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Reemployment Tax for Employee Leasing Companies
A newly licensed employee leasing company (ELC) has 30 days from the date of licensure by the Department of Business and Professional Regulation to make an election with the Department of Revenue to report and pay reemployment tax using the reemployment tax account number and tax rate for each client company of the ELC. This is called the client method. This one-time election by an ELC is binding on all current and future clients. A newly licensed ELC that does not timely notify the Department in writing of its election to use the client method must report all leased and internal employees under its own reemployment tax account number and tax rate.
An ELC that chooses the client method must first register with the Department of Revenue and get a reemployment tax (RT) account number. Each client company must also have a separate RT account number.
Registering and Electing the Client Method Prior to January 1, 2013
If a new ELC chooses to elect the client method prior to January 1, 2013, the ELC must, within 30 days of licensure:
- Register with the Department of Revenue by completing a Florida Business Tax Application (Form DR-1). We have instructions (Form DR-1N) to help you complete the application. (Online registration for ELCs will not be available until January 1, 2013.)
- Attach a letter explaining that the ELC has elected to file using the client method.
- Attach a copy of their employee leasing license from the Department of Business and Professional Regulation.
- Send the application, letter, and copy of the license to the address on Form DR-1.
Registering and Electing the Client Method On or After January 1, 2013
If a new ELC chooses to elect the client method on or after January 1, 2013, the ELC must register with the Department of Revenue within 30 days of licensure. The fastest way is to register online. The online application will guide you through an interactive interview. Once the Department has issued an RT Account number, the ELC can make the client method election online.
Reporting Client Companies’ Information
Once the ELC has registered and elected the client method (whether online or by paper), the ELC will then be able to enter (key or import) each client company's information online.
The import file specification must include:
- ELC Information: DBPR License #, company name, RT account number
- Client Information: FEIN, RT account number, legal entity name, mailing address, city, state, ZIP, leasing start date. Note: under the client method, each client company must have a separate RT account number. The fastest way for a client company to get an RT account number is for them to register online.
Employee information will only be required if the current ELC states that some or all of the client companies were previously reported by another ELC that had common ownership, management or control with the current ELC at the time of the transfer.
Filing and Paying Tax
A tax rate will be calculated for each client company. The ELC must use the calculated rate to electronically file and pay a separate Employer's Quarterly Report (UCT-6) for each client company. An initial tax rate of 2.7% will be assigned to client companies for whom the ELC has filed fewer than eight (8) chargeable quarters (generally it is 10 filing quarters), until an earned rate can be calculated. However, if the client company transferred from a related ELC, the mandatory transfer of experience provisions would apply according to section 443.131(3)(g), Florida Statutes. The ELC will continue to file its own Employer's Quarterly Report for its internal employees using the tax rate assigned.
Notifying the Department of Changes
An employee leasing company must notify the Department of Revenue within 30 days after the initiation or termination of the company’s relationship with a client company. ELCs should use the ELC website to add or terminate client companies.
Frequently Asked Questions about Reemployment Tax for Employee Leasing Companies
- Question: Are Employee Leasing Company (ELC) and Professional Employer Organization (PEO) the same?
- Answer: Yes, the names (ELC or PEO) are often used interchangeably.
- Question: If the ELC client already has a reemployment tax (RT) account number, does the client need to obtain a new RT number?
- Answer: No.
- Question: If the client does not have a RT number, must the client obtain one?
- Answer: Yes, if the ELC is electing the client method, all clients must obtain their own reemployment tax account numbers if they do not already have one assigned. The client must register online or complete and submit a Florida Business Tax Application (Form DR-1). The client should indicate the leasing arrangement in the application process.
- Question: Will the state set up a reemployment tax (RT) account number for the client?
- Answer: No. The client must register for a RT account number with the Department of Revenue.
- Question: The law requires that after the election to report and pay using the client method, the ELC must file and pay the Employer’s Quarterly Report by approved electronic means. Will concessions be allowed if the ELC is in process but not yet able to report client level detail in electronic format by April 30, 2013?
- Answer: No. Currently, any employer with 10 or more employees must report and pay electronically.
- Question: The law says the client company shall continue to report the nonleased employees under its own rate. Does “nonleased employees” refer to employees not covered under the ELC arrangement?
- Answer: Yes.
- Question: If an employee leasing company chooses the new client method option, will all the clients under that leasing company move to that method or do the leasing company's clients each have a choice about how leased employees will be reported?
- Answer: The election applies to all the employee leasing company's current and future clients, for as long as the leasing company has a written agreement in effect with a client.