Taxability of Certain Clinical Medical Trial Services Discussed in New York

Monday, June 4th, 2012

New York

The New York Department of Taxation and Finance recently issued guidance regarding the taxability of certain services offered in conjunction with clinical medical trials. N.Y. Advisory Op. of the Commr. of Taxn. & Fin. TSB-A-12(11)S (May 15, 2012). The petitioner performs global patient recruitment and retention services for medical drug companies and medical equipment supply companies. They help recruit qualified patients to participate in various drug studies offered by these medical drug and equipment companies. This recruitment process involves conducting advertising campaigns through various media outlets as well as caller outreach.

New York imposes sales tax on the retail sale of tangible personal property and certain enumerated services. In New York, advertising services are exempt from tax because they are not specifically listed as a taxable service. Therefore, various service offered by the petitioner, including developing advertising campaigns and websites for clients, conducting email campaigns, and any direct mailing campaigns are exempt from tax as advertising service (N.Y. Tax Law sec. 1105(c)(1)). Additionally, the operation of call centers are also exempt from tax since it is not an enumerated service subject to tax in New York.

However, if tangible personal property is exchanged between the petitioner and client, the petitioner will be liable for tax on those items. For example, the petitioner's creation of site kit materials, which include posters, flyers, brochures, etc., will be subject to tax because taxable tangible personal property is included in the exchange. Additionally, while direct mailing services are considered to be an exempt advertising service, any tangible personal property purchased in conducting the direct mail campaign is subject to tax if the property is delivered to the petitioner in New York.

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