Are a real-estate listing website's paid agent-promotion products subject to New York sales tax?

Plain-English summary

A company runs a real-estate listing website where agents and brokers list properties (and consumers search) for free. It asked whether revenue from three paid products sold to agents — and certain bundled features — is subject to New York sales tax.

The Office of Counsel concluded everything at issue is nontaxable:

• Products A, B and C are advertising services. Product A gives agents ad-free featured listings (no competitor ads) plus a search "boost"; Products B and C let agents buy a share of the "Agent List" and banner views within chosen zip codes/cities (B on the website, C on the mobile app). All of them enhance an agent's advertising position, calling the agent's profile to the attention of the public. Selling website space for advertising is a nontaxable advertising service under 20 NYCRR 527.3(b)(5) (citing TSB-A-15(1)S, TSB-A-97(43)S; United Parcel Serv.).
• Bundled Components 1–3 are de minimis parts of those advertising products. Standing alone, Component 1 (extra buyer information when a buyer chooses to provide it) would look like a taxable information service (Tax Law sections 1105(c)(1), (9)), and Component 3 (a phone number that sends the agent a call/text notification of a new lead) would look like a taxable telephone-answering service (Tax Law section 1105(b)(1)). Component 2 (showing up in under-served geographic markets) is just more advertising.
• But Components 1 and 3 are offered only with the paid products, carry no separate charge, are not separately available, and are not predominant — they further the advertising and are integrated, de minimis parts of the products (citing Penfold, SSOV'81, TSB-A-15(1)S). So they are analyzed as part of the nontaxable advertising products and are not taxed.

What this means for you

Selling online advertising / promotion

Selling space on a website to promote a customer — featured placement, banners, a share of impressions in a market — is a nontaxable advertising service in New York. It does not become taxable just because the platform is sophisticated or priced by share-of-views.

Watch bundled features that would be taxable alone

A feature that looks like a taxable information service or a telephone-answering service can avoid tax when it is bundled into a nontaxable advertising product, provided it has no separate charge, is not separately available, and is a de minimis, integrated part. If you instead price such a feature separately or sell it on its own, it can become taxable.

One price, mixed items

Remember the flip side: when truly distinct taxable and nontaxable items are sold for one nonitemized price, sales tax can apply to the whole charge (20 NYCRR 527.1(b)). The de minimis treatment here depended on the features being genuinely incidental.

Common questions

Q: Why isn't selling "a share of views" a taxable service?
A: Because it is advertising — buying placement to call the agent's profile to the public's attention. New York excludes advertising services from the information-service tax.

Q: The lead-notification feature sounds like a taxable phone service — why isn't it taxed?
A: Alone it might be, but it is bundled into the advertising products with no separate charge, is not sold separately, and is a de minimis integrated part, so it is treated as part of the nontaxable products.

Q: Would charging separately for the buyer-info feature change the answer?
A: Potentially yes — a separately charged, separately available information service can be taxable. The result here depended on the feature being incidental and not separately priced.

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)(1) (information services)
• Tax Law section 1105(c)(9) (information services furnished by telephony/telegraphy)
• Tax Law section 1105(b)(1) (telephone and telegraph services)
• Tax Law section 1101(b)(3) (definition of receipt)
• 20 NYCRR 527.3(b)(5) (advertising services exclusion)
• 20 NYCRR 527.1(b) (one nonitemized price for taxable and nontaxable items)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_22s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

TSB-A-16(22)S
Sales Tax
May 27, 2016

PETITION NO. S130723A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED (“Petitioner”). Petitioner asks whether receipts it derives from three of the
products it offers customers are subject to New York State and local sales taxes. Petitioner also
asks whether certain ancillary products are subject to tax.
We conclude that Petitioner’s products are excluded from New York State sales tax
because they constitute the furnishing of advertising services.
Facts
Petitioner is a company based in a state other than New York. However, Petitioner
maintains a business location in New York. Petitioner engages in the business of providing a
real estate website from which local real estate agents and brokers can list and advertise their
clients’ real estate properties to the public. Petitioner represents that its basic advertising service
is free, and it allows real estate professionals to set up an online profile with Petitioner, list
properties, receive leads from those listings, and access the platform that will allow an agent to
manage his or her listings, leads, and contacts. Potential buyers and renters can also use
Petitioner’s website for free in order to search for available properties they may wish to purchase
or rent, and find out information about neighborhood statistics. At issue in this Advisory
Opinion are the revenues Petitioner generates by offering three types of paid services to real
estate agents and brokers – Product A, Product B, and Product C and certain ancillary services
offered in conjunction with Products A-C.
Paid Agent Offerings:
1.

Product A:

Real estate listings set up using Petitioner’s free service will often contain the
advertisements of other real estate professionals in addition to the listing agent’s own contact
information. Product A is a service that real estate professionals may purchase to upgrade the
promotion that their otherwise free listings on Petitioner’s website receives. Product A offers the
ability for agents to have ad-free featured listings, which are listings exclusive to the subscribing
agent and do not allow any competitive agent’s advertising. Product A’s pricing options offer
agents the choice of a 1-pack, 3-pack, 10-pack, 20-pack, or 50-pack plan, which is based on a
different number of ad-free listings an agent purchases. Regardless of which plan an agent
purchases, Petitioner still permits an agent to post an unlimited number of non-featured listings;
however, such listings may contain competitor agent advertisements. All five paid plans also
include a “listing boost,” which will boost an agent’s individual listing to the top of the real
estate professionals reflected in a particular search result. In addition, a Product A electronic

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badge, which identifies the agent on Petitioner’s web site as a Product A ”member,” is provided
under all five paid plans. Petitioner’s December 31, 2014 Form 10-K indicates that Product A
provides agents the ability to “enhance their online presence [and] feature their listings in search
results . . . .” Product A was launched in 2008.
2.

Product B

This service advertises a real estate professional’s profile on both Petitioner’s search
results pages and property details pages. These advertisements will show up on Petitioner’s
“Agent List,” which is a rotating list of two to four potential agents to contact for more
information when a buyer lands on a search results page or property details page. The Agent List
is meant to introduce potential buyers to agents and makes it easier for buyers to quickly make
contact with these agents. In addition to the Agent List, agents also are able to display their
contact information through a banner advertisement on the search results page or property details
page. The pricing for Product B allows agents to purchase a share of a market within a certain
geographical location (cities and zip codes) in which they choose to advertise. The agent can
purchase a share of views in 1% increments for any given geographic area. In this case, the
agents are not guaranteed a set number of views, just a percentage of total views that occur
within a period. For example, an agent can purchase 50% of a particular zip code for a certain
price (the price fluctuates based on the demand of other agents wishing to advertise in that same
region). If there are a total of 3,000 page views of that zip code in a month, the paying agent will
show up on 50% of them (or 1,500 page views within that zip code). If there are only 1,000
views in another month, the agent will show up on 500 of those views. There is no guarantee
that an agent will receive additional leads as a result of purchasing this service, because even if a
potential buyer views the agent’s contact information or banner in the Agent List, the buyer may
choose to contact another agent about a given property, or alternatively contact no one at all.
Product B was launched in 2010. Petitioner’s December 31, 2014 Form 10-K indicates that
Product B provides agents with the opportunity to purchase “local advertising on [Petitioner’s]
website by zip code or city and by share of given market.”
3.

Product C

Product C is very similar to Product B, except that it provides agents with banner
advertisements and the Agent List on Petitioner’s mobile application. The pricing structure is
identical to Product B in that agents purchase a share of the market within a geographical
location (based on zip code or city) and are guaranteed a percentage of total views in that market.
The agent’s advertisement will show up only on certain geographical locations that the agent has
paid for, on a frequency that is dependent on the percentage of views that was purchased. An
agent’s advertisement also has the potential to generate leads, but only if a buyer decides to
contact that agent while browsing various properties. Product C was launched in 2012.
The percentage of agents who have an account with Petitioner’s web site and also
subscribe to one of Petitioner’s fee-based services (Products A-C) are approximately 3%-4% of
all agents who have an account with Petitioner. Petitioner’s Form 10-K refers to Products A-C
as products that enable real estate professionals the opportunity “to promote themselves to
potential buyers.”

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IV.

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Sales Tax
May 27, 2016

Additional Features Included with Subscriptions to Petitioner’s Products:

Petitioner’s three paid services described above all include the following features, which
Petitioner represents are incidental components of each Product: (1) “Component 1,” which can
provide an agent with further detailed buyer information; (2) “Component 2,” which provides the
ability for agents to show up in the Agent List of geographic areas with low market saturation;
and (3) “Component 3,” which is a service that provides agents with a special phone number in
order to manage phone and email leads in the same place. Petitioner represents that there are no
additional charges to subscribing agents of Products A-C for access to Components 1-3, and they
are not available for sale separately.
Specifically, “Component 1” can provide an agent with additional potential buyer
information, such as the buyer’s moving timeframe, loan status, and whether the buyer is
currently working with an agent. This additional information, however, is only available to an
agent if a potential buyer selects to view an agent’s advertised listing and also decides to contact
the agent and provide certain requested information. Otherwise, a potential buyer’s information
is not provided by Petitioner to an agent who is using one of Petitioner’s products. The
“Component 1” information is a list of questions that are posed to potential buyers just after they
elect to click “contact the agent” while on Petitioner’s web site. The buyer can elect not to
answer the questions. Based on Petitioner’s tracking of Component 1, about 60% of buyers elect
not to answer any of the Component 1 questions. Petitioner maintains the Component 1
information on a database for purposes of storing the information; however, no information is
shared with another agent unless the buyer has chosen to contact that specific agent. The
Component 1 service is merely passing on the information provided by the potential customer to
the agent, and does not integrate, compile, or recast the information provided by the potential
customer. The Component 1 feature was introduced in January 2012.
The “Component 2” feature allows agents to select certain cities and zip codes they are
interested in, with the potential of generating more leads. If certain geographic areas are not
fully capped in market demand under the Product B and Product C offerings, Petitioner will
allow paying agents to show up in the Agent List for a given geographic area on a rotating basis
to the extent there is excess supply of listings that need agents to fill. There is no guarantee that
an agent will receive any additional leads by listing a geographic region in their Component 2
selection, but they may on occasion show up in an Agent List for the selected geographic
location and, therefore, potentially receive an additional lead if a buyer decides to contact that
agent. This feature essentially provides agents with the opportunity for additional advertising in
areas with a low market saturation of agents. The Component 2 feature was launched in 2011.
Petitioner’s “Component 3” feature was introduced in June 2011. The Component 3
feature provides product subscribing agents with an optional phone number provided by
Petitioner, which potential buyers can use to contact an agent. This feature sends an automated
text message or phone call notification to the agent when a potential buyer has sent a lead to the
agent. These phone numbers are used only for purposes of routing responses to a particular
agent, and the agent can make no other use of the number (e.g., the agent cannot make outgoing
calls, etc.). The functionality of Component 3, such as the phone numbers and the ability to

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route calls and emails, is provided by one of Petitioner’s vendors for which Petitioner pays a fee
based on the minutes of use and the number of phone numbers purchased. Agents have the
option of not using Component 3. Without the Component 3 feature, a potential lead can still
contact an agent by either calling the phone number listed near the agent’s name on the search
results page, or by clicking the “request info” button located at the end of all of the agents’
names listed for a property. Component 3 is primarily a notification system so that the
subscribing agent will receive a text message when it receives a new lead in its inbox.
Component 3 also will have any phone messages included in the agent’s inbox as an audio file.
Component 3 brings agents’ voicemails messages and email messages to the same number so an
agent may have an easier time organizing and keeping track of them.
Components 1-3 are not offered separately from Petitioner’s Products A through C and
there are no additional charges to agents for access to, or use of, Components 1-3.
Analysis:
The Tax Law imposes sales and use tax on retail sales of tangible personal property,
including prewritten software, and the sale, except for resale, of certain services. See Tax Law §§
1101(b)(6); 1105(a), (b), (c). Among the services subject to tax is 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. Excluded from the tax on
information services are advertising services and the furnishing of information that is personal or
individual in nature and that is not or may not be substantially incorporated in reports furnished
to other persons. See Tax Law §§1105(c)(1), (9); see also TSB-A-09(44)S.
For purposes of the exclusion from the information service tax, “[a]dvertising services
consist of consultation and development of advertising campaigns, and placement of
advertisements with the media without the transfer of tangible personal property. The furnishing
of a personal report containing information derived from information services, by an advertising
agency, to its client for a fee is not a taxable information service.” 20 NYCRR §527.3(b)(5).
Advertisements have been defined in New York as “the action of making generally known; a
calling to the attention of the public." Matter of United Parcel Serv. Inc. v Tax Appeals Trib. of
State of N.Y., 98 AD3d 796, 798 (2012), lv denied 20 NY3d 860 (2013) (internal quotations
omitted).
Traditional advertising services include a range of transactions between advertiser and
their clients. Matter of Hudson Sheraton Corporation, Tax Appeals Tribunal, September 29,
1988. Selling space on websites for advertising purposes constitutes an advertising service. See
TSB-A-15(I)S and TSB-A-97(43)S.
When several distinct taxable items and non-taxable items are sold together for one nonitemized price, sales tax is due on the total sales price charged. See 20 NYCRR § 527.1(b).
Products A, B and C:

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Petitioner engages in the business of providing a real estate website from which real
estate agents and brokers can list and advertise their clients’ real estate properties to the public
for free. Potential buyers and renters also can use Petitioner’s website for free in order to search
for available properties they may wish to purchase or rent. Petitioner sells subscriptions to
Products A-C, all of which in essence enhance an agent’s advertising position on Petitioner’s
web site either by excluding all other potential agents’ listings (Product A), or enhancing the
likelihood that an agent’s listing will be one of several featured in a certain geographical area
(Products B and C). The percentage of agents that have an account with Petitioner’s website
and also subscribe to a fee-based service (i.e. Products A-C) is approximately 3%-4% of all
agents who have an account with Petitioner. Charges for Products A-C are not contingent upon
the closing of sales by agents. Products A-C are methods of allowing agents to better call an
agent’s existence and profile to the attention of potential buyers and the public in general. The
utilization of websites to advertise brands constitutes non-taxable advertising services. See Sales
Tax Reg. §527.3(b)(5), TSB-A-15(I)S, and TSB-A-97(43)S.
Accordingly, Petitioner’s
Products A-C are non-taxable advertising services. See Matter of United Parcel Serv. Inc. v Tax
Appeals Trib. of State of N.Y., 98 AD3d 796 [2012]), lv denied 20 NY3d 860 (2013)
Components 1-3:
If utilized by a potential buyer, Component 1 provides a subscribing agent with additional
information about that potential buyer who has seen the agent’s advertisement. Component 2
allows a subscribing agent of Products B or C to potentially expand its advertising presence into
underserviced geographic markets. Component 3 offers agents the ability to receive a voice or
text notification message when an agent is contacted by a new lead through the agent’s
advertisement with Petitioner.
It appears Component 1 and 3 would be taxable on a stand-alone basis. Component 1
appears to include the collecting and compiling of information and furnishing of reports of such
information. Component 1, thus, would be a taxable information service under Tax Law
§§1105(c)(1), (9). Because the information collected pursuant to Component 1 potentially could
be shared with other agents, the exclusion from sales tax for information which is personal or
individual in nature would not apply. Component 3 appears to be a telephone or telegraph
service and/or telephone answering service subject to sales tax. see Tax Law §1105(b)(1), §1737.
However, Component 2 appears to be a mirror extension of Products B and C and as such would
be a non-taxable advertising service.
Components 1 and 3 are offered only to subscribers of Products A-C. Products A and B
were both previously available to paying subscribers before Components 1 and 3 were ever
offered. There have never been any incremental additional charges to subscribers of Products AC for access to Components 1 and 3. Components 1 and 3 are not separately available to parties
who do not subscribe to Products A- C. Agents may choose to not use Components 1 and 3, or
may use them in such varying amounts that best meet their needs. Components 1 and 3 further
the main advertising objectives of Products A-C as integrated parts of such products; however,
Components 1and 3 are not predominant features of Products A-C. Although Components 1 and
3 appear to constitute taxable services on a stand-alone basis, when considered in light of the
Petitioner’s facts as presented, Components 1 and 3 are merely integrated de minimis aspects of

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the overall products offered by Petitioner.
Accordingly, we analyze the tax status of
Components 1 and 3 as part and parcel of Products A – C, rather than as separate individual
products themselves. See TSB-A-15(1)S, Tax Law §1101(b)(3), Penfold v State Tax
Commission, 114 AD2d 696 (1985). Under such circumstances they do not cause the entire
products offered by Petitioner to be subject to sales tax and are not subject to taxation
themselves. TSB-A-15(1)S, TSB-A-13(1)S, TSB-A-09(54)S, and TSB-A-13(12)S citing Matter
of SSOV’81, Ltd., Tax Appeals Tribunal, January 19, 1995.

DATED: May 27, 2016

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

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.