Are in-vehicle telematics service plans subject to sales tax, including the extra 5% tax on aural information services?
Plain-English summary
The petitioner provides in-vehicle telematics service plans (an OnStar-type service): "Safe and Sound" (automatic crash response, emergency services, vehicle diagnostics, stolen-vehicle assistance, remote door unlock, roadside assistance, crisis assist, remote horn/lights), "Directions and Connections" (adds turn-by-turn navigation and convenience info), and "Luxury and Leisure" (adds third-party concierge services), plus prepaid telephone offerings: "Hands-Free Calling" and "Virtual Advisor" (traffic, weather, stock quotes by phone). The plans are sold as lump-sum packages. It asked whether the receipts are subject to the additional 5% tax on aural information/entertainment services under Tax Law 1105(c)(9)(ii).
The Office of Counsel concluded the plans are taxable, but the 5% applies only to the aural-only Virtual Advisor content.
- Safe and Sound = taxable, no 5%. Its elements are taxable protective/detective services (crash response, emergency, stolen-vehicle -- 1105(c)(8)) and maintenance services (diagnostics, roadside -- 1105(c)(3)). But none are information or entertainment services, so the 5% aural tax doesn't apply, even though some are delivered by voice.
- Directions and Connections = info service, but no 5%. Turn-by-turn navigation and convenience info are taxable information services (drawn from a common database -- the same directions go to many customers, Rich Products). But they're delivered both aurally and on the vehicle's screen, not exclusively aurally, so the 5% doesn't apply.
- Luxury and Leisure (concierge) = mostly not taxable info. Making reservations, buying tickets, shopping assistance aren't taxable information/entertainment; reminder/profile-storage items qualify for the personal/individual exclusion; some local/general info is taxable info, but because it's provided both aurally and in writing (web/email/fax), the 5% doesn't apply.
- Prepaid Hands-Free Calling = taxable telephone service (Tax Law 1105(b)/1212; mobile-telecom rules).
- Virtual Advisor = the one that owes the 5%. Telephonic traffic and stock reports are taxable information/entertainment delivered exclusively aurally, so they're subject to the additional 5% (1105(c)(9)(ii)). Weather reports are exempt (TSB-M-95(11)S).
- Provider's own phone costs. The petitioner owes tax on the telephone service it buys and consumes to deliver its services; it isn't reselling phone service, except possibly the Hands-Free minutes it sells to customers.
What this means for you
Telematics, safety-monitoring, and connected-vehicle providers
Your safety package is taxable -- but as protective and maintenance services, not as information/entertainment, so the extra 5% aural surtax doesn't reach it. The 5% is narrow: it hits information/entertainment delivered exclusively by voice. Deliver the same content on a screen or in writing too, and the 5% falls away. Pure navigation/info from a common database is a taxable information service regardless.
Bundling and the 5% trap
Because the 5% turns on exclusively aural delivery, how you deliver content matters as much as what it is. Aural-only traffic/stock lines (like Virtual Advisor) owe the 5%; weather is exempt entirely. And remember you owe tax on the telephone service you consume to run the platform.
Common questions
Q: Is our in-car safety plan subject to the extra 5% tax?
A: No. It's taxable as protective/detective and maintenance services, not information/entertainment, so the 1105(c)(9)(ii) 5% doesn't apply.
Q: What triggers the 5%?
A: Taxable information/entertainment delivered exclusively aurally -- like phone-only traffic or stock reports. Delivering the same content on a screen or in writing avoids it. Weather is exempt either way.
Q: Is the prepaid calling taxable?
A: Yes -- Hands-Free Calling is taxable telephone service under 1105(b)/1212. And you owe tax on the phone service you buy and consume to provide your plans.
Citations and references
- Tax Law section 1105(c)(9)(i) and (ii) (information/entertainment via telephony; additional 5% aural tax)
- Tax Law section 1105(c)(1) (information services; personal/individual exclusion)
- Tax Law section 1105(c)(8) (protective and detective services)
- Tax Law section 1105(c)(3) (maintaining tangible personal property; 20 NYCRR 527.5(a)(3))
- Tax Law section 1105(b) and 1212 (telephone service; local utility tax)
- Rich Products Corp. v Chu, 132 AD2d 175 (common database = taxable)
- TSB-M-95(11)S (meteorological/weather service excluded from tax)
Source
- Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2009.htm
- Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a09_50s.pdf
Original ruling text
New York State Department of Taxation and Finance
TSB-A-09(50)S
Sales Tax
November 4, 2009
Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
PETITION NO. S090130A
Petitioner name and address redacted asks whether the receipts from the sale of its “Safe and Sound,”
“Directions and Connections,” and “Luxury and Leisure” services, and its prepaid telephony service
offerings, “Hands-Free Calling” and “Virtual Advisor” services, are subject to the additional 5% sales tax
imposed by section 1105(c)(9)(ii) of the New York Tax Law. We conclude that while receipts from the sale
of the “Safe and Sound,” “Directions and Connections,” and the “Luxury and Leisure” services are subject to
the State and local sales and use taxes imposed by section 1105 of the Tax Law, the receipts for such services
are not subject to the additional 5% tax imposed by section 1105(c)(9)(ii). The receipts from the sale of the
“Hands-Free Calling” services are subject to the taxes imposed by sections 1105(b) and 1212 of the Tax
Law. Certain of the receipts from “Virtual Advisor” service are subject to the additional 5% tax imposed by
section 1105(c)(9)(ii).
Facts
Petitioner offers “Safe and Sound,” “Directions and Connections,” and “Luxury and Leisure” service
plans, and also offers prepaid telephony service through its “Hands-Free Calling”and “Virtual Advisor”
programs. Petitioner’s services are currently offered only for properly-equipped name redacted vehicles.
Safe and Sound
Petitioner’s “Safe and Sound” plan includes the following core safety services, which are included in
Petitioner’s other plans as well:
•
Automatic Crash Response/Automatic Airbag Deployment Response
After a crash or airbag deployment, built-in vehicle sensors automatically alert Petitioner.
An Advisor is immediately connected by telephone to the vehicle to ask whether the occupants need
assistance. If the occupants are unable to respond, Petitioner uses GPS technology to pinpoint the
vehicle’s exact location and requests emergency help be sent.
•
Emergency Services
The vehicle’s occupants are immediately connected by telephone with Petitioner. Petitioner
can request that emergency help be sent to the vehicle’s exact location. Petitioner dials 911 (or other
similar emergency number) and is connected with and contacts the third-party emergency services
responders.
•
Vehicle Diagnostics
This service provides an automatic check on key operating systems in the vehicle. This
information is sent to the customer via monthly email reports at no additional cost.
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Stolen Vehicle Assistance
If the vehicle is reported to law enforcement as “stolen”, Petitioner can use real-time GPS
technology to pinpoint the exact location of the vehicle and will work with law enforcement
authorities to help recover the vehicle.
•
Remote Door Unlock
Petitioner can send a remote signal to the vehicle to quickly unlock its doors.
•
Roadside Assistance
The vehicle’s occupant is connected by telephone with Petitioner. If in need of a tow, tire
change, or fuel, Petitioner will then contact and help direct a service provider to the vehicle’s exact
location.
•
Crisis Assist
During severe weather, natural disasters, or other crisis, Petitioner provides the vehicle
occupants with a central point of contact to help navigate their way out of danger. A specially-trained
crisis advisor can help the occupant reach loved ones, obtain food, water, and medical supplies, find
the closest evacuation route, and address a wide range of other needs.
•
Remote Horn And Lights
Petitioner can remotely sound the vehicle’s horn and flash its lights to help locate the vehicle
quickly.
Directions and Connections
Petitioner's “Directions and Connections” plan includes all of the core services offered in the “Safe
and Sound” plan, along with additional services, including:
•
Turn-by-Turn Navigation
The navigation system offers voice-guided driving directions to practically any destination at
the push of a button. The directions are also downloaded to the vehicle and visually displayed on a
screen (radio channel tuner or other visual display).
•
Information/Convenience Services
Petitioner will provide the occupant with information about and directions to the nearest gas
station, ATM, or other location the occupants might need or want to visit right away. Addresses,
directions, and phone numbers may be downloaded and displayed in a manner similar to Turn-byTurn Navigation.
•
Ride Assist
Petitioner’s advisor can help vehicle occupants find a ride when they are unable to drive themselves
(i.e., Petitioner will locate and call for a taxi service and direct it to the correct location).
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Luxury and Leisure
Petitioner's “Luxury and Leisure” plan included1 concierge services in addition to all of the services
offered in the "Directions and Connections" plan. This service is not directly provided by Petitioner. Rather,
Petitioner has an agreement with a third party vendor whereby Petitioner passes off the subscriber directly to
the Luxury and Leisure Vendor (“L&L Vendor”). An L&L Vendor customer service advisor (“concierge”)
then handles the services covered under the Luxury and Leisure (“L&L”) transactions. The following is a
brief list of the most common request/transaction types that are handled as part of the L&L plan:
•
•
•
•
•
•
•
•
•
Hotel, resort, restaurant information and reservations;
Travel planning, reservations and assistance (world-wide);
Entertainment (movie tickets, concerts, theater, opera, etc.);
Local information (festivals, events, museums, attractions, tourist information);
Services assistance (errand runners, help around the house);
Shopping assistance (flowers, gifts, baskets);
General information (e.g., sports trivia and the like);
Reminder service for important dates/occasions; and
Profile storage (for subscriber profile information and preferences).
Requests to the L&L Vendor that involve a purchase transaction (movie tickets, hotel reservations, etc.) are
generally completed by either conferencing the subscriber in when making the purchase or accessing the
subscriber’s credit card on file and making the purchase on the subscriber’s behalf.
The subscriber can request L&L service by accessing Petitioner’s call center from the vehicle. A
L&L subscriber request can also be made from another phone or via e-mail. L&L service can also be
accessed through Petitioner’s website portal. The L&L Vendor is required by the terms of its contract with
Petitioner to be able to communicate via e-mail and fax with the L&L subscriber. The response to an L&L
subscriber’s request may be via telephone, fax, or e-mail. Petitioner provides the L&L Vendor with data on
current subscribers to facilitate the L&L Vendor’s interactions with the subscribers.
Prepaid Telephone Services
Petitioner also offers its subscribers the following prepaid telephone services:
•
Hands-Free Voice-Activated Calling
Petitioner’s Hands-Free Voice-Activated Calling (“Hands-Free Calling”) allows the
occupant to make and receive telephone calls using the system built into the vehicle. Petitioner’s
Hands-Free Calling requires a Hands-Free Calling-enabled vehicle, an existing service contract with
Petitioner, and the customer’s purchase of prepaid minutes or enrollment in a shared minutes plan.
•
Virtual Advisor
Customers subscribing to Petitioner’s plans may also use the Hands-Free Calling minutes to connect
with Petitioner’s Virtual Advisor service and receive information on such things as local traffic
reports, local weather reports, and stock quotes via the telephone.
1
Though Petitioner no longer offers the "Luxury and Leisure Plan" to new subscribers, it has a limited number of
subscribers still enrolled in this plan and receiving its benefits
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Petitioner’s telephone service offerings are offered only on a prepaid basis. The service provider is a
mobile telephone service company. Petitioner collects the money for the prepaid account from the customer
and pays it over to the telephone service provider. As the customer makes calls, the account is charged down
(so many minutes were purchased – so many minutes are remaining). Customers may replenish their prepaid
minutes via Petitioner. While the telephone service provider provides the telephone service, Petitioner
provides the information content delivered through the Virtual Advisor services.
The telephone service used by Petitioner in its “Safe and Sound,” “Directions and Connections,” and
Luxury and Leisure” services is purchased, paid for, and consumed by Petitioner. So, for example, with
respect to emergency service, when the vehicle’s sensors tell Petitioner that airbags were deployed and
Petitioner asks whether assistance is needed and then calls for an ambulance, Petitioner buys and consumes
the phone service (i) used to communicate with the vehicle occupants and (ii) used to contact the police,
ambulance, etc. Similarly, the telephone service Petitioner uses to connect to a vehicle and unlock the doors
is consumed by Petitioner. Petitioner recoups its phone costs (expense) in the amounts it charges customers
for these services.
The “Safe and Sound” plan, “Directions and Connections” plan, and “Luxury and Leisure” plan are
each sold on a lump sum price basis for the whole package of services provided in each plan. Both the
annual and monthly charges for these plans are lump sum amounts.
Analysis
Sales tax is imposed upon information and entertainment services delivered via telephony and
telegraphy or telephone and telegraph service pursuant to the provisions of section 1105(c)(9)(i) of the Tax
Law. Information services delivered via telephony and telegraphy are not subject to tax unless the
information service would be subject to the tax imposed pursuant to the provisions of section 1105(c)(1) if
the information was delivered in written or printed format. Receipts from sales of information that is
personal or individual in nature and that is not or may not be substantially included in reports given to other
persons are not subject to tax. See section 1105(c)(1).
Section 1105(c)(9)(ii) of the Tax Law imposes an additional 5% tax on the receipts from the sale of
information and entertainment services delivered via telephony and telegraphy and telephone and telegraph
service when the services are received by the customer in an exclusively aural manner.
Petitioner’s basic service, the Safe and Sound plan, which is sold on a lump sum price basis (both the
annual charge and the monthly charge are a lump sum) for the whole package of services provided, contains
elements that individually or as a bundled package are subject to State and local sales tax under section 1105
of the Tax Law. For example, the Stolen Vehicle Assistance, Automatic Crash Response, and Emergency
Services protect vehicle owners and occupants from burglary, theft, and injury and are subject to the taxes
imposed on protective and detective services pursuant to section 1105(c)(8) of the Tax Law. Similarly, the
Vehicle Diagnostics and Roadside Assistance are maintenance services subject to tax pursuant to the
provisions of section 1105(c)(3) of the Tax Law. See 20 NYCRR 527.5(a)(3). However, none of the
elements of these services as described by Petitioner, either singly or as part of a bundled package, appears to
constitute an information or entertainment service subject to tax pursuant to the provisions of section
1105(c)(1) or 1105(c)(9) of the Tax Law. Asking whether help is needed and calling for police, ambulance,
or tow truck response (Automatic Crash Response, Emergency Services, Roadside Assistance); telephoning
family members to inform them that their loved ones are safe (Crisis Assist); locating a stolen vehicle or a
misplaced vehicle in a crowded parking lot (Stolen Vehicle Assistance, Remote Horn and Lights); and
diagnosing vehicle maintenance problems or electronically unlocking a door (Vehicle Diagnostics, Remote
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Door Unlock) are not sales of common database information or games, chat rooms, or like entertainment
services subject to the taxes imposed on information and entertainment services under section 1105(c)(1) or
1105(c)(9) of the Tax Law, whether delivered in writing or electronically.
Thus, to the extent that Safe and Sound does not include any taxable information or entertainment
service(s) the additional 5% tax imposed pursuant to section 1105(c)(9)(ii) does not apply, notwithstanding
that certain Safe and Sound services might be delivered in an exclusively aural manner.
With respect to the receipts from the sale of the Directions and Connections plan, the Turn-by-Turn
Navigation element and the Information/Convenience Services elements of that plan constitute information
services of a kind subject to the sales tax imposed pursuant to the provisions of section 1105(c)(1) and
1105(c)(9)(i) of the Tax Law. Generally, when a common database is used to generate reports or otherwise
disseminate information, the information sold is subject to sales tax under section 1105(c)(1) or 1105(c)(9) of
the Tax Law despite the fact that the reports, screens, or displays of the information may be customized to
meet the specific needs of customers, because the same information may be furnished to different customers.
Thus, for example, identical directions and navigation to the nearest service station from a Thruway exit will
be provided numerous customers notwithstanding that they may be approaching the exit from opposite
directions. See Rich Products Corporation v Chu, 132 AD2d 175 (3d Dept 1987) lv denied 72 NY2d 802;
Towne-Oller & Assoc. v State Tax Comm, 120 AD2d 873 (3d Dept 1986); Alan/Anthony, Inc., Adv Op
Comm T&F, June 19, 1992, TSB-A-92(51)S. Though provided orally, Petitioner states that these services
(navigating directions) are also delivered to the vehicle in a written format via the vehicle’s video displays.
Accordingly, to the extent these services do not include and are not bundled with any taxable information or
entertainment services delivered exclusively in an aural manner, the additional 5% tax imposed under section
1105(c)(9)(ii) would not apply.
The concierge services provided under the Luxury and Leisure plan, such as the making of dinner
reservations and travel reservations, purchasing event tickets, and assisting in the purchasing of property
(flowers, gift baskets, etc.), do not constitute the sale of taxable information or entertainment services under
section 1105(c)(1) or 1105(c)(9) of the Tax Law so as to be subject to the additional 5% tax imposed under
section 1105(c)(9)(ii). Some of the other L&L services (i.e., the reminder service for important
dates/occasions and the storage of subscriber profile information and preferences) might constitute
information services, but the information appears to qualify for the exclusion from tax for information that is
personal or individual in nature and is not or may not be substantially incorporated in reports furnished to
others. Some of the L&L services involve the provision of taxable information services (i.e., the Local
information relating to festivals, events, museums, attractions, tourist information and the General
information). Petitioner states that the L&L service is provided over the phone (aurally) and also via the
web, e-mail, and fax. Thus, the L&L services are provided both aurally and in writing. Accordingly, this
service is not subject to the additional 5% tax imposed under section 1105(c)(9)(ii).
With respect to the Prepaid Telephone Service, charges for Hands-Free Calling and Virtual Advisor
are subject to sales and use tax.
The charges to customers for the Hands-Free Calling are subject to the taxes imposed under sections
1105(b) and 1110(G) of the Tax Law and, as applicable, the local sales tax on utilities services imposed in
certain school districts pursuant to the provisions of section 1212 of the Tax Law. (See also Tax Law
§1111(l); TSB-M-02(6)S, Amendments Affecting the Application of the Sales and Use Tax and Excise Tax
Imposed on Mobile Telecommunications Service, July 30, 2002.)
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The charges attributable to Virtual Advisor - the telephonic delivery of local traffic reports, stock
market reports, etc. - constitute receipts from the sale of otherwise taxable information and entertainment
services delivered exclusively aurally and are thus subject to the additional 5% tax imposed under section
1105(c)(9)(ii) of the Tax Law. We note that charges for weather reports whether written or aural are not
subject to tax. (See TSB-M-95(11)S, Exclusion of Meteorological Service From Sales and Use Tax, October
26, 1995.) Petitioner is responsible for applicable sales tax on the charges to customers for the provision of
taxable information and entertainment services by Virtual Advisor.
Lastly, we note that Petitioner is liable for payment of applicable sales and use taxes on its purchases
and uses of telephone services in the provision of its services. Petitioner is not considered to be reselling
telephone services, as such, to its customers with the possible exception of its sales to customers of minutes
(excluding the minutes Petitioner consumes in its provision of Virtual Advisor service to its customers) for
Hand-Free Calling service.
We note that the advice provided herein is based upon the descriptions of Petitioner’s service(s) for
the purpose of this Opinion. Changes to the plans’ provisions by Petitioner might result in different tax
consequences than discussed herein.
DATED: November 4, 2009
NOTE:
/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel
An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion.