Are receipts from a call-tracking service sold to car dealerships subject to NY sales tax?

Plain-English summary

The petitioner sells a call-tracking service to car dealerships. Through an out-of-state subcontractor, it assigns toll-free "vanity" numbers used in the dealer's ads; when a shopper calls, the subcontractor's server plays a greeting, connects the caller to the dealer's salesperson, records the conversation, identifies which ad generated the call, and (with consent) runs an exit survey. The dealer can later access the recordings and surveys and build reports to gauge its advertising effectiveness. The petitioner asked whether its receipts are taxable.

The Office of Counsel concluded the service is not taxable.

• Not a taxable telephone answering service (1105(b)). A telephone answering service is taking messages and relaying them to the customer. Although the call-tracking service has some answering-service elements, the answering of the phone is incidental to the real service -- measuring ad effectiveness, recording calls, and running exit surveys (TSB-A-98(70)S, Farella). So 1105(b) doesn't apply.
• Not a taxable information service (1105(c)(1)/(9)). The information the petitioner provides relates only to the dealer's own advertising and its own callers, is transmitted only to that dealer (and the petitioner), and is not incorporated into reports furnished to others. The petitioner does not pool or sell one dealer's data to other dealers. So it fits the "personal or individual" exclusion. And because it isn't taxable under 1105(c)(1), it isn't taxable under 1105(c)(9) (information delivered by telephony) either.
• Exit surveys and recorded calls -- same result, with a condition. The exit-survey results and the recorded conversations also fall within the personal/individual exclusion as long as access is limited to the dealer for whom they were made. If that information were made available to other customers, those receipts would be taxable -- and if the survey results weren't separately offered and sold, the petitioner's entire charge would be taxable.

Two cautions:
- Tangible copies are taxable. Extra copies of recorded conversations delivered in tangible form (tape, disc, flash drive) are taxable as sales of tangible personal property (1105(a)).
- Bundling can flip it. This opinion assumes the call-tracking service is a discrete transaction. If it were sold as a constituent part of some other taxable service -- even if separately itemized -- the call-tracking charge would be swept into the taxable receipt.

What this means for you

Marketing/analytics services built on phone calls

A service that happens to answer and route calls isn't a taxable answering service if the answering is incidental to a larger, non-enumerated service. And data you generate that stays specific to one customer -- never pooled or resold to others -- keeps the personal/individual exclusion. The moment you start sharing or reselling one customer's data to others, you lose the exclusion.

Watch the delivery medium and the bundle

Handing customers tangible copies (discs, drives) creates a taxable TPP sale. And selling a nontaxable service as part of a taxable one drags it into tax -- keep genuinely separate services genuinely separate.

Common questions

Q: My service answers and routes calls -- is that a taxable telephone answering service?
A: Not if the answering is merely incidental to a larger, non-enumerated service (like measuring advertising or recording/surveying). The dominant service controls.

Q: I collect and report call data -- is that a taxable information service?
A: Not if the information relates only to that one customer and isn't pooled with, or resold to, others. That's the personal/individual exclusion. Sharing it across customers makes it taxable.

Q: We give customers recordings on a flash drive -- taxable?
A: Yes. Extra copies delivered on tangible media (tape, disc, flash drive) are taxable sales of tangible personal property.

Citations and references

• Tax Law section 1105(b) (telephone answering services)
• Tax Law section 1101(b)(13) (telephone answering service defined)
• Tax Law section 1105(c)(1) (information services)
• Tax Law section 1105(c)(9) (information services by telephony)
• Tax Law section 1105(a) (sales of tangible personal property)
• Tax Law section 1101(b)(6) (tangible personal property)
• TSB-M-91(13)S (telephone answering services taxable 9/1/1991)
• TSB-A-98(70)S (Alfred Farella)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2010.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a10_29s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-10(29)S
Sales Tax
July 2, 2010

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S100316A

The Petitioner, name and address redacted asks whether its receipts from the sales of its call tracking
services provided to car dealerships located in New York are subject to New York State and local sales tax.
We conclude that the receipts from the provision of Petitioner’s call tracking services are not subject
to New York State and local sales tax1.
Facts
Petitioner provides a call tracking service to car dealerships. The service collects and analyzes
certain information regarding prospective customers of the dealerships, measures advertising performance,
and evaluates employee call handling skills. New York car dealerships are among Petitioner’s customers.
While Petitioner is the party that contracts for the provision of the call tracking services with the
dealerships, Petitioner has engaged a third party call measurement, monitoring, and tracking service provider
as a subcontractor to provide the call tracking services on its behalf. The subcontractor is headquartered
outside of New York and its call center is also located outside of New York.
To facilitate its call tracking service, the subcontractor arranges for one or more custom vanity phone
numbers (1-8YY numbers which can be customized such as 1-800-RET-AILR) for use by the customer
dealerships. The number of toll-free phone numbers to be contracted for use by a customer dealer is
determined by the package purchased by the customer from Petitioner (various packages include the use of
from one to ten toll-free numbers). Customers that want a customized toll-free number may request the use
of the designated number, subject to its availability.
The toll-free numbers are used in advertisements on Petitioner’s website (new car sales), Petitioner’s
affiliated website(s) (used auto sales), and on the customer’s website. Although the dealers are not required
to participate in advertising on Petitioner’s website, if a dealer participates in advertising on Petitioner’s
website, the dealer must participate in one of Petitioner’s call tracking services. The toll-free numbers can
also be used in the customer’s own newspaper, television, radio, or billboard advertising.
The toll-free numbers ring at the subcontractor’s out-of-state call center. They do not ring into the
customer’s place of business, and other than for advertising purposes the customer may make no other use of
the number (e.g., no outgoing calls, etc.).

1

Petitioner also charges its customers for advertising their new and used cars on Petitioner’s or its affiliates’ Web Pages
and charges for software used by those customers to upload listings of the customer’s inventory directly to those
advertisements. Petitioner’s charges for software and advertising are separate and distinct from the charges for the
service discussed herein and are not the subject of this Advisory Opinion. We make no determination about the
imposition of New York taxes on those receipts.

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TSB-A-10(29)S
Sales Tax
July 2, 2010

The subcontractor purchases the toll-free numbers and maintains exclusive rights to those numbers
beyond the terms of its agreements with Petitioner and the car dealers. When the agreements end, the car
dealers are not given the option to purchase the numbers that were assigned to them for use in the call
measurement service. Although a small percentage of the dealer customers have been permitted to use their
own 800 phone numbers, the agreement with the subcontractor does not generally allow the dealer customers
to use an 800 phone number other than those purchased by the subcontractor for its use in providing the call
tracking service. The subcontractor is billed by its telecommunications providers for the toll-free numbers it
uses in the performance of its call tracking. The subcontractor pays all applicable federal, state and local
sales taxes applicable to the purchase of the phone numbers to the telecommunications providers, and it does
not charge those taxes to Petitioner.
When a potential automobile purchaser dials one of the toll-free numbers assigned to one of the
customer-dealers, the subcontractor’s out-of-state server plays a “welcome” message and connects the caller
with the car dealer. The contractor’s server identifies the 800 phone number that was called (i.e., the 800
number related to the customer dealer’s newspaper advertising) for purposes of tracking the response to the
dealer’s various forms of advertising. If caller ID lookup is available, the subcontractor’s server identifies
the name and location associated with the telephone number from which the call is made, and delivers the
call to the customer dealer’s “point to number.” When the customer’s salesperson answers the call, a
recording is played that indicates who is on the line and where the prospective purchaser obtained the tollfree number, and asks if the salesperson wishes to take the call. If prompted, the server connects the call to
the customer’s salesperson. The subcontractor’s servers remain connected to the call, recording the
conversation between the prospective purchaser and the customer’s salesperson. During the call, the
salesperson has access to the customer’s information residing on the subcontractor’s servers through the
Internet. At the end of the call, if the prospective purchaser agrees to participate in a survey, the call to the
dealer’s salesperson is terminated, and the purchaser remains connected to the server so that the
subcontractor may conduct the exit survey. The exit survey rates the prospective purchaser’s satisfaction
with the salesperson’s responsiveness to the prospective purchaser’s inquiries. The call is terminated when
the prospective purchaser hangs up.
Petitioner’s customers have access through the Internet to the information obtained from each call,
including the recording of the phone conversation and the exit surveys. The customer may also have the
ability to create reports to determine the effectiveness of its advertising. The recorded conversation between
the salesperson and prospective purchaser is used by the customer to monitor its sales staff to ascertain
whether they were rude, engaged in hard selling or deceptive tactics (e.g., bait and switch), were responsive
to the purchaser’s questions and concerns, etc.
The “point to number” to which the purchaser’s toll-free call is directed is the customer-dealer’s own
local phone number. The transfer from the subcontractor’s servers to the customer-dealer’s salesperson is
transparent to the prospective purchaser. The customer is responsible for paying its telecommunications
provider for its own telecommunications service, including all applicable taxes.
Petitioner also receives a report through the Internet summarizing its customer’s phone referral
reports and usage data for each toll-free number. However, Petitioner does not collect and compile the
collective results of multiple customers or sell the information of any customer to other customers. For
example, Petitioner does not tell other customers that John Doe inquired about purchasing an automobile
from Customer A, nor does it tell Customer A that John Doe called another customer about its
advertisements. Likewise, Petitioner does not inform other customers whether prospective purchasers were
satisfied or dissatisfied with Customer A’s salespersons, or were more or less satisfied with Customer A’s
salespersons than with Customer B’s salespersons.

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TSB-A-10(29)S
Sales Tax
July 2, 2010

Analysis
Sales tax is imposed upon the receipts from every sale, other than a sale for resale, of telephone
answering services pursuant to section 1105(b) of the Tax Law. A "telephone answering service" is any
service that consists of taking messages by telephone and transmitting such messages to the purchaser of the
service (or his or her designee), but not including such a service if it is merely an incidental element of a
different service purchased by the customer. See Tax Law §1101(b)(13); see also Telephone Answering
Services Subject to Sales Tax Effective September 1, 1991, Technical Services Bureau Memorandum,
October 11, 1991, TSB-M-91(13)S.
The tax imposed by Section 1105(b) of the Tax Law on telephone answering services does not apply
to Petitioner’s call tracking service. Although Petitioner’s call tracking service does include elements of a
telephone answering service, the answering of the telephone is incidental to the services provided by
Petitioner to its subscribers (i.e., measuring the effectiveness of the customer’s advertising, recording
conversations between prospective purchasers and salespersons, and performing exit surveys). See also
Alfred Farella, Adv Op Comm Tax & Fin, October 7, 1998, TSB-A-98(70)S. Thus, Petitioner’s call tracking
service, as described above, is not subject to the sales tax imposed pursuant to section 1105(b) of the Tax
Law on telephone answering services.
Section 1105(c)(1) of the Tax Law imposes sales tax on the 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.
Petitioner, as part of its call tracking service, makes sales of information. However, the initial
information Petitioner provides as part of its call tracking service relates only to determining the source of
the customer’s advertising that generated the telephone inquiry, and if available, the location of the
prospective car purchaser. This information provided by Petitioner is personal and individual to the
customer’s advertising practices. This information is transmitted electronically by Petitioner’s subcontractor
through the Internet only to the customer and Petitioner, and is not incorporated into reports furnished to
other persons. Accordingly, the call tracking service described above qualifies for the exclusion from tax
under section 1105(c)(1) of the Tax Law for the provision of information which is personal or individual in
nature and is not or may not be incorporated into reports furnished to others.
Sales tax is imposed upon information and entertainment services delivered by means of telephony
and telegraphy or telephone and telegraph service under section 1105(c)(9) of the Tax Law. Information
services delivered by telephony or telegraphy are not subject to tax unless the information service would be
subject to the tax imposed by Tax Law section 1105(c)(1) if the information was delivered in written or
printed format. Because, as previously noted, Petitioner’s service is not subject to the tax imposed under Tax
Law section 1105(c)(1), this service is not subject to the sales taxes imposed by section 1105(c)(9) of the
Tax Law.
The results of the exit survey will likewise qualify for the exclusion from sales tax on information
services as the provision of information that is personal or individual in nature, if neither Petitioner nor its
subcontractor uses the survey information in reports furnished to persons other than the customer for whom
the survey was performed. If the survey information is made available to customers other than the dealer for
whom the survey was performed, the receipts from the sale of the exit survey results would be subject to tax.

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TSB-A-10(29)S
Sales Tax
July 2, 2010

In that case, moreover, if the exit survey results are not separately offered for sale and sold separate from
Petitioner’s call tracking service, then Petitioner’s total charge to the customer would be subject to sales tax.
The recorded conversation between the dealer’s salesperson and the prospective purchaser, to the
extent that provision of the information contained in the recording might be considered an information
service, will likewise qualify for the exclusion from sales tax for the purposes of the taxes imposed pursuant
to sections 1105(c)(1) and 1105(c)(9) of the Tax Law for information that is personal or individual, if access
to the recorded conversation is given only to the customer-dealer for whom the recording is made. However,
section 1105(a) of the Tax Law imposes New York State sales tax upon receipts from every retail sale of
tangible personal property. "Tangible personal property" means corporeal personal property of any nature.
See Tax Law §1101(b)(6). Thus, additional charges for extra copies of the recorded conversations that are
delivered to the customer in tangible format (tape, disc, flash drive, etc.) would be subject to the sales tax
imposed pursuant to section 1105(a) of the Tax Law.
The advice provided in this opinion presumes that the sale of the call tracking service is a discrete
separate transaction. If this service was sold as a constituent part of some other taxable service, regardless of
whether the charges for the call tracking service were separately itemized, the charges for the otherwise
nontaxable call tracking service would be included as expenses in the receipts for the taxable service and
would be subject to sales tax.

DATED: July 2, 2010

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.