Is a marketing/business analysis consulting firm's fee subject to New York sales tax, including when it also provides presentation artwork?

Plain-English summary

Gormley & Partners provides business analysis services -- studying existing or potential markets for clients whose products are stagnating or underperforming, and developing new market-positioning or product strategies. Every engagement starts with a confidentiality agreement barring Petitioner from using client information for any other purpose or from serving the client's competitors. Petitioner mostly works from information the client provides, occasionally supplementing it with outside services to refine ideas. At the end of an engagement, Petitioner presents its findings and, if needed, delivers a written summary, presentation boards, advertising concepts, and imagery -- with any "artwork" used in the presentation billed separately. Petitioner isn't itself an advertising or marketing agency, though it sometimes coordinates directly with the client's own ad agency. Petitioner asked whether its fees are taxable.

Tax Law § 1105(c) taxes only enumerated services, and the Department found business analysis/market-positioning consulting isn't on that list, so it's untaxed on its own. But the opinion carves out an important wrinkle for presentation materials: if Petitioner creates presentation-board materials, uses them in the presentation, and then simply hands them to the client afterward at no charge, that transfer isn't a taxable sale. If Petitioner instead SELLS tangible property (like finished artwork) together with the analysis service for one undivided price, the ENTIRE charge -- service included -- becomes taxable, per the Department's established Greenstone & Rabasca Advertising precedent. The fix is separate, reasonable billing: if the artwork is billed apart from the consulting fee at a price reasonably related to its actual value, only the artwork charge is taxed, leaving the consulting fee untaxed. There's one more trap, though, drawn from the Morton L. Coren precedent: if the business analysis service genuinely CANNOT be purchased separately from other taxable services or artwork Petitioner provides -- i.e., the offering is inherently bundled, not just billed together -- the whole combined charge is treated as one taxable package regardless of how the invoice is itemized.

What this means for you

Marketing, branding, and business-strategy consulting firms

Your core analysis and strategy consulting is likely untaxed under this reasoning. But if your engagements include deliverable artwork, presentation materials, or other tangible items, bill them SEPARATELY at a reasonable, value-reflective price to keep your consulting fee out of the tax base -- a single bundled price pulls everything into taxable territory. And structure your offering so the analysis service genuinely CAN be purchased on its own, not just invoiced separately while functionally inseparable from the taxable deliverables -- an inherently bundled offering gets taxed as one package regardless of invoice formatting.

Clients purchasing consulting services with creative/artwork deliverables

Ask your consultant to itemize artwork or other tangible deliverables separately from the analysis/strategy fee on your invoice -- that's what keeps the service portion of your bill untaxed.

Common questions

Q: Does giving a client leftover presentation-board materials for free after a presentation trigger sales tax?
A: No -- material purchased by Petitioner for creating presentation boards and turned over to the client without charge after use isn't considered a sale.

Q: What happens if consulting and artwork are billed as one combined price?
A: The entire combined charge becomes taxable, following the Greenstone & Rabasca Advertising precedent -- separately and reasonably stating the artwork charge is the only way to keep the consulting fee untaxed.

Q: Can a firm avoid tax just by itemizing its invoice, even if the service and taxable items are never actually offered separately?
A: No -- if the business analysis service can't genuinely be purchased apart from other taxable services or artwork the firm provides, the whole package is taxed as one combined charge regardless of invoice itemization, per the Morton L. Coren precedent.

Q: Can another consulting firm rely on this exact result?
A: No. This advisory opinion binds the Department only as to Gormley & Partners and the specific facts described; a firm with a different service/deliverable mix should confirm its own facts before assuming the same treatment.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c) (tax on enumerated services)

Prior rulings and cases referenced:

• Greenstone & Rabasca Advertising Inc., Advisory Opinion, Commissioner of Taxation and Finance, September 9, 1986, TSB-A-86(35)S
• Morton L. Coren, P.C., Advisory Opinion, Commissioner of Taxation and Finance, June 29, 1990, TSB-A-90(33)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_55s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (55)S
Sales Tax
September 18, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S941110A

On November 10, 1994, a Petition for Advisory Opinion was received from Gormley &
Partners, One Fawcett Place, 3rd Floor, Greenwich, CT 06830.
The issue raised by Petitioner, Gormley & Partners, is whether the sale of its business
analysis service is subject to sales tax.
Petitioner makes the following statement of facts.
Petitioner provides a business analysis service, i.e., it analyzes existing or potential markets
for its clients' products or services. Petitioner specializes in market positioning and new product or
service development. Usually, clients' products are stagnating or initial results from their launch are
disappointing.
At the time that Petitioner is retained, Petitioner and its client enter into a confidentiality
agreement under which Petitioner is prohibited from using any information it obtains from the client
for any purpose other than the services it is to provide. The services are unique to the particular
client, who requests Petitioner to assist in resolving a problem by creating a new approach to selling
(marketing) the goods or services. Petitioner is also prohibited, pursuant to the confidentiality
agreement, from providing services to any competitor of Petitioner's client.
Substantially all of the information that Petitioner uses in providing services is provided by
the client, although, from time to time, Petitioner will use outside services to refine ideas and
concepts. Upon conclusion of its research, Petitioner will make a presentation to the client and, if
needed or required, will provide a written summary of the marketing ideas created, presentation
boards, advertising ideas and appropriate imagery. Any"art work" used in the presentation is billed
separately to the client. Also, where required, the recommendations and concepts are reviewed
directly with the client's advertising or marketing agency. Petitioner is not, however, an advertising
or marketing service agency.
Section 1105(c) of the Tax Law imposes a tax upon the receipts from every sale, except for
resale, of certain enumerated services. The service of providing a business analysis service as
described by Petitioner is not one of the services enumerated under section 1105(c) of the Tax Law
and, therefore, is not subject to sales or use tax.
Material purchased by Petitioner for the purpose of creating presentation boards and turned
over to the client subsequent to use, without charge, is not considered to be sold to the client. No
sales tax is due on the transfer of this material to the client. However, if Petitioner sells tangible

-2­
TSB-A-96 (55)S
Sales Tax
September 18, 1996

personal property, such as art work, together with its business analysis service for a single charge,
it must collect sales tax upon the entire amount of the charge. See Greenstone & Rabasca
Advertising Inc., Adv Op Comm T&F, September 9, 1986, TSB-A-86(35)S. If the art work is billed
separately from the charge for the service, and the separate charge for the art work is reasonably
related to its true value, sales tax is only due on the charge for the art work.
It should be noted that if Petitioner's business analysis services furnished to its client cannot
be purchased separately from the sale of other taxable services or artwork provided by Petitioner,
the combination of the items must be considered as one, and the entire charge for all items would
be subject to sales tax. See Morton L. Coren. P.C., Adv Op Comm T&F, June 29, 1990, TSB-A­
90(33)S.

DATED: September 18, 1996

/s/
JOHN W. BARTLETT
Deputy Director
Technical Services Bureau

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