Are fees charged to advertisers for typesetting, printing, packing, and hanging their door-to-door flyers subject to sales tax as an information service, or excluded as an advertising service?

Subject

Susan L. Wilson dba Co-op Slingers Door-to-Door: whether fees collected from clients to cover the cost of having the client's advertising material typeset, printed, packed in door hanging bags and hung on doors in designated areas are subject to sales and use taxes.

What this means for you

A small business solicits advertisers to be included in mass door-to-door flyer distributions using door-hanging bags in selected neighborhoods. Depending on the client's needs, the business either just packs/hangs a client's own pre-printed material, or arranges the whole job: sending the client's ad copy to a local printer to be typeset and printed (sometimes sharing costs between two clients on a co-op flyer), then packing the printed flyers into bags and hanging them door-to-door. Clients are billed a fee covering typesetting, printing, packing, and hanging.

New York taxes certain "information services" (collecting/compiling/analyzing information and furnishing reports), but that tax expressly excludes advertising services -- consultation, campaign development, and placing ads with media without transferring tangible personal property to the client. Following a 1990 precedent (Cooperman, Levitt and Winikoff, P.C.) involving a similar postcard-advertisement packaging business, this opinion holds that soliciting clients, arranging printing, and packing/distributing flyers together amount to performing an ADVERTISING SERVICE rather than selling tangible personal property (title and possession of the printed flyers pass to the public via door-hanging, not to the client) -- so the client fees are excluded from sales and use tax. But there's a flip side: because the business isn't reselling goods to its clients (it never transfers the printed flyers TO the client), its own purchases of hanging bags, typesetting, and printing services are treated as retail purchases for its own use, not purchases for resale -- so the business itself owes sales tax on those purchases.

Q&A

Q: We charge advertisers a fee to have their flyers typeset, printed, packed, and distributed door-to-door -- is that fee taxable?
A: No, per this opinion -- soliciting clients and coordinating printing/packing/distribution is an advertising service excluded from sales tax under Tax Law § 1105(c)(1) and 20 NYCRR § 527.3(b)(5), not a taxable sale of tangible personal property or information service.

Q: If we only pack and hang a client's own pre-printed flyers (without arranging the printing ourselves), does the answer change?
A: No -- per this opinion, that narrower packaging-and-distribution-only service is treated the same way, still excluded from tax as an advertising service.

Q: Since our fee to the client isn't taxed, can we at least buy our hanging bags and printing tax-free for resale?
A: No, per this opinion -- because you're performing a service rather than transferring title and possession of the printed flyers to your client, your purchases of hanging bags, typesetting, and printing don't qualify as purchases for resale; you owe sales or use tax on those purchases yourself.

Citations

• Tax Law § 1105(c)(1) -- imposes tax on information services (collecting, compiling, or analyzing information and furnishing reports), while excluding advertising agency/representative services.
• 20 NYCRR § 527.3(b)(5) -- excludes advertising-agency-type services from the information-services tax, but taxes an advertising agency's own purchases of materials used to perform its services.
• Matter of Cooperman, Levitt and Winikoff, P.C., Adv. Op. Comm. T&F, March 21, 1990, TSB-A-90(14)S -- prior opinion holding a similar co-op postcard-advertisement packaging/distribution business performs an advertising service (not a taxable TPP sale), while its own purchases of mailing lists, cards, and artwork remain taxable; followed here.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1994.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a94_19s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-94 (19)S
Sales Tax
April 25, 1994

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S940303B

On March 3, 1994, a Petition for Advisory Opinion was received from Susan L. Wilson dba
Co-op Slingers Door-to-Door, 37 Glendale Drive, Lancaster, New York 14686.
The issue raised by Petitioner, Susan L. Wilson dba Co-op Slingers Door-to-Door, is whether
fees collected by Petitioner from her clients to cover the cost of having the client's advertising
material typeset, printed, packed in door hanging bags and hung on doors in designated areas are
subject to sales and use taxes.
Petitioner solicits advertisers (clients) to be included in mass door to door hangings (using
9 x 16 or 10 x 16 door hanging bags) in selected market areas. Upon acquiring a client, a written
agreement is executed specifying the areas the client desires to be advertised in, whether the client
will provide their own printed advertising and pay only a fee for packing and hanging of their
material, or if the client will provide copy only. In cases where the client provide copy only,
Petitioner delivers the copy to a local printer to be typeset and printed as per the client's instructions.
Some clients may select a co-op flyer, sharing the cost of the typesetting and printing with
one other client, while others select a flyer size that promotes only their individual business. Upon
approval of a proof, the desired number of ads are printed, and are packed up by Petitioner.
The printer, on its invoices to Petitioner, discloses the client's full name and the particular
print job, itemized to a total. Such total is then paid by Petitioner. Subsequently the client's pay a
fee to Petitioner to cover the cost of typesetting, printing, packing and hanging their advertisements.
Petitioner purchases the door hanging bags, collates the participating client's ads, packs them in the
bags and hangs them in the designated areas. Upon completion of the advertisement hanging, each
client receives an area list, upcoming schedule and a finished copy of their printed advertisement.
Section 1105 of the Tax Law imposes sales tax upon:
(a)
The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
*
(c)

*

*

The receipts from every sale, except for resale, of the following services:

-2­
TSB-A-94 (19)S
Sales Tax
April 25, 1994
(1)
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 newspapers, radio broadcasters and
television broadcasters in the collection and dissemination of news. (emphasis
added)
Section 527.3 of the Sales and Use Tax Regulations provides, in part, as follows:
*
(b)

*

*

Exclusions.

(5)
Fees for the services of advertising agencies or other persons acting
in a representative capacity are excluded from the tax. Advertising 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. However, if an advertising agency is engaged only for the purpose of
conducting a survey or if a survey is separately authorized and billed to the customer,
the taxability of such survey is determined in accordance with the provisions of
subdivision (a) of this section and the other provisions of this subdivision. Sales of
tangible personal property such as layouts, printing plates, catalogs, mailing devices
or promotional handouts, tapes or films by an advertising agency for its own account
are taxable sales of tangible personal property. (See section 527.1 of this Part.)
*
(c)

*

*

Purchases by persons providing information and advertising services.
*

*

*

(2)
All purchases of materials by an advertising agency for use in performing its
services are purchases at retail subject to the sales tax.
(3)
The purchase of a service subject to tax under section 1105(c)(1) of the Tax
Law by a vendor who will resell that service as such or as a part of a service also
subject to tax under section 1105(c)(1) is not a purchase at retail and is exempt from
the sales tax.

-3­
TSB-A-94 (19)S
Sales Tax
April 25, 1994
In Cooperman, Levitt and Winikoff, P.C., Adv Op Comm T&F, March 21, 1990, TSB-A­
90(14)S the Commissioner opined that a Company's business activities which consist of providing
a post card advertisement for a client and including such advertisement in a package containing
similar post card advertisements for other clients, for distribution to potential customers within New
York State are considered to result in the performance of an advertising service and not the sale of
tangible personal property. Therefore, the receipts from the charges to clients for such advertising
service are excluded from New York State and local sales and use tax under the provisions of
Section 1105(c)(1) of the Tax Law and Section 527.3(b)(5) of the Sales and Use Tax Regulations.
Moreover, the Commissioner opined that whereas the Company was performing an advertising
service and not making sales of tangible personal property or services whereby title and possession
are transferred to the Company's clients, the Company's purchases of mailing lists, cards,
mechanicals and artwork were not considered to be purchased for resale or purchases of physical
component parts of tangible personal property for resale. Thus, the Company's purchases of such
items were subject to New York State and local sales or use tax where delivery occurred within New
York State.
In the instant case, Petitioner solicits clients to be included in mass door-to-door advertising
hangings in selected market areas, delivers copies of flyers to a local printer to be typeset and
printed, packs hanging bags with flyers and hangs advertising bags on doors. Pursuant to the
rationale set forth in Cooperman, Levitt and Winikoff, P.C., supra, the soliciting of clients to be
included in mass door-to-door advertising hangings, arranging for printing of flyers, packing and
distributing hanging bags result in Petitioner performing an advertising service and not the sale of
tangible personal property. Accordingly, pursuant Section 1105(c)(1) of the Tax Law and Section
527.3(b)(5) of the Sales and Use Tax Regulations the receipts from the charges to clients for such
advertising service are excluded from sales and use taxes. This would also be the case if Petitioner
was only providing the packaging and distribution of the client's own printed advertising.
It is further noted that since Petitioner is performing an advertising service and not making
sales of tangible personal property or services whereby title and possession are transferred to
Petitioner's clients, that Petitioner's purchases of hanging bags, typesetting and printing are not
considered to be purchased for resale or purchases of physical component parts of tangible personal
property for resale. Therefore, pursuant to Cooperman, Levitt and Winikoff, P.C., supra, and Section
527.3(c) of the Sales and Use Tax Regulations purchases of such items by Petitioner will be subject
to sales and use taxes.

DATED: April 25, 1994

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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