Are an online provider's legal-document services (wills, entity formation, registered agent, trademarks, legal plans) subject to NY sales tax?

Plain-English summary

The Petitioner runs an online platform offering New York customers five service lines: (1) estate-planning document preparation (wills, living trusts, advance directives); (2) business entity formation (corporations, LLCs, nonprofits); (3) registered-agent service; (4) trademark and copyright filing; and (5) a subscription legal plan (attorney consultations). Customers supply information by phone or web questionnaire, and Petitioner's specialists prepare and file the documents.

The Office of Counsel concluded none of the services is subject to sales tax, applying the primary-function test:

• Estate-planning documents -- not an information service. Petitioner uses the customer's information to produce personalized documents, not to furnish information; converting information from one form to another without changing its substance isn't an information service (Finserv v. Tully). Customers don't access Petitioner's software, so it isn't a sale of prewritten software either.
• Entity formation -- primary function is creating the entity (preparing and filing documents), even though name-availability checks and proof-of-filing have information-like elements (SSOV'81). Third-tier extras (binder, corporate seal, blank certificates) are tangible personal property used by Petitioner to provide the service.
• Registered-agent service -- not an enumerated taxable service.
• Trademark / copyright -- primary function is obtaining the trademark or copyright, not furnishing information.
• Legal plan -- legal services aren't taxable.

But the opinion flags Petitioner's own tax exposure:

• Use tax on its software. Petitioner may owe use tax on software it uses in New York to generate documents; if Petitioner wrote the software, the measure is its ordinary selling price, or if not sold, the cost of the blank medium -- zero if never reduced to tangible media (section 1110(g); TSB-A-13(30)S).
• Use tax on purchased databases. Buying access to databases that Petitioner's employees use in New York (for entity formation or trademark checks) can be a taxable purchase of an information service.
• Tax on its TPP. Petitioner must pay sales/use tax on the tangible items it buys and uses (binders, seals, certificates) and cannot claim resale on them.

What this means for you

Online "do-it-for-you" legal/document services

If your customers pay you to produce documents or get a result (an entity, a filing, a trademark) and they never use your software themselves, the charge is generally not taxable -- the primary function isn't an enumerated service. Legal advice and registered-agent service aren't taxable either.

Don't forget your own use tax

Selling a nontaxable service doesn't make you tax-free on the inputs. Software you run in New York, database / information-service subscriptions your staff use here, and the tangible items you consume to deliver the service can all carry New York use tax -- and you can't buy those for resale.

Information-like steps don't automatically tax the whole

Name-availability checks, conflict searches, and proof-of-filing look like information services, but when they're in service of a larger nontaxable result, the package follows its primary function.

Common questions

Q: Are online will / LLC / trademark services taxable in New York?
A: Not when the customer is paying for the finished documents or result and doesn't use the provider's software -- the primary function isn't a taxable service.

Q: We don't charge sales tax to customers -- are we off the hook entirely?
A: No. You may owe use tax on software you run in New York and on database subscriptions your employees use here, and you must pay tax on the tangible supplies you consume.

Q: Is registered-agent or legal-plan service taxable?
A: No -- neither is an enumerated taxable service.

Citations and references

• Tax Law section 1105(a) (retail sale of tangible personal property)
• Tax Law section 1105(c)(1) (information services; primary function)
• Tax Law section 1105(c)(9) (information furnished by telephony or telegraphy)
• Tax Law section 1110(g) (use tax on self-produced software)
• 20 NYCRR section 526.7 (use of software)

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_3s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(3)S
Sales Tax
March 18, 2015

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S120627A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED REDACTED REDACTED REDACTED REDACTED. Petitioner asks whether
various services it provides are subject to sales and compensating use taxes in New York State.
We conclude that Petitioner’s services are not subject to sales and compensating use
taxes in New York State.
Facts
Petitioner is headquartered in another state but has provided registered agent services in
New York through its wholly-owned subsidiary since 2009. Petitioner provides a variety of
products and legal-related services through an on-line platform. Petitioner’s website directs
customers to get help from an attorney participating in one of its legal plans if they have legal
questions. All of the services provided by Petitioner require information to be provided by the
customer. A customer who is interested in purchasing a specific service will access the website
and either read through the explanatory information or call a specialist employed by Petitioner
for assistance. The customer will provide his or her information to a specialist by phone or
through the Petitioner’s website. If the customer chooses to provide the information through the
Internet, the customer will fill out an on-line questionnaire. All of the information collected by
phone or through the Internet is then reviewed to determine the appropriate next steps to
complete relevant documents and determine action steps necessary to facilitate the goal for
which the service was purchased (i.e., incorporating a business, completing a trademark
application or a last will and testament). Generally, three specialists are available to each
customer. The first specialist provides customer service at inception to answer questions
regarding the best service to purchase for an individualized set of needs. A second specialist is
assigned to the customer’s account to provide specific services with regard to completion and
consistency review of necessary documents. A third specialist is made available to customers
after the service is provided to address questions or follow up on any issues. Petitioner also
provides expedited processing, if requested by the customer, to support the services it provides.

-2-

TSB-A-15(3)S
Sales Tax
March 18, 2015

The following are service offerings provided by Petitioner to customers located in
New York:
(1) Preparation and review of estate planning documents:
Petitioner completes and reviews customers’ estate planning documents, including
documents such as a last will and testament, a living trust, and an advance medical directive. To
purchase any one of these services, the customer provides answers to questions on Petitioner’s
website or via phone. Petitioner downloads or inputs the information gathered from the
customer into Petitioner’s own proprietary software to complete a preliminary document which
is then subjected to a rigorous review by one of Petitioner’s specialists and supplemented
through discussions between the specialist and the customer. However, the customer does not
have access to Petitioner’s software. Rather, Petitioner’s employees input or download the
customer’s information to Petitioner’s software. Each customer is provided with a copy of all
documents generated and completed. Petitioner charges a flat fee for this service. A higher flat
fee is charged if the customer requires that the service be completed within 48 hours.
(2) Entity formation service (formation of business entities such as: “C” or “S”
corporations, limited liability companies, non-profit corporations, etc.):
A customer purchasing this service provides information regarding the entity he or she
wants to form and Petitioner uses this information to begin the process of completion of the
entity formation documents in the customer’s desired jurisdiction. As part of this process,
Petitioner checks for the availability and use of the entity name with the appropriate government
agency and cross-checks the information provided by the customer against official government
records to ensure there will be no conflict when any documents are filed with that agency.
Petitioner maintains constant communication with its customer throughout this process to
ensure that all information needed or requested to form an entity is consistent and complete.
Petitioner completes all official documents on appropriate forms and files the documents, as
necessary, with the appropriate state or other government agency. After the government agency
approves the filing, Petitioner provides the customer with proof of filing and a copy of all the
documents as a matter of record for the customer’s purchase. As part of these services,
Petitioner also collects and pays the governmental filing fees. These services are offered to
customers for a base price. Second tier pricing includes completion of the above-referenced
entity formation services in an expedited time frame. Third tier pricing includes all of the abovereferenced services and the following: completion of an application for a Federal Employer
Identification Number (FEIN) and the filing and obtaining of the FEIN application
with the Internal Revenue Service; completion and filing of paperwork necessary to make an SCorporation election, if appropriate; expedited mailing services; on-line access to additional,
miscellaneous business forms; and a one-month free trial subscription to a business or personal
legal plan whereby legal consultations, guidance and advice are available to the customer by an
attorney from a participating network law firm related to the customer’s business operations or

-3-

TSB-A-15(3)S
Sales Tax
March 18, 2015

personal legal matter (see (5) Legal Plan Service below for further details of this service).
Additionally, as part of the third-tier pricing, the customer receives a binder to hold the
documents, blank corporate certificates, a corporate seal, and free access to on-line, third-party
software. Petitioner does not pay for the third-party software and the trial period varies from
thirty days to three months.
(3) Registered agent service:
As a separate service related to the entity formation service, Petitioner, through a whollyowned subsidiary, offers a subscription-based, registered agent service in New York. In
exchange for a flat fee, Petitioner provides a designated agent for companies to use when
incorporating a business in the state, as well as for any ongoing functions of a registered agent as
required under state law.

(4) Trademark and copyright services:
Petitioner provides services related to obtaining trademarks and copyrights. With respect
to any applications filed with the appropriate governmental agencies, Petitioner performs the
following services: it reviews the customer’s information; checks for omissions of necessary
information; contacts the customer with requests that the customer provide any omitted or
incomplete information; adjusts the trademark specimens; performs checks to ensure that there
are no conflicting trademarks or copyrights, completes the application and electronically files the
application with the appropriate federal agency, and pays the appropriate fees. Petitioner then
provides its customer with a copy of the filed trademark or copyright application as proof of
service. The price charged covers all services related to the application, with a higher price
charged for expedited service.
(5) Legal Plan Service:
Petitioner offers a monthly subscription to a legal plan service whereby a customer may
obtain legal consultation and advice from an independent attorney in a participating law firm.
Petitioner pays a monthly fee to participating law firms to provide legal services to Petitioner’s
customers. The legal plan services also include as part of the subscription unlimited access to
downloadable forms from Petitioner’s website. Legal plan services are available in two types of
subscriptions, related to either the general business operations or the personal needs of the
customer. Customers are charged on a flat-fee, subscription basis, with the first month generally
being a free-trial period and monthly paid renewals thereafter if the customer chooses to renew.
Analysis
While the receipts from retail sales of tangible personal property are subject to sales tax,
except as otherwise provided (Tax Law § 1105[a]), services are not generally subject to sales tax

-4-

TSB-A-15(3)S
Sales Tax
March 18, 2015

unless they are specifically enumerated in the Tax Law. Tax Law § 1105(c)(1) provides that the
receipts from every sale, except for resale, of the following services are subject to tax:
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, and excluding
the services of advertising or other agents, or other persons acting in a
representative capacity, and information services used by newspaper, electronic
news services, radio broadcasters and television broadcasters in the collection and
dissemination of news, and excluding meteorological services.
In addition, Tax Law § 1105(c)(9) provides that an information service furnished,
provided or delivered by means of telephony, or telegraphy or telephone or telegraph
service (whether intrastate or interstate) of whatever nature is also subject to sales tax.
The Department has also explained in guidance:
As a general rule, furnishing information created or generated from a common
database, or information that is widely accessible is a taxable information service.
...
Whether a service qualifies as an information service depends on its primary
function. The fact that one element of a service is an information service does not
mean that the service as a whole is taxable as an information service. The Tax
Department will determine a service’s primary function based on an examination
of the service being sold and what is being paid for by the purchaser. . . . If a
customer’s chief purpose in paying for a service is to receive information from
that service . . . the service as a whole qualifies as an information service.
TSB-M-10(7)S.
We consider each of Petitioner’s services separately.
(1) Preparation and review of estate planning documents:
Petitioner prepares estate planning documents, such as wills and health care proxies,
using its customers’ information and its own proprietary software. While Petitioner collects
information from its customers and may perform some analysis of the information provided to
determine some of the language to include in the documents, it is not providing information to its
customers. Petitioner’s customers are paying for personalized documents, not information.
Moreover, converting information already in the customer’s possession from one form or
medium to another, without interpreting or recasting it, so that the form of the information
changes but not the intelligence contained therein, does not constitute an information service.
Finserv v. Tully, 94 AD2d 197 (3d Dep’t 1983), aff’d, 61 NY2d 947 (1984). Petitioner’s estate
planning document preparation service uses the information provided by the customer and
incorporates it into estate planning documents. It does not alter the information provided by the

-5-

TSB-A-15(3)S
Sales Tax
March 18, 2015

customer. Therefore, this service would not be considered an information service subject to sales
or use tax.
Neither does the service constitute the sale of prewritten software. Petitioner’s customers
do not access the software. Rather, Petitioner’s employees download or input the customer’s
information into the software in order to generate estate planning documents. However,
Petitioner may be subject to use tax on the software if it is used by Petitioner’s employees within
the State. If the software was written or created by Petitioner, the consideration for purposes of
the use tax would be the price at which Petitioner sells the software in the ordinary course of
business or, if not so sold, the consideration paid for the blank medium, such as disks or tapes,
used in conjunction with the software. See Tax Law § 1110(g). If the software is not reduced to
tangible media, the consideration on which the use tax would be calculated is zero. See TSB-A13(30)S.
(2) Entity formation service:
As part of the service, the availability and use of a name is checked against the records of
the appropriate government agency and proof of filing is provided which suggest elements of an
information service. However, the primary function or purpose of this service is to create a
business or non-profit entity for Petitioner’s customer by preparing and filing the appropriate
documents with the proper government agency. Therefore, the entity formation service as a
whole would not be subject to sales tax as an information service, even though the service may
have elements that could be individually subject to sales tax. See Matter of SSOV’81 Ltd. d/b/a/
People Resources, Tax Appeals Tribunal, 1995. However, Petitioner’s purchase of the use of
such databases may constitute the purchase of a taxable information service if used or accessed
by Petitioner’s employees within New York State.
At the third pricing tier, the customer also receives, among other services, a binder to
hold its documents, blank corporate certificates, a corporate seal, and free access to on-line
software provided free of charge by third parties for a minimum period of time. These items
constitute tangible personal property. However at the pricing tier in question, the primary
function of Petitioner’s service remains entity formation. Thus, we conclude that these items of
tangible personal property are used by Petitioner in the course of providing its service. Petitioner
must pay sales or use tax on purchases of tangible personal property purchased or used within the
State (except for the third-party on-line software that is provided free of charge to Petitioner’s
customers), and may not claim a resale exemption for such purchases or uses.
(3)

Registered agent service:

Petitioner’s registered agent service includes providing a designated agent for
incorporating a business within the State and other functions required by State law (e.g., receipt
of service). This is not one of the services subject to tax under Tax Law § 1105(c). Therefore,
Petitioner’s receipts from this service are not subject to sales tax.

-6-

TSB-A-15(3)S
Sales Tax
March 18, 2015

(4) Trademark and copyright services:
This service includes all aspects of obtaining a trademark or copyright, including
performing checks for completing copyrights or trademarks, filing applications and obtaining the
copyright or trademark from the appropriate entity. Although Petitioner may consult databases
in the course of checking for conflicting trademarks or copyrights, we conclude that Petitioner is
not providing an information service, because the primary function of this service is to assist
customers in obtaining a valid trademark or copyright. However, similar to the Entity Formation
Service, any purchase by Petitioner for the use of any databases to perform this service may
constitute the purchase of a taxable information service if used or accessed by Petitioner’s
employees within New York State.

(5) Legal Plan Service.
Petitioner’s sales of subscriptions to legal plan services so that its customers can obtain
legal advice for various issues is not subject to sales tax, because legal services are not among
the services subject to sales tax.

DATED: March 18, 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.