Is a 'phone flea market' — where sellers pay to be listed and buyers call in for the listings — a taxable sales-agent service or a taxable advertising service in Connecticut?

Note: DRS has flagged this 1994 ruling as "not current … for reference purposes only," and it is obsoleted in part by Announcement AN 2000(8). It's preserved here for historical reference and to show DRS's reasoning; don't rely on it for a current transaction without confirming present law.

Plain-English summary

An individual ran a "phone flea market." Sellers submitted their name, contact information, a description of items for sale, and an asking price; the operator kept a listing and charged sellers a fee to be included. The operator didn't hunt for buyers — buyers called in, the operator matched them with sellers on the list, and the buyer then contacted the seller directly and negotiated the sale on their own. A seller stayed on the list until they reported the item sold. The operator asked whether this was a taxable sales-agent service or a taxable advertising service.

DRS said neither (as the law stood in 1994).

Not a sales-agent service (§ 12-407(2)(i)(U)). That category taxes the services of an agent who acts on a seller's behalf and is paid for work that leads to the actual sale of tangible personal property, with title passing in Connecticut (per Ruling 93-3). Here the operator was paid only to provide information — the fee was not contingent on any sale, and the operator didn't even know whether a sale occurred until the seller said so. So it wasn't a sales-agent service.

Not taxable advertising (§ 12-407(2)(i)(W)). Applying the true-object test (Hartford Parkview v. Groppo), DRS agreed the operator's true object was advertising — providing a forum where sellers list goods and buyers learn what's for sale, the price, and how to reach the seller. But § 12-407(2)(i)(W) only taxes advertising "not related to the development of media advertising." DRS found the phone flea market was media advertising: (i) a sale of space, (ii) in a preexisting medium (the phone flea market listing), (iii) disseminated to the segment of the public who call in — analogous to hearing an ad on a radio station you tune to. Because it was media advertising, it fell outside the taxable (non-media) category. So it wasn't taxable under (W) either.

The result: no tax under either category — but again, this analysis is partly superseded and should be treated as historical.

What this means for you

Read this as history, not current guidance

DRS itself labeled the ruling not current and obsoleted in part by AN 2000(8). The specific conclusions — especially the "media advertising" characterization of a listing service — may no longer hold, and later law addresses electronic and online marketplaces differently. Confirm current rules before applying any of this.

The durable ideas worth remembering

Two concepts here have outlived the ruling's specific outcome: (1) a "sales agent" for sales-tax purposes is generally someone paid for work that leads to an actual sale (a flat listing fee not tied to any sale is different); and (2) Connecticut historically split advertising into taxable non-media and non-taxable media advertising, using the "sale of space/time in a preexisting medium disseminated to the public" test. Those distinctions still frame the analysis even where this ruling's result has changed.

Listing / marketplace operators

If you charge sellers to be listed and let buyers and sellers transact on their own, whether you're a taxable "agent" can turn on whether your pay is contingent on completed sales. But given how much marketplace taxation has changed, treat this 1994 outcome as a starting point for questions, not an answer.

Common questions

Q: Can I rely on Ruling 94-22 today?
A: No. DRS marks it "not current … for reference purposes only," and it is obsoleted in part by AN 2000(8). Use it to understand DRS's historical reasoning, and confirm the current rules before applying it.

Q: Why wasn't the operator a taxable "sales agent"?
A: Because the operator was paid a listing fee just to provide information — not for services leading to an actual sale. The fee wasn't contingent on a sale, and the operator didn't even know when sales occurred.

Q: Why wasn't the listing taxable advertising?
A: DRS found its true object was advertising, but of the media kind (sale of space in a preexisting medium disseminated to a segment of the public). The taxable category (W) reached only non-media advertising, so this fell outside it.

Q: Has the advertising statute changed since 1994?
A: The subparagraph lettering has shifted (the advertising category cited here as (W) was later (V)), and the treatment of electronic/online listing services has evolved. Check current statutes and guidance.

Citations and references

Statutes:

• Conn. Gen. Stat. § 12-407(2)(i)(U) (services of a sales agent in relation to the sale of tangible personal property)
• Conn. Gen. Stat. § 12-407(2)(i)(W) (advertising or public relations services not related to the development of media advertising)

Case and related guidance (described in prose, not linked):

• Hartford Parkview Associates Limited Partnership v. Groppo, 211 Conn. 246, 558 A.2d 993 (1989) (true-object test)
• Ruling No. 93-3 (taxable sales-agent services lead to an actual sale)
• Ruling No. 93-8 (media-advertising definition: sale of time/space in a preexisting medium disseminated to the public)
• Announcement AN 2000(8) (obsoletes this ruling in part)

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 94-22

Original ruling text

Ruling 94-22, Sales and Use Taxes / Sales Agent Services / Advertising Services

This information is not current and is being provided for reference purposes only

Ruling 94-22

Sales and Use Taxes

Sales Agent Services

Advertising Services

This Ruling is obsoleted in part by   AN 2000(8)

FACTS:

An individual ("the Operator") operates a "phone flea market." In the "phone flea market," sellers of various goods submit to the Operator an application in which they provide their name, address, telephone number, description of items for sale, and their asking price. The Operator maintains a listing of such information, and sellers pay the Operator a fee when they are included on such listing. The Operator does not seek buyers for sellers included in the "phone flea market" listing; prospective buyers call the Operator for information on items for sale. The Operator matches prospective buyers with sellers on his list. If interested, a prospective buyer will contact a seller directly.

Buyers and sellers negotiate their own sales. A seller's information remains on the phone flea market list until the seller notifies the Operator that its item listed for sale has been sold or otherwise is no longer for sale.

ISSUES:

Whether "phone flea market" services are "sales agent services" subject to sales and use taxes under section 12-407(2)(i)(U) of the Connecticut General Statutes.

Whether "phone flea market" services are "advertising services . . . not related to the development of media advertising" subject to sales and use taxes under section 12-407(2)(i)(W) of the Connecticut General Statutes.

DISCUSSION:

Conn. Gen. Stat. § 12-407(2)(i)(U) imposes sales and use taxes on the "services of the agent of any person in relation to the sale of any item of tangible personal property for such person" subject to certain exceptions. In Ruling No. 93-3 , the Department determined that taxable sales agent services are performed when an individual or a company acts on behalf of a seller and is paid for services which lead to the actual sale of tangible personal property, as long as the transfer of title takes place in Connecticut. Under the facts of this ruling, the Operator is paid only to provide information about goods for sale and the identity of the seller to prospective buyers. The amount paid by sellers to the Operator is not contingent upon the actual sale of tangible personal property. Furthermore, the Operator does not know whether a sale has actually occurred until so notified by the seller. Therefore, the Operator's "phone flea market" services are not "sales agent services" subject to sales and use taxes under section 12-407(2)(i)(U) of the Connecticut General Statutes.

Conn. Gen. Stat. §12-407(2)(i)(W) imposes sales and use taxes on "advertising or public relations services . . . not related to the development of media advertising . . . " Whether the services provided by the Operator to sellers are advertising requires the identification of the true object of the contract. See Hartford Parkview Associates Limited Partnership v. Groppo , 211 Conn. 246, 558 A.2d 993 (1989).

The true object of the Operator's "phone flea market" services is to provide a forum in which sellers may list their goods for sale and prospective buyers may learn about specific goods for sale, their cost, and how to contact the seller. Sellers pay the Operator for such services when they ask to be included on the "phone flea market" listing, not when their items for sale are actually sold. The Operator disseminates information about items for sale on demand by prospective buyers. Therefore, under the facts of this ruling, the true object of the Operator's "phone flea market" is to provide a type of advertising service.

As a general rule, advertising is "media advertising" if there is (i) a sale of time or space (ii) in or on a preexisting medium (iii) for broadcast or dissemination to all or a segment of the public. See Ruling No. 93-8 at 4.

Under the facts of this ruling, the Operator sells space in the "phone flea market" listing. The Operator uses a preexisting medium, the "phone flea market," to advertise the sellers' goods. The Operator disseminates information about goods for sale to that segment of the public that calls the Operator and requests it. This scenario is analogous to an individual who turns on the radio, selects a radio station, and hears an advertisement broadcast over the air waves. Accordingly, the true object of the Operator's "phone flea market" services is to provide "media advertising." Therefore, the Operator's "phone flea market" services are not subject to sales and use taxes under section 12-407(2)(i)(W) of the Connecticut General Statutes.

RULING:

The Operator's "phone flea market" services are not "sales agent services" or "advertising services" subject to sales and use taxes under section 12-407(2)(i)(U) or (W), respectively, of the Connecticut General Statutes.

LEGAL DIVISION

November 30, 1994