Which parts of an executive office-suite company's flat monthly membership fee (office space, mailbox, phone lines, secretarial services, conference rooms) and its separate 'a la carte' add-on services are subject to New York sales tax?

Plain-English summary

Biscotti, Toback and Co. asked on behalf of a client ("Corporation X") that runs an executive office-suite business: small businesses pay a flat monthly membership fee (median around $200) entitling them to office space and equipment, conference room access, and a bundle of general clerical/office services — a locked mailbox, dedicated business phone lines, photocopy/fax machine use, a professional address, a voice mailbox, receptionist and secretarial services, live-answer tele-secretarial coverage (up to 200 calls/month), conference room use, and high-speed DSL/modem lines. Higher-tier plans cost more and include more services, but the invoices show the membership fee charged as a single flat amount, not itemized. On top of that, members can buy 16 categories of "a la carte" add-ons separately — everything from hourly conference-room or after-hours office access to long-distance minutes, extra voicemail/mailbox options, copying/faxing by the page, mail forwarding, and even coffee service or notary signatures.

New York's general bundling rule governs both parts of the question: when taxable and nontaxable items are sold together for one undifferentiated charge, the whole charge is taxed unless the taxable components are separately stated, reasonably priced, and could be purchased on their own. Within the flat monthly membership fee, the Department identified real taxable components — the locked mailbox (a taxable storage service), dedicated phone lines/voice mailbox/live-answer tele-secretarial/DSL (taxable telephone-type services), and photocopier/fax machine availability (a taxable rental of tangible personal property) — sitting alongside nontaxable components like the professional address, secretarial/receptionist services, and conference room access. Because Corporation X's membership fee doesn't separately break these out, the Department held the entire flat membership fee taxable, even though much of what's bundled in wouldn't be taxable if sold alone.

The "a la carte" services got a detailed item-by-item table: hourly conference-room and office rentals and after-hours access are taxable (rental of real property/space used this way); 800 numbers, extra long-distance accounts, directory listings, long-distance minutes, and DSL-related charges are taxable telephone services (interstate/international calls are exempt, but intrastate long-distance and fax stay taxable); live-answer message-taking beyond the plan limit is a taxable telephone answering service (though setting up conference calls specifically may not be, per prior guidance); copying is taxable as a sale of tangible property when the company supplies the paper, or as a taxable fabrication service when the member supplies it; most mailbox/voicemail options tied to the phone system are taxable, while a mailbox check itself is not; postage-based mail services (metered mail, courier, forwarding) are not separately taxable; and coffee service for meetings is taxable as food/drink, while notary services are not. As with the membership fee, whenever Corporation X sells a bundle of taxable and nontaxable a la carte items under one undifferentiated charge, the whole thing becomes taxable unless the taxable pieces are separately stated and reasonably priced.

What this means for you

Executive office-suite and coworking-space operators

Itemizing your membership invoice matters enormously: bundling a taxable item (phone lines, mailbox storage, equipment rental) into an undifferentiated flat fee with genuinely nontaxable items (address service, secretarial help, meeting room access) makes the entire fee taxable. Breaking out and reasonably pricing the taxable pieces separately can shrink your tax base substantially.

Businesses renting shared office space and services

If your invoice shows one lump membership charge, expect the whole thing to be taxed even if most of what you're paying for (space, address, secretarial help) wouldn't be taxable if billed on its own.

Accountants and tax professionals

This ruling is a useful line-item reference table for classifying nearly every common executive-suite ancillary charge (phone options, mail options, room rentals, copying, notary, coffee service) — cite the Genetelli precedent for the core separately-stated-and-reasonable bundling rule that runs through the whole opinion.

Common questions

Q: If most of a membership fee covers nontaxable services, does bundling in one taxable item make the whole fee taxable?
A: Yes, under these facts — because the flat fee wasn't broken out between taxable and nontaxable components, the Department taxed the entire membership fee, even though items like secretarial services and conference room use wouldn't be taxable standing alone.

Q: Are all telephone-related add-on charges taxable?
A: Most are (dedicated lines, 800 numbers, intrastate long distance, DSL, answering services), but interstate and international calls and faxes are specifically exempt.

Q: Is copying service always taxed the same way?
A: No — it depends on who supplies the paper. If the office-suite company supplies the paper, it's a taxable sale of tangible property (the copies); if the member supplies their own paper, it's a taxable fabrication/processing service instead — either way it's taxable, just under a different provision.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4)(i) (retail sale definition); § 1101(b)(13) (telephone answering service definition)
• Tax Law § 1105(a) (retail sales tax); § 1105(b) (utility/telephone services); § 1105(c)(2) (fabricating/imprinting); § 1105(c)(4) (storage/safe deposit rental); § 1105(c)(5) (real property maintenance); § 1105(d) (restaurant/caterer food and drink)

Prior rulings referenced:

• Richard W. Genetelli, C.P.A., TSB-A-97(11)S
• Frontier Confer Tech, Inc., TSB-A-99(30)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_6s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(6)S
Sales Tax
March 3, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S001127A

On November 27, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Biscotti, Toback and Co., CPA’s, PC, 100 Merrick Road, Rockville Centre,
New York 11570. Petitioner, Biscotti, Toback and Co., CPA’s, PC, submitted additional
information with respect to the Petition on October 10, 2002.
The issue raised by Petitioner is whether fees for the provision of office rental, telephone
services, and other general clerical and office services as described below are subject to sales and
use tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Corporation X will charge a membership fee to various small businesses in New York State.
The membership fee would entitle the businesses to have office space, and office equipment,
available for use throughout the month and to utilize conference rooms for meetings a certain
number of days a month. These small businesses would pay a membership fee with a median price
of $200 per month. Additional membership fees would be required for each member of an affiliated
group of businesses. Day memberships and associate memberships are available for a reduced fee.
In addition to the use of office and conference room space and equipment as part of the membership
fee, employees of Corporation X will perform general clerical and office services on behalf of each
member. Corporation X offers several different membership plans which provide different levels
of services. The monthly membership fee is higher for plans that provide additional services. Each
member would be entitled to most or all of the following general clerical or office services, and
office facilities, depending on the membership plan, provided as part of its membership privileges
without an additional charge:
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.

Locked mailbox
Dedicated business phone lines
The use of photocopy and fax machines
Professional address
Voice mailbox
Receptionist, pick-up/drop off
Secretarial services
Live answer tele-secretarial services, 200 calls per month
Use of conference rooms for meetings
High speed DSL (digital subscriber lines) and modem lines

Sample invoices submitted by Petitioner indicate that the membership fee is charged as a flat
amount.

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For an additional charge, members may separately purchase the following “A La Carte”
services:

1. Small conference room at an hourly rate
2. Standard office at an hourly fee
3. After hours access at an hourly fee
4. 800 number at an hourly fee
5. Additional long distance account at a monthly fee
6. Bell Atlantic directory listing at a monthly fee
7. Long distance calls which will be billed to each member at 12½ cents per minute
8. Live answer tele-secretarial services for over calls (over 200 per month limit as per H
   above) at a nominal fee per call
9. Handle third party messaging and conference calls at a nominal fee
10. Procure calling card for member at a nominal fee. The member is billed for card use
    by the phone company.
11. Copying services at a per page fee for self service, staff assisted or laser copies
12. Faxing services at a per page fee which includes sending and receiving
13. Voice mail options:
    a. Passive voice mailbox included in the membership fee
    b. Active notification at a monthly fee
    c. Variable active notification at a monthly fee
    d. Additional passive mailbox at a monthly fee
    e. Extended message length and capacity at a monthly fee
    f. Custom operator at a monthly fee
14. Mailbox options:
    a. Standard is included in the monthly membership fee.
    b. Large or storage size at an additional monthly fee
    c. Additional company names at a monthly fee
    d. Mailbox check for a nominal fee
15. Mail services:
    a. Metered mail charges as postage plus a nominal transaction fee
    b. Courier shipping charges for the carrier plus a nominal fee
    c. Forwarding charges for a nominal fee plus postage
16. Miscellaneous services:
    a. Coffee service for meetings for a nominal fee per pot of coffee per meeting
    b. Notary services for a nominal fee per signature
    Applicable Law
    Section 1101(b)(4)(i) of the Tax Law defines the term "retail sale" as:
    A sale of tangible personal property to any person for any purpose, other than (A)
    for resale as such or as a physical component part of tangible personal property, or

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(B) for use by that person in performing the services subject to tax under paragraphs
(1), (2), (3), (5), (7) and (8) of subdivision (c) of section eleven hundred five where
the property so sold becomes a physical component part of the property upon which
the services are performed or where the property so sold is later actually transferred
to the purchaser of the service in conjunction with the performance of the service
subject to tax. . . .
Section 1101(b)(13) of the Tax Law defines the term "telephone answering service" as:
A service that consists of taking messages by telephone and transmitting such
messages to the purchaser of the service or at the purchaser’s direction, but not
including such service if it is merely an incidental element of a different or other
service purchased by the customer.
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax – . . . there is hereby imposed and there shall be paid a tax
. . . upon:
(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
(b)(1) The receipts from every sale, other than sales for resale, of the
following:(A) gas, electricity, refrigeration and steam, and gas, electric, refrigeration
and steam service of whatever nature; (B) telephony and telegraphy and telephone
and telegraph service of whatever nature except interstate and international telephony
and telegraphy and telephone and telegraph service; (C) a telephone answering
service; and (D) a prepaid telephone calling service.
*

*

*

(c) The receipts from every retail sale, except for resale, of the following
services:
*

*

*

(2) Producing, fabricating, processing, printing or imprinting tangible personal
property, performed for a person who directly or indirectly furnishes the tangible
personal property, not purchased by him for resale, upon which services are
performed.
*

*

*

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(4) Storing all tangible personal property not held for sale in the regular course
of business and the rental of safe deposit boxes or similar space.
(5) Maintaining, servicing or repairing real property, property or land, as such
terms are defined in the real property tax law, whether the services are performed in
or outside of a building, as distinguished from adding to or improving such real
property, property or land, by a capital improvement as such term capital
improvement is defined in paragraph nine of subdivision (b) of section eleven
hundred one of this article, but excluding (i) services rendered by an individual who
is not in a regular trade or business offering his services to the public. . . .
*

*

*

(d)(i) The receipts from every sale of beer, wine or other alcoholic beverages or
any other drink of any nature, or from every sale of food and drink of any nature or
of food alone, when sold in or by restaurants, taverns or other establishments in this
state, or by caterers, including in the amount of such receipts any cover, minimum,
entertainment or other charge made to patrons or customers (except those receipts
taxed pursuant to subdivision (f) of this section):
(1) in all instances where the sale is for consumption on the premises where sold;
(2) in those instances where the vendor or any person whose services are
arranged for by the vendor, after the delivery of the food or drink by or on behalf of
the vendor for consumption off the premises of the vendor, serves or assists in
serving, cooks, heats or provides other services with respect to the food or drink . . . .
Opinion
Petitioner’s client, Corporation X, will charge small businesses membership fees for the use
of office space and equipment and the provision of general clerical and office services. Corporation
X will offer several membership plans, with a median monthly membership fee of $200. These
membership plans entitle a member to most, or all, of the items enumerated in A through J above,
depending on the membership plan. The membership fee is higher for plans that offer more services.
Corporation X will charge businesses separately on an hourly basis for the rental of offices and
conference rooms. Based on these facts, Corporation X’s monthly membership fee is considered
to be primarily a charge for services and the use of office equipment.
The monthly membership fee includes both taxable and nontaxable items. The locked
mailbox service is a taxable storage service under Section 1105(c)(4) of the Tax Law, and the
dedicated phone lines, voice mailbox, live answer tele-secretarial services and high speed DSL are
taxable services under Section 1105(b) of the Tax Law. The provision of photocopy and fax

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machines is a rental of tangible personal property taxable under Section 1105(a) of the Tax Law.
The professional address service, secretarial and receptionist services, and the use of conference
rooms are generally not taxable. Where taxable and nontaxable services are provided to a purchaser
as part of a single receipt, sales tax must be collected on the entire charge, unless the charges for the
various taxable services are separately stated and for a reasonable amount and such services may
be purchased separately from the nontaxable services. See Richard W. Genetelli, C.P.A., Adv Op
Comm T & F, March 6, 1997, TSB-A-97(11)S. Since the monthly membership fee in this case does
not break out the charges for taxable and nontaxable sales, the entire amount of such fee is subject
to sales tax.
The determinations as to the taxability of the “A La Carte” services follow:
Taxability of "A La Carte" Services
Service being provided

Taxable

Exempt

1. Small conference room at an hourly fee.

X

2. Standard office at an hourly fee.

X

3. After hours access at an hourly fee.

X

4. 800 number at a monthly fee.

Sec. 1105(b)

5. Additional long distant account at a
   monthly fee.

Sec. 1105(b)

6. Bell Atlantic directory listing at a
   monthly fee.

Sec. 1105(b)

7. Long distance calls which will be billed
   to each member at 12½ cents per
   minute.
8. Live answer tele-secretarial services for
   over calls (over 200 per month limit as
   per above) at a nominal fee per call.

Sec. 1105(b)
Sec. 1105(b)*

9. Handle third party messaging and
   conference calls at a nominal fee.

Sec. 1105(b)**

10. Procure calling card for member at a
    nominal fee plus fixed rate per minute.

Sec. 1105(b)*

11. Copying services at a per page fee for
    self service, staff assisted or laser
    copies.

Sec. 1105(a) or
Sec.
1105(c)(2)***

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Taxability of "A La Carte" Services
Service being provided

Taxable

12. Faxing services at a per page fee which
    includes sending and receiving.

Sec. 1105(b)*

13.

Sec. 1105(b)

Voice mail options:
a.
Passive voice mailbox included in
the membership fee.
b.
Active notification at a monthly
fee.
c.
Variable active notification at a
monthly fee.
d.
Additional passive mailbox at a
monthly fee.
e.
Extended message length and
capacity at a monthly fee.
f. Custom operator at a monthly fee.

14. Mailbox options:
    a.
    Standard is included in the
    monthly membership fee.
    b.
    Large or storage size at an
    additional monthly fee.
    c.
    Additional company names at a
    monthly fee.
    d.
    Mailbox check for a nominal fee.

Sec.1105(b)
"
"
"
"
"

Sec. 1105(c)(4)
"
"
X

15. Mail services:
    a.
    Metered mail charges as postage
    plus a nominal transaction fee.
    b.
    Courier shipping charges for the
    carrier plus a nominal fee.
    c.
    Forwarding charges for a nominal
    monthly fee plus postage.
16. Miscellaneous services:
    a.
    Coffee service for meetings for a
    nominal fee per pot of coffee per
    meeting.
    b.
    Notary services for a nominal fee
    per signature.

Exempt

X
X
X

Sec. 1105(d)

X

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*

Separate charges for interstate and international telephone calls and fax service are exempt
from sales tax. However, intrastate long distance telephone calls and intrastate fax service
are subject to the sales tax imposed under Section 1105(b) of the Tax Law.

**

Retrieving and forwarding messages is taxable as a telephone answering service under
Section 1105(b)(1)(C) of the Tax Law. The service of setting up conference calls may not
be subject to tax in some cases. See Frontier Confer Tech, Inc., Adv Op Comm T&F,
May 21, 1999, TSB-A-99(30)S.

Where Corporation X provides the photocopy machine and paper supplies, Corporation X
is selling tangible personal property (i.e., the copies) subject to tax under Section 1105(a)
of the Tax Law. Where the member furnishes the paper supplies, Corporation X is providing
a service taxable under Section 1105(c)(2) of the Tax Law.

When Corporation X provides taxable and nontaxable A La Carte services to a member, sales
tax must be collected on the entire charge, unless the charges for the taxable services are separately
stated and for a reasonable amount and such services may be purchased separately from the
nontaxable services. See Richard W. Genetelli, C.P.A., supra.

DATED: March 3, 2003

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.