For a retail merchandising agency's in-store marketing services, which are taxable, and is the whole charge taxable if some services are?

Plain-English summary

The Petitioner is a retail merchandising agency that provides in-store "Shop in Shop" marketing support for a sporting-goods/apparel manufacturer ("Client"). Its associates visit stores to maintain Client's branded displays: walking the department with the manager, organizing/folding/hanging/restocking merchandise to Client's standards, installing poster graphics in existing frames, occasionally assembling mannequins, pressing showroom garments, overseeing (but not doing) third-party fixture installs, and writing reports to Client (sales trends, fixture condition, photos). It bills a single fee but can itemize.

The Office of Counsel concluded:

• Taxable: installing signs and assembling mannequins. Section 1105(c)(3) taxes installing or servicing tangible personal property. Installing signs (putting graphics in frames) and assembling a mannequin are taxable -- the sign install is taxable whether planned or decided on-site.
• Not taxable -- supervising a third party's installation. Merely overseeing another contractor's fixture install isn't installing TPP, and isn't a taxable interior-design service (1105(c)(7)) unless the agency created the design being implemented or makes placement/design decisions. Following Client's precise specs is not taxable.
• Not taxable -- handling/organizing merchandise. Folding, hanging, organizing by size/color, and restocking sale merchandise doesn't change the property's condition, so it's not taxable servicing/maintaining, not processing (no change in nature/shape/form), and not installation (not creating a sample display). It's also partly training store staff.
• Not taxable -- placing clothes / pressing. Placing clothes on an installed mannequin, on hangers, or footwear on shelves isn't installation. Pressing garments is an expressly excluded service.
• Not taxable -- reports. The "Shop in Shop" reports are personal and individual in nature and not substantially incorporated into reports for others, so they fall within the information-service exclusion (section 1105(c)(1)).
• Multiple discrete services -- bundling rule. These are separate, customized services (no standard package; Client dictates the work; each is divisible), not one integrated product. So: a single charge that includes any taxable installation makes the whole charge taxable; but a separately stated, reasonable charge for the taxable install is taxed only on that (20 NYCRR 527.1(b)).

What this means for you

Retail merchandising / field-marketing agencies

Most of what you do -- organizing, folding, restocking, presenting merchandise, supervising others' installs, writing store reports -- is not taxable, because it doesn't change the property's condition and isn't installing TPP. The taxable pieces are narrow: installing signs/graphics and assembling mannequins (servicing/installing TPP under 1105(c)(3)).

Itemize to avoid taxing everything

If you bill one fee that includes a taxable install, the entire fee is taxable. Separately state a reasonable charge for the install and you collect tax only on that. This is the practical takeaway.

Supervision and reports stay clean -- if structured right

Supervising a third-party install is nontaxable unless you created the design or make placement decisions (then it can be taxable design under 1105(c)(7)). Reports stay nontaxable as a personal/individual information service as long as they aren't resold/shared in substantially the same form to others.

Common questions

Q: Is my in-store merchandising service taxable in New York?
A: Mostly no. Organizing/restocking/presenting merchandise, supervising installs, and writing client reports aren't taxable. Only installing signs and assembling mannequins (installing/servicing TPP) are taxable.

Q: I bill one flat fee -- is it all taxable?
A: If it includes any taxable installation, yes -- the whole charge is taxable. Separately state a reasonable charge for the install and you collect tax only on that.

Q: Are my store reports taxable as an information service?
A: No -- they're personal and individual and not shared with others in substantially the same form, so they fall under the 1105(c)(1) exclusion.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(c)(3) (sales tax on installing/servicing tangible personal property)
• Tax Law section 1105(c)(7) (interior decorating and designing services)
• Tax Law section 1105(c)(1) (information services; personal/individual exclusion)
• 20 NYCRR section 527.1(b) (single charge for taxable and nontaxable services)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(13)S
Sales Tax
March 19, 2015

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE

ADVISORY OPINION

PETITION NO. S110208A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTED
“Petitioner”.
Petitioner asks whether its sale to a sporting goods and apparel manufacturer of marketing
support services that assist in the retail marketing of the manufacturer’s products are subject to
sales and use taxes. Petitioner also asks if it must collect sales tax on its entire charge because
some of the services are taxable, or whether it may itemize charges for individual services on its
invoices and collect sales tax only on the receipts for the taxable services.
We conclude that the installation of signage or the assembling of mannequins by
Petitioner is a service subject to sales tax under Tax Law § 1105(c)(3) as the installing or
servicing of tangible personal property. The other services provided by Petitioner are not subject
to sales tax. If Petitioner sells both taxable services and non-taxable services to its customer for
a single charge, the total receipts for the services are subject to sales tax. If Petitioner itemizes
on the invoice or bill given to the customer a charge for taxable services that is reasonable,
Petitioner would be required to collect sales tax only on the receipts for the taxable services.
Facts
Petitioner is a retail marketing agency that provides retail merchandising services
throughout the country, including in New York. Its primary client (“Client”) has special
relationships with retail store chains that carry Client’s products. When a large chain store
retailer commits to ordering a specified volume of Client’s products, the retailer and Client may
enter into an additional agreement, under which the retailer agrees to dedicate a portion of sales
floor space exclusively to Client’s merchandise. In exchange, Client agrees to provide on-site
marketing support for the dedicated area.
The dedicated area is referred to as a “Shop in Shop.” The Shop in Shop agreement
allows Client to apply its custom branding to the dedicated area of the store. The branding
includes graphics and special fixtures.
Client has two types of “Shop in Shop” agreements: “Soft Shop” and “Hard Shop.” In a
contract for Soft Shop, Client supplies the retailer with graphics but the retailer supplies the

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merchandising fixtures. In a Hard Shop contract, Client agrees to supply the retailer with both
graphics and merchandising fixtures.
The objective of the in-store marketing support provided under a "Shop in Shop"
agreement is to maintain Client’s desired presentation of its products and to increase sales of
these products. This in-store marketing support is aimed at maintaining a consistent look and
feel across all retail locations for Client’s merchandise. This is accomplished through the
employment of graphics (e.g., logos, photographs, and advertising slogans), branded trade
fixtures (in the case of Hard Shops) and consistent product presentation. For example, Client has
standards for hanging, folding, lacing and placement of merchandise at retail locations, which it
requires retailers to comply with at their Shop in Shop locations.
Client has retained Petitioner to provide services at the vast majority of its Shop in Shop
locations. Petitioner has approximately 60 merchandising associates who perform in-store
marketing work for Client. Six of the associates work at New York locations. Nationwide,
Petitioner provides between 900 to 1,000 days of Shop in Shop marketing support services per
month.
In providing the services, Petitioner is responsible for ensuring that Client’s image is
properly maintained at the Shop in Shop locations. Petitioner does this by executing visual
merchandising tasks in accordance with Client’s standards, providing retail store employees with
instructions on the presentation standards to assist them in maintaining the Shop in Shop between
visits, and providing retail store staff with marketing, product and technical information. In
addition, Petitioner is required to furnish Client with real time market reports regarding the
activities at an inspected Shop in Shop. The information provided to Client includes individual
store sales trends, product replenishment issues, competitors’ presentation of merchandise at the
store, damage to or removal of Client trade fixtures or graphics, and questions asked by store
staff. This information is contained in a written report submitted to Client. The report also
includes photographs of the Shop in Shop.
A regular visit by one of the Petitioner’s associates to a Hard Shop takes approximately
4.5 to 5 hours. During the visit, the associate does a walk-through of the Shop in Shop with the
manager of the department. The associate makes inquires about any questions, special requests
or needs the store might have and collects information regarding product sales. The associate
will also discuss with the manager new products and promotional campaigns. The walk through
and discussion with the manager takes approximately one hour.
During an early stage of a Hard Shop visit, the associate will take photos of the Shop in
Shop from various angles and makes notes as to any missing graphics or trade fixtures. This
takes approximately 15 minutes.
Other tasks that an associate performs on a Hard Shop visit are to organize and restock
merchandise in the Shop in Shop. This involves checking to make sure that products are in their
proper location, display racks/shelves are stocked, and merchandise is organized by size, color

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and category. As part of this process, the associate folds, hangs and or laces products per Client’s
standards, e.g., zippers closed, product and price tags tucked in, and apparel categories, colors
and fabric types organized per Client’s directives. These activities take two to three hours to
complete. This organizing activity is done in large part to educate the retailer as to how Client
wants its products displayed.
If the stock of a particular product is low, the associate may replace the low stocked item
with different items based on product availability. For example, if the supply of socks in the
Shop in Shop is low, the associate may replace socks with caps and change graphics to reflect the
change in stock. This process may entail moving display components. The restocking activity
takes 15 minutes.
During final stages of the Hard Shop visit, the associate will scrutinize how competitors’
products are being presented for sale in the store and take after photos of the Shop in Shop. The
associate does another walk through of the Shop in Shop with the manager. If necessary, the
associate reviews Client’s product presentation standards with the manager. The associate then
prepares a report of the visit for Client. These activities take one hour.
Two to four times a year, Client arranges for new graphics to be printed and delivered to
Shop in Shop locations. Petitioner is responsible for placing the graphics in existing holders at
the Shop in Shop. The graphics are installed pursuant to the instructions of Client. This
installation activity takes 15 minutes.
The graphics that are changed on a regular basis are poster style graphics that slide into
existing frames. Petitioner does not handle graphics that do not fit into frames or holders on
fixtures. Thus, Petitioner does not hang signs from the ceiling.
At Soft Shop locations (locations where the retailer owns the fixtures), Petitioner
provides visual merchandising services similar to those provided at a Hard Shop location, but the
services are performed on a semi-annual basis in conjunction with the delivery of new graphics
by Client. The installation of graphics takes about 15 minutes. The associate then spends about 1
hour and 45 minutes doing tasks performed during a regular Hard Shop visit. The Soft Shop
visits take less time than Hard Shop visits because Soft Shop locations are smaller than Hard
Shop locations.
When a retailer and Client agree to create a new Hard Shop or update the fixtures or floor
plan for an existing Hard Shop, Client will design the new layout and hire a contractor to install
the new fixtures. Petitioner is not responsible for doing any of this installation, but is hired by
Client to oversee the installation process, and give directions about the placement of fixtures.
Once the physical setup is completed, Petitioner’s associates will perform the tasks done during a
regular visit described above. Thus, at this time, the associate will pull Client’s products from
stock, organize the presentation of the products in the Shop in Shop and install graphics.

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When a retailer and Client agree to create a new Soft Shop or update the fixtures or floor
plan of an existing Soft Shop, Client designs the new layout, but the retailer is responsible for
installing the new fixtures. Client contracts with Petitioner to perform the same services it
performs for Hard Shop installations.
Client also owns and operates retail stores that sell Client’s products. Petitioner performs
services at those stores similar to those it performs retail stores not owned by Client.
Occasionally, Petitioner will assemble and dress mannequins as part of a visit to a Client retail
store.
Petitioner also provides showroom support for Client’s wholesale showrooms. These
services entail placing garments on hangers (and steaming them if necessary), placing footwear
on stands or shelves in the showroom and ensuring that products are displayed in accordance
with Client’s presentation standards.
Petitioner does not sell tangible personal property to Client or to retailers. Petitioner does
not offer to the public a standard package of marketing services. It tailors the services it provides
to the specific needs of each customer. Petitioner does not provide to any other customer the
same exact package of services it provides to Client.
Petitioner bills Client a single fee based on an agreed rate for services comprised of a
variety of tasks. Regular visual merchandising services are billed at a flat rate. Any graphic
changes performed at the Hard Shop are included in the flat rate. Graphic change services at a
Soft Shop and services provided in conjunction with installations are billed at an hourly rate.
All other services are billed at a flat rate. Petitioner has the capacity to separately bill for tasks
performed during regular Shop in Shop visits.
Analysis
Petitioner is providing a variety of services under the rubric of marketing support
services. Some of the services qualify as the installation of tangible personal property, which is
taxable under Tax Law § 1105(c)(3).
Tax Law § 1105(c)(3) imposes sales tax on the receipts from every sale of the services of
installing, maintaining, servicing or repairing tangible personal property, but expressly excludes
from sales tax the services of laundering, dry-cleaning, tailoring, weaving, pressing, shoe
repairing, and shoe shining. Installing means setting up tangible personal property or putting it in
place for use. See 20 NYCRR § 527.5(a)(2). Maintaining, servicing and repairing are terms used
to cover all activities that relate to keeping tangible personal property in a condition of fitness,
efficiency, readiness or safety or restoring it to such condition. See 20 NYCRR § 527.5(a)(3).
The service of supervising installation work performed by a third party does not itself
qualify as the service of installing tangible personal property. That is, such supervisory work is
not a service subject to sales tax under Tax Law § 1105(c)(3). Nor does the supervisory activity

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described by Petitioner constitute a taxable interior design service under Tax Law § 1105(c)(7).
Supervision of installation work may be an element of a taxable design service if the vendor
providing the supervisory service has created the design that is being implemented or the
supervisory work includes making interior design decisions, such as the placement of tangible
personal property. Compare TSB-A-91(47)S. Therefore, any charge by Petitioner for supervising
the construction or the renovation of a Shop in Shop done in accordance with precise design
specification set by Client is not subject to sales tax.
The handling of merchandise that is ready to be sold in order to place the product in a
preferred form of presentation at a retail store (e.g., organizing merchandise by color, fabric or
size; placing clothes on hangers; or folding clothing merchandise in a precise way) is not a
taxable service to tangible personal property. This type of handling of merchandise does not
constitute servicing or maintaining tangible personal property because the condition of the
property does not change. Cf. TSB-A-97(12)S. Nor does Petitioner’s movement of merchandise
from a stock or storage area of a retail store to the sales floor constitute the installation of
tangible personal property for purposes of Tax Law § 1105(c)(3), because Petitioner is not using
the merchandise to create a sample display. Compare TSB-A-88(3)S. Similarly, Petitioner’s
handling of merchandise does not constitute the processing of tangible personal property for
purposes of Tax Law § 1105(c)(2), because no change in the basic nature, shape or form of the
property is occurring. See 20 NYCRR § 527.4(d). The conclusion that Petitioner is not
performing taxable services to tangible personal property when it works on the presentation of
merchandise offered for sale is substantially buttressed by the training aspect of the service Petitioner performs these tasks in part to demonstrate to retail staff how the products should be
presented for sale.
While the cleaning and pressing of clothing are services to tangible personal property,
these services are expressly excluded from sales tax. Therefore, Petitioner’s pressing of
garments that are to be displayed at a wholesale showroom is not a taxable service.
Petitioner’s installation of signs at retail stores is a taxable service to tangible personal
property under Tax Law § 1105(c)(3). The installation service is subject to sales tax irrespective
of the circumstances under which it is performed. Thus, the installation work is taxable both
when done as a planned part of a visit (e.g., Client has directed that new signs be installed) and
when the installation work is contingent on the Petitioner determining a need to change signs
upon an inspection of a Shop in Shop.
The assembling of a mannequin constitutes a taxable service to tangible personal property
because tangible personal property (a mannequin) is being installed or serviced. However, the
mere placement of clothes on an installed mannequin is not a taxable service because neither the
clothes nor the mannequin is being installed for purposes of Tax Law § 1105(c)(3). See 20
NYCRR § 527.5. Similarly, placing garments on hangers and placing footwear on stands or
shelves in a showroom is not a taxable service.

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Petitioner’s sale of installation services does not qualify for the resale exclusion because
the tangible personal property being serviced is not being sold. See 20 NYCRR § 527.5(b)(1).
Petitioner is not providing a taxable information service when it provides Client with
reports about a Shop in Shop. The reports furnished are personal and individual in nature and are
not substantially incorporated into reports furnished to others. Therefore, the reports come
within the exclusion from the tax imposed on information services by Tax Law § 1105(c)(1).
Petitioner is not providing an integrated service product when it provides services to
Client. Petitioner does not have a standard service package that it offers for sale to the public.
All of its services are customized. Client dictates what services Petitioner is to perform. Further,
the various services that Petitioner provides to Client are discrete in that they are divisible from
each other and none are necessary to be performed in order to provide any of the other services.
For example, Petitioner could have worked on the presentation of merchandise without changing
graphics. It exercises no special skills in installing graphics that would preclude the retailer or
other party from performing this task. Thus, Petitioner is selling multiple services.
If a vendor sells both taxable and nontaxable services for a single fee, the full receipt is
subject to sales tax. See, e.g. 20 NYCRR § 527.1(b); TSB-A-97(11)S. Thus, when Petitioner
charges Client a single fee for multiple services that include any of the taxable installation
services described above, the entire receipt for the package is subject to sales tax. If Petitioner
were to bill a separate charge for the taxable service or services that is reasonable in price, only
that charge would be subject to sales tax.

DATED: March 19, 2015

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy 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. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.