Online Marketing Services Not Taxable in New York

Wednesday, February 11th, 2015

A person using an online marketing site on their iPad.
New York

The New York Department of Taxation and Finance issued an advisory opinion on the taxability of internet-based marketing products.

The taxpayer provided online marketing services to wholesalers and retailers. For the taxpayer's Core Offering ("CO"), the taxpayer used software to collect customer feedback from the client's website. The taxpayer's employees screened and managed the information and then sent relevant portions back to the client. The taxpayer's design team then helped the client use the information to improve customer education and product promotion. The CO product included a "workbench" component. The workbench was remotely accessible prewritten software that the client could use to analyze data independently.

New York taxes sales of prewritten software. A sale of software is taxable whether the software is on a CD from a store or accessed remotely over the internet. New York also taxes the sale of information services. "Information services" are the collection, compilation, or analysis of information of any kind that is furnished in reports to other persons. Information services do not include advertising services. Advertising services include consultation, development of advertising campaigns, and placement of advertisements with the media without the transfer of tangible personal property.

The CO product was not taxable because it was an advertising service. The compilation and transmission of customer feedback is normally a taxable information service, but the CO product qualified for the advertising exclusion. The main benefit of the CO product was that the client could better place advertisements in the media, not just receive an informational report. Further, the taxpayer helped the client use the informational report to properly display, use, and collect customer feedback in the future. The "workbench" did not make the product taxable, even though the workbench was prewritten software. Its relatively minor role in the overall CO product did not change the taxability of the whole product.

About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at or call 866.578.8193.

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