Are fees a website charges professionals to be listed in its online directory taxable as an information service, or are they exempt advertising?

Plain-English summary

A company planned to run a website with a directory of representatives who help people pursue Social Security disability benefits. Claimants use the directory for free — they create an account (or log in with Facebook/Google), search by state, and find a representative's photo, bio, and contact details, then reach out on their own. Representatives pay to be listed (about $19.95/month or $99.95/year after a free trial) and can upload their photo, logo, bio, email, phone, and website. The company asked whether the fees it collects from representatives are subject to sales tax. The stub headline guessed "subject to sales tax," but the Department concluded the opposite: the fees are not taxable, because the service is advertising.

New York taxes certain enumerated services, including information services — "collecting, compiling or analyzing information of any kind … and furnishing reports thereof" (Tax Law § 1105(c)(1)). But that same provision excludes advertising services from tax. Advertising is defined as the consultation and development of advertising campaigns and the placement of advertisements with the media, without transferring tangible personal property (20 NYCRR 527.3(b)(5)), and New York courts describe an advertisement as "a calling to the attention of the public."

Here, representatives pay for the right to display their profile so claimants and the public will notice them; the fee isn't tied to whether any claimant actually hires them. That is placing advertising, not selling compiled information. The Department relied on TSB-A-93(20)S, which treated fees for participating in a computerized directory as advertising. So the listing fees are excluded from sales tax.

What this means for you

Directory, listing, and marketplace operators

If you charge businesses or professionals to display their own profiles so they get noticed by the public, that fee generally reads as nontaxable advertising in New York — even though a directory looks like an "information service." The key facts here: the listing puts the advertiser in front of the public, the fee isn't contingent on a sale or match, and the people browsing the directory do so for free. Structure your product around displaying advertisers' information rather than compiling and selling data reports, and you stay on the advertising side of the line.

Where this can flip to taxable

The advertising exclusion is fact-sensitive. If instead you compile and sell data or reports to subscribers (e.g., a paid research database, lead lists, analytics, or screening reports), you're likely furnishing a taxable information service under § 1105(c)(1). Charging for access to compiled information about third parties is different from charging advertisers to be seen. Also note that adding tangible personal property to the deal can change the analysis, since advertising services are defined as not transferring TPP.

Accountants and tax professionals

The holding rests entirely on the § 1105(c)(1) advertising exclusion and the § 527.3(b)(5) definition, read against the directory facts and TSB-A-93(20)S. The distinguishing test is whose attention is being called and who pays for what: advertisers paying to be made "generally known" to the public is advertising; subscribers paying for compiled information is a taxable information service.

Common questions

Q: Aren't online directories "information services"?
A: Not when the paying customer is the listed party buying visibility. New York's information-service tax (§ 1105(c)(1)) expressly excludes advertising, and paying to display your profile so the public notices you is advertising (20 NYCRR 527.3(b)(5)).

Q: Why does it matter that claimants browse for free?
A: It confirms the revenue model is advertising. Representatives pay to be seen by the public; no one is paying for access to compiled information or reports, which is what makes an information service taxable.

Q: When would directory or listing fees be taxable?
A: When you're really selling compiled data or reports about people or businesses — a paid information database, lead lists, screening or analytics reports. That's a taxable information service, not advertising.

Q: Can I rely on this opinion for my website?
A: No. An Advisory Opinion binds the Department only as to the petitioner and the exact facts described, and only if those facts were fully and accurately presented. It shows the Department's reasoning but cannot be relied on by another taxpayer.

Citations and references

Statutes and regulations:
- Tax Law § 1105(c) (sales tax on certain enumerated services)
- Tax Law § 1105(c)(1) (tax on information services; advertising services excluded)
- 20 NYCRR 527.3(b)(5) (definition of advertising services — campaigns and placement, no transfer of TPP)

Authority referenced in the opinion: TSB-A-93(20)S (fees to participate in a computerized directory are advertising, not taxable); TSB-M-10(7)S; Matter of United Parcel Serv. Inc. v Tax Appeals Trib., 98 AD3d 796 (3d Dep't 2012) (defining "advertisement").

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao.htm
• Opinion: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales/24-31s.htm
• Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-31s.pdf

Original ruling text

Sales Tax
August 14, 2024
Office of Counsel

The Department of Taxation and Finance (“Department”) received a Petition for Advisory Opinion from [ redacted ] (“Petitioner”). Petitioner asks whether its receipts from providing an online directory, which lists persons who represent claimants seeking disability benefits, are subject to sales tax. We conclude that Petitioner’s online directory is excluded from New York State sales tax, because it constitutes the furnishing of advertising services.

Facts

Petitioner anticipates establishing a website that maintains a directory of persons who assist and represent claimants seeking social security disability benefits. These representatives typically represent claimants before administrative hearings on disability determinations.

The directory is free to access for claimants. Claimants can access the directory by either creating a user account on the directory website or using their existing Facebook or Google account to log into the directory website. Once a claimant accesses the directory website, the claimant can search the directory for a representative. The directory will include contact information for representatives listed in the directory, allowing claimants to contact representatives if they so choose.

Representatives who wish to be listed in the directory pay a fee to the Petitioner. Petitioner anticipates charging representatives $19.95 per month or $99.95 per year, after providing a free three-month trial to interested representatives. Representatives who pay to be listed in the directory can upload their photo, logo, biography, email address, phone number and website address, all to be displayed in the directory.

The directory will be organized by state according to the location of the representative. Claimants can search the directory for a representative in their state and use the contact information from the directory to contact a representative directly. The website does not provide a means through which claimants can contact representatives. Instead, claimants would need to call or email a representative on their own (albeit using the contact information from the website).

Analysis

Tax Law imposes sales tax on sales, except for resale, of certain services. See Tax Law § 1105(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.” Tax Law § 1105(c)(1). Excluded from the tax on information services are advertising services. Tax Law § 1105(c)(1); TSB-M-10(7)S.

Advertising services consist of “consultation and development of advertising campaigns, and placement of advertisements with the media without the transfer of tangible personal property.” 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 (3d Dep’t 2012) (internal quotations omitted).

Petitioner engages in the business of providing a website on which representatives who aid claimants for disability benefits can list their services and information for the public to see. Representatives are charged a fee for listing their information on the website. Potential claimants can use Petitioner's website for free in order to search for representatives they may wish to contact and/or retain. Charges for representative listings are not contingent upon the retention of a representative by a claimant. The website allows representatives to better call their existence and profile to the attention of claimants and the public in general. This type of listing and displaying of representatives’ information constitutes the placing of advertising. See TSB-A-93(20)S (determining that fees paid for the right to participate in a computerized information directory was for advertising and not subject to sales tax). Accordingly, the charges by Petitioner to representatives for listing and displaying their information in Petitioner’s directory on its website are not taxable.

DATED: August 14, 2024

Mary Ellen Ladouceur
Principal Attorney

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.