agency is an executive
				search agency or a private employment agency, the following nonexhaustive lists
				of elements may be used to distinguish the two.
a. Private employment agency:
(1) All levels of jobs in an organization.
				All salary levels.
(2) Large number
				of clients at all times. Both possible employers and employees.
(3) Individual's rÃ©sumÃ©
				circulated to many possible employers.
(4) No extensive analysis of the position or
				the individual.
(5) Normally does
				not make travel arrangements for interviews, does not conduct salary
				negotiations, does not perform detailed follow-up studies.
(6) Paid by either the company or the job
				seeker.
(7) Paid on a
				contingent-fee basis. Paid only if a referred person is hired.
(8) Does engage in general advertising of
				available positions.
(9) Overall
				placement of an individual is not as extensive or sophisticated.