Is a toll-free 'call before you dig' service that takes callers' messages and relays them to member utilities a taxable telephone answering service in New York?

Plain-English summary

One Call Systems, Inc. operates a call center in New York City that runs a toll-free 800 "call before you dig" service. Contractors, utilities, and the general public call to report their intent to disturb the earth; One Call transmits that message to the member utilities that have underground facilities near the dig, and those utilities then tell the caller where their lines are (and may stake them out). The service is purchased by One Call User's Council, Inc., a New York not-for-profit owned by the member utilities. Its purpose is to prevent damage to underground utilities and harm to the public. One Call asked whether providing this service is subject to New York sales and use tax.

The Department said yes, it's taxable:

• New law taxing answering services. Effective September 1, 1991, Tax Law § 1105(b) (as amended by Ch. 166, Laws 1991) taxes receipts from the sale of a telephone answering service.
• This fits the definition. Section 1101(b)(13) defines a telephone answering service as taking messages by telephone and transmitting them to the purchaser or at the purchaser's direction — exactly what One Call does: receiving the "intent to dig" calls and relaying the messages to the member utilities who fund the Council.
• Not merely incidental. The definition excludes message-taking that is "merely an incidental element of a different or other service." Here message-taking is the sole service One Call provides, so the exception doesn't apply.
• Result: One Call's receipts from One Call User's Council are subject to New York State and local sales tax under § 1105(b).

What this means for you

New York taxes telephone answering services (since 9/1/1991)

Since September 1, 1991, taking messages by phone and passing them to a customer (or where the customer directs) is a taxable service under § 1105(b). This reaches modern message-relay and dispatch-style services, not just a classic "answering service" for a doctor's office.

The "incidental element" exception is narrow

Message-taking that is merely incidental to a different service the customer buys isn't taxed as an answering service. But when relaying messages is the whole point of what you sell — as with a "call before you dig" clearinghouse — the exception doesn't save you.

A not-for-profit purchaser doesn't make it exempt

The service was bought by a not-for-profit council owned by utilities, but the opinion turned on the nature of the service, not the buyer. The taxable event is the sale of the answering service; who pays for it doesn't change the analysis here.

Common questions

Q: Is a "call before you dig" / one-call locate service taxable in New York?
A: Yes. Taking callers' "intent to dig" messages and relaying them to member utilities is a taxable telephone answering service under § 1105(b).

Q: When did New York start taxing telephone answering services?
A: The tax under § 1105(b) and the § 1101(b)(13) definition took effect September 1, 1991 (Ch. 166, Laws 1991).

Q: What is the "incidental element" exception?
A: If message-taking is merely an incidental part of some other service the customer buys, it isn't taxed as an answering service. Here message-taking was the only service, so it applied full tax.

Q: Does it matter that the buyer is a not-for-profit?
A: On these facts, no. The opinion taxed the service itself; it did not treat the not-for-profit purchaser as exempting the transaction.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1105(b), as amended by Ch. 166, Laws 1991 (eff. 9/1/1991) (tax on the sale, other than for resale, of a telephone answering service)
• Tax Law § 1101(b)(13), added by Ch. 166, Laws 1991 (telephone answering service = taking messages by telephone and transmitting them to the purchaser or at the purchaser's direction, excluding message-taking that is merely an incidental element of a different service)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (1)S
Sales Tax
January 3, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S911112A

On November 12, 1991, a Petition for Advisory Opinion was received from One Call
Systems, Inc., Three Allegheny Center, Pittsburgh, PA 15212.
The issue raised by Petitioner, One Call Systems, Inc., is whether the providing of a toll-free
800 telephone service for One Call User's Council, Inc. is subject to New York State and local sales
and use tax.
Petitioner operates a call center in New York City whereby contractors, utilities, and the
general public may call its toll-free 800 telephone service number to report their intent to disturb the
earth. This message is transmitted by the Petitioner to the member utilities who have underground
facilities located in the area of the dig. The utilities then inform the caller of underground line
locations based on the utilities research maps and records of facilities. The utilities may also stake
out the location of underground lines prior to the dig. The telephone service is purchased by One Call
User's Council, Inc., a New York not-for-profit corporation owned by member utility companies.
The purpose of the service is to prevent damage to underground utilities and harm to the public and
property from excavating in areas where underground facilities are located.
Section 1105(b) of the Tax Law as last amended by Ch. 166, Laws 1991, effective September
1, 1991 imposes sales tax upon "The receipts. . .from every sale, other than sales for resale, of a
telephone answering service."
Section 1101(b)(13) of the Tax Law as added by Ch. 166, Laws 1991, effective September
1, 1991 defines a telephone answering service as "A service that consists of taking messages by
telephone and transmitting such messages to the purchaser of the service or at the purchaser's
direction, but not including such service if it is merely an incidental element of a different or other
service purchased by the customer."
Petitioner's activities consisting of receiving telephone calls from contractors, utilities and
the general public to report their intent to disturb the earth and the transmission of the messages at
the direction of the purchaser to the member utilities who fund One Call User's Council, Inc. come
within the definition of a telephone answering service as defined in Section 1101(b)(13) of the Tax
Law. This service is not merely an incidental element of a different or other service purchased by
One Call User's Council, Inc. on behalf of the member utilities from the Petitioner, since the

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TSB-A-92 (1)S
Sales Tax
January 3, 1992

answering service as heretofore described is the sole service provided by the Petitioner. Therefore
the receipts received by Petitioner from One Call User's Council, Inc. are subject to the imposition
of State and local sales tax pursuant to Section 1105(b) of the Tax Law.

DATED: January 3, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.