Are an online auction site's seller listing fees and buyer registration fees subject to sales tax?

Plain-English summary

The petitioner is an auctioneer building a multi-seller online auction website. Sellers pay a $20 registration fee plus a $2-$5 per-listing fee; buyers pay a $10 registration fee to bid. Registration fees are nonrefundable, used to verify identities, and a buyer's fee is not applied toward any purchase and isn't refunded if the buyer buys nothing. Anyone with internet access can view the auction listings for free (descriptions, photos, prices, bids). The petitioner asked whether the registration and listing fees are subject to sales tax.

The Office of Counsel concluded neither the seller fees nor the buyer fees are taxable.

• Seller fees = nontaxable advertising. Charging sellers to register and list goods is a charge for advertising on the website -- internet advertising is nontaxable media placement (Jones Day).
• Buyer fees = not connected to a taxable sale. Unlike a Costco membership (a prepayment for merchandise the warehouse itself sells, which is taxable), this site doesn't sell the goods -- buyers purchase from third-party sellers. The buyer fee isn't applied to or made in conjunction with any taxable sale, so it isn't taxable.
• Auction info is free, so no taxable information sale. The listing information (descriptions, photos, prices, bids) is the kind of information that could be taxable under 1105(c)(1)/(9) if a charge were made to access it -- but since anyone can view it free, there's no receipt or sale of information.
• Two notes. The site's purchases of credit/identity-verification services from third parties may be taxable (information services 1105(c)(1)/(9) or protective/detective services 1105(c)(8)). And the opinion makes no determination about the site's duty to collect sales tax on the taxable goods sold at its auctions (see Norman Levy).

What this means for you

Online marketplaces and auction platforms

Fees you charge sellers to list/advertise are nontaxable advertising. Fees you charge buyers to participate aren't taxable as long as you don't sell the goods yourself and the fee isn't a disguised prepayment for merchandise -- the Costco line is whether the fee is, in substance, payment for goods the operator sells. Keep listing info free to view and you avoid creating a taxable information service.

Don't overlook your own purchases and collection duties

You may owe tax on identity/credit-verification services you buy. And being a marketplace can still make you responsible for collecting tax on the goods sold through you -- a separate question this opinion doesn't resolve.

Common questions

Q: Are seller listing fees taxable?
A: No. They're charges for advertising the seller's goods on your site -- nontaxable advertising/media placement.

Q: Why isn't the buyer registration fee taxable like a Costco membership?
A: Costco's fee is a prepayment for merchandise Costco sells. Your site doesn't sell the goods (third-party sellers do), and the fee isn't applied to any purchase -- so it isn't tied to a taxable sale.

Q: Is the listing information a taxable information service?
A: Only if you charged to access it. Because anyone can view listings for free, there's no sale of information.

Citations and references

• Tax Law section 1105 (sales tax on tangible personal property and enumerated services)
• Tax Law section 1105(c)(1) (information services; advertising-agent exclusion)
• Tax Law section 1105(c)(9) (electronically furnished information/entertainment services)
• Tax Law section 1105(c)(8) (protective and detective services)
• TSB-A-09(44)S (Jones Day; internet advertising/media placement nontaxable)
• TSB-A-92(66)S (Costco; membership fee = prepayment for merchandise, taxable)

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_52s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(52)S
Sales Tax
November 13, 2009

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S090817A

Petitioner name and address redacted, asks whether its registration and listing fees for its
proposed on-line auction service are subject to New York State and local sales taxes.
We conclude that petitioner’s “on-line auction” buyers’ registration fees and its sellers’ listing
fees are not subject to State and local sales tax.
Facts
Petitioner, an auctioneer engaged in live and on-line auctions, is currently developing a new
multi-seller website where individual sellers can list personal merchandise that they want to sell and
where buyers can submit bids to purchase the listed merchandise. Each seller will be charged a
registration fee of $20, which will entitle it to participate on Petitioner’s websites as both a seller and a
buyer. Petitioner proposes that sellers will also be charged a flat rate of $5 or $2 per listing (depending on
the type/quantity of item(s) listed). Buyers will be charged a registration fee of $10, which will allow
them to submit bids for the purchase of the listed merchandise.
Petitioner’s registration application requests the registrant’s name, credit card information (card
number, expiration date, verification code, billing address), business information (company name,
address, etc.), if applicable, and day and evening phone contact numbers. Petitioner describes its
registration fees as nonrefundable, one-time fees. The website indicates that valid credit card information
is mandatory for registration. Petitioner represents that it uses the registration fee to cover its cost in
verifying the registrants’ identities. A buyer’s registration fee is not applied as payment, in whole or in
part, of the cost of any property purchased by the buyer and is not reduced or refunded if the buyer fails to
make any purchases.
Though potential purchasers (buyers) will be required to register in order to bid for the purchase
of the listed merchandise, any person with access to the Internet may, without charge (i.e. , they do not
have to be registered), view auction information on Petitioner’s website, such as the merchandise
descriptions and photographs, current bid prices, opening/closing dates for the sale, final sales prices,
minimum bids, reserve price, etc.
Analysis
The Tax Law imposes sales tax on sales, unless for resale or otherwise exempt, of tangible
personal property and certain enumerated services (Tax Law section 1105).
Section 1105(c)(1) of the Tax Law imposes sales tax on the service of:

-2-

TSB-A-09(52)S
Sales Tax
November 13, 2009

[t]he furnishing of information by printed, mimeographed or multigraphed matter or by
duplicating written or printed matter in any other manner, including the services of collecting,
compiling or analyzing information of any kind or nature and furnishing reports thereof to other
persons, but excluding the furnishing of information which is personal or individual in nature and
which is not or may not be substantially incorporated in reports furnished to other persons, and
excluding the services of advertising or other agents, or other persons acting in a representative
capacity…
Also included among the enumerated services subject to tax are entertainment or information
services furnished or provided electronically (Tax Law section 1105(c)(9).
Charges for advertising on Internet websites are generally considered receipts from the sale of
advertising in the media (media placement) and constitute nontaxable advertising services. (See Matter of
Jones Day, Adv Op Comm Tx & Finance, September 24, 2009, TSB-A-09(44)S.) Petitioner’s charges to
its sellers to register and list their goods for sale on Petitioner’s website are charges for advertising
services and thus are not receipts subject to sales tax.
Because Petitioner is not in fact selling tangible personal property, the facts in this Advisory
Opinion are distinguishable from the facts in Costco Wholesale Corporation, Adv Op Comm Tx & Fin,
September 17, 1992, TSB-A-92(66)S. The Costco Advisory Opinion advised that the annual membership
fee paid by members for access to Costco's warehouse sales facilities was subject to sales tax pursuant to
section 1105(a) of the Tax Law because, in substance, the membership fee was a prepayment for the
merchandise sold by Costco. (See also John L. Buono, Adv Op Comm Tx & Fin, March 17, 1994,
TSB-A-94(10)S.) In the present case, Petitioner’s charges for registration of potential buyers do not
relate to and are not made in conjunction with the sale by Petitioner of any tangible personal property or
enumerated services subject to tax under section 1105 of the Tax Law. Thus, Petitioner’s charges to
buyers for registration, after which the buyers may participate in auctions to purchase property from thirdparty sellers, are not subject to sales tax.
However, Petitioner is engaged in furnishing information of a kind that may be subject to sales
tax under the provisions of section 1105(c)(1) and section 1105(c)(9) of the Tax Law. The information as
to what items are offered for sale, the descriptions and photographs of the items offered for sale, the terms
of the sale (delivery, pick up, etc.), the prices (opening, reserve, buy now, current bid price, and final sale
price), number of bids, amount of time left in the auction, etc., all constitute information of a kind that is
neither personal nor individual to the persons viewing such materials on Petitioner’s website. The
furnishing of that information would be subject to tax if a charge were made for accessing that
information. However, since any person with access to the Internet may view Petitioner’s auction site
(and the information posted thereon) without charge by Petitioner, there is no receipt or sale of that
information.
Please note that we make no determinations on Petitioner’s responsibility for the collection of any
sales taxes due on sales of taxable property and services via its auctions, whether online or otherwise. See
Norman Levy Associates, Inc., Adv Op Comm Tx & Fin, April 22, 1996, TSB-A-96(23)S for a discussion
of auctioneers’ responsibilities for collection of sales tax when they are the seller or agent of the seller of
tangible personal property sold at auction.
Though the registration fees paid by purchasers to Petitioner are not receipts subject to sales tax,
we note that, to the extent Petitioner uses the fees to purchase credit/identity verification services from
third-party vendors, Petitioner’s purchases may be subject to the taxes imposed under Tax Law sections

-3-

TSB-A-09(52)S
Sales Tax
November 13, 2009

1105(c)(1) and 1105(c)(9) (information services delivered in writing or electronically), and section
1105(c)(8) (protective and detective services).

DATED: November 13, 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.