NY TSB-A-10(38)S Sales Tax 2010-08-20

Is an online-advertising analytics/management platform a taxable information service in NY?

Short answer: No -- it qualifies for the personal/individual exclusion. The platform lets clients monitor, manage, and optimize their online advertising across third-party ad networks; it retrieves, analyzes, and presents each client's own campaign data (hits, keyword bidding by time of day) and makes recommendations using regression and predictive algorithms. No software is licensed to clients. To the extent this is an information service under Tax Law 1105(c)(1), it's excluded as information that is personal or individual in nature: the analysis and recommendations are based solely on that client's own specific campaign data, there's no comparison or benchmarking against other advertisers, and the data doesn't come from a common database and isn't sold or substantially incorporated in reports furnished to others. So the service is not subject to sales tax.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

The accounting firm Anchin asked, for a client (Company X, a Dallas web platform), whether its online-advertising management product is taxable. The platform lets clients monitor, purchase, manage, and evaluate their online advertising across multiple third-party ad networks. Company X retrieves, analyzes, and presents each client's own data (hits, keyword bidding broken down by time of day) and makes recommendations to improve campaigns, using regression and predictive algorithms. No software is licensed to clients, and there's no benchmarking against other businesses. Fees are a percentage of the client's ad spend.

The Office of Counsel concluded the service is not taxable.

Tax Law 1105(c)(1) taxes information services, but excludes information that is personal or individual in nature and isn't (or may not be) substantially incorporated in reports furnished to others. (1105(c)(9) extends the tax to electronically delivered information that would be taxable under (c)(1).)
Here, even if Company X is furnishing an information service, it qualifies for the exclusion: the information and recommendations are based solely on that client's own specific campaign data; there's no comparison of data between advertisers and no competitor data; and the information doesn't come from a common database and isn't sold or substantially incorporated in reports to others.
Company X isn't licensing software -- it may use software to deliver the service, but the transaction is about the information the client receives on its own advertising (TSB-A-10(6)S).

So the platform's receipts are not subject to sales tax.

What this means for you

Analytics, optimization, and martech platforms

A service that analyzes only the customer's own data and hands back insights/recommendations -- with no benchmarking against others and no common database -- is a nontaxable personal/individual information service, even though you run it on software and deliver it over the web. The two facts that keep it nontaxable: the analysis is confined to the client's own data, and the output isn't drawn from, or fed into, a shared/common dataset used for others.

Where it would flip to taxable

Add peer benchmarking, competitor comparisons, or reports built from a common/pooled database, and the personal/individual exclusion is lost -- the service becomes a taxable information service (compare the peer-group and shared-database opinions).

Common questions

Q: We run our analytics on software -- does that make it a taxable software sale?
A: No. No software is licensed to the client; the transaction is the information the client receives about its own advertising, which here is a nontaxable personal/individual information service.

Q: Why is this nontaxable when other data services are taxable?
A: Because it uses only the client's own campaign data with no benchmarking and no common database. Services built on a common/pooled database, or that compare clients to competitors, are taxable.

Q: Would adding competitor benchmarking change the answer?
A: Yes. Benchmarking or a common database defeats the personal/individual exclusion and makes it a taxable information service.

Citations and references

Tax Law section 1105(c)(1) (tax on information services; personal/individual exclusion)
Tax Law section 1105(c)(9) (information services delivered by telephony/telegraphy)
TSB-A-10(6)S (personal/individual information service)

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_38s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-10(38)S
Sales Tax
August 20, 2010

Office of Tax Policy Analysis
Taxpayer Guidance Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S080227A

On February 27, 2008, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Anchin, Block and Anchin, LLP., 1375 Broadway, New York,
New York 10018. Petitioner provided additional information pertaining to the Petitioner on
May 23, 2008, and July 1, 2008.
The issue raised by Petitioner, Anchin, Block and Anchin, LLP, is whether certain
online advertising products are subject to sales tax.
Facts
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Company X provides a Web platform that allows its clients to monitor, purchase,
manage and evaluate online advertising across multiple third party ad networks. Clients set up
their advertising network accounts at Company X’s Web site, accessed by username and
password. No software is licensed by Company X to clients or downloaded from Company
X’s Web site to client’s computers. Company X, located in Dallas, Texas, will retrieve,
analyze, and present data to clients, such as keyword bidding and the number of hits on the
clients’ ads on various sites broken down by different times of the day. Company X’s Web
site makes recommendations for how the client might have a more successful advertising
campaign. Using Company X’s Web site, the client can send detail and instructions to the
advertising networks’ servers. No comparison or benchmarking is done between Company
X’s clients and other businesses’ online advertising. Company X employs regression analysis
and predictive algorithms to deliver recommendations to boost and maintain optimal
advertising performance. Clients can produce and export customized reports featuring
selective metrics, trends, and most and least successful executions. Company X’s business
receipts are based on a percentage of the clients’ overall advertising expenditures through the
use of the service.
Analysis
Section 1105(c)(1) of the Tax Law imposes sales tax upon every sale of the furnishing
of information by printed, mimeographed, or multigraphed matter including the services of
collecting, compiling or analyzing information of any kind or nature and furnishing reports
thereof to other persons, excluding the furnishing of information which is personal or

-2TSB-A-10(38)S
Sales Tax
August 20, 2010
individual and which is not or may not be substantially incorporated into reports furnished to
other persons.
Section 1105(c)(9)(i) of the Tax Law imposes sales tax on the sale of an information
service that is furnished, provided, or delivered by means of telephony or telegraphy or
telephone or telegraph service (whether intrastate or interstate) of whatever nature, such as
information services provided through 800 or 900 numbers, mass announcement services, or
interactive information network services. However, the tax imposed by section 1105(c)(9)
does not apply to an information service unless it would otherwise be subject to taxation
under section 1105(c)(1) of the Tax Law if it were furnished by printed, mimeographed, or
multigraphed matter, or by duplicating written or printed matter in any other manner. Section
1105(c)(9)(ii) of the Tax Law imposes an additional tax at the rate of 5% on the sale of an
information service subject to tax under section 1105(c)(9)(i) that is received by the customer
exclusively in an aural (i.e., audible) manner.
In the situation described, Company X tracks hits on the clients’ ads on various sites
and Web search engines. This information is gathered and analyzed to provide reports to
clients relating to the on-line activity of their potential customers. For example, reports
provided by Company X will show clients that their advertising on a certain Web site during
certain time periods is not being accessed as often as the client’s same advertising placed on
other Web sites in the same or different time slots. The information allows Company X’s
clients to take better advantage of their advertising dollars by placing their ads in the proper
location where their target market is more effectively reached. No comparison of data
between multiple advertisers or information relating to advertising of competitors is provided
by Company X to its customers.
Company X is making sales of a service in which Company X collects, compiles, and
analyzes information regarding the activity levels of the client’s Web advertising. Company
X is not licensing software to clients. While Company X may use software to provide its
service, the nature of the transaction between Company X and its clients relates to the
information that the client is receiving on its Web advertising.
The information provided by Company X to its client is based on the specific activities
occurring within the various search engines with respect to that client’s ads.
Recommendations made to the client are based on the analysis of that client’s specific data,
and are not based on, and do not include, data relating to activity regarding other advertisers.
To the extent that these services might be considered information services subject to the taxes
imposed pursuant to section 1105(c) of the Tax Law, it appears these services will qualify for
the exemption from tax for sales of information which is personal and individual and is not or
may not be substantially incorporated into reports submitted to others. Therefore, provided
the information as to one client’s activity is not sold, nor available for sale, nor substantially
incorporated into reports furnished to other advertisers, and does not contain data from a

-3TSB-A-10(38)S
Sales Tax
August 20, 2010
common data base, the information service being provided by Company X to its clients is
personal and individual in nature and is not subject to the sales tax. See Adv Op Comm T&F,
February 17, 2010, TSB-A-10(6)S.

DATED: August 20, 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.