Is selling a discount-coupon directory of health and fitness vendors subject to sales tax?

Plain-English summary

Healthy Step Directory, LLC publishes a booklet -- the "Healthy Step Directory" -- containing coupon-like discount advertisements from vendors of health, fitness, and wellness products and services. It also includes a membership registration form so the company can notify purchasers of additions, deletions, or changes to the advertiser list. To use a discount, the book owner brings the booklet to the specific advertiser, who signs the book to confirm the discount was given, creating a record of use. In its first year, Healthy Step Directory distributed most copies through consignment sales or giveaways, and not-for-profit or charitable organizations could sell the book as a fundraiser.

Tax Law § 1105 taxes sales of tangible personal property and certain enumerated services. The Department characterized this publication as fundamentally an advertising vehicle for the participating vendors: what the purchaser is really buying is the right to receive discounts from those independent vendors, not a standalone taxable publication. Because that discount-access purpose predominates over the physical booklet itself, the Department concluded the sale of the "Healthy Step Directory" isn't a taxable sale of tangible personal property, regardless of the sales channel (consignment, wholesale, retail, or nonprofit fundraiser).

What this means for you

Publishers of discount/coupon books

If your publication's core value proposition is providing access to discounts from independent third-party vendors -- rather than the informational or entertainment content of the publication itself -- you may be able to sell it without charging sales tax, following this opinion's reasoning. Structure your product and marketing around the discount-access purpose to support that characterization.

Nonprofits and charities selling coupon books as fundraisers

This opinion confirms that a qualifying discount-coupon book sold as part of a fundraising project doesn't automatically become taxable just because a charitable organization is the seller -- the underlying analysis is the same regardless of which entity in the distribution chain makes the sale.

Accountants and tax professionals

This is a useful companion precedent to other New York rulings distinguishing "discount access" products from taxable publications or taxable admission-type charges -- the key fact pattern here is a book whose primary function is unlocking third-party discounts, verified by an advertiser's own signature at redemption.

Common questions

Q: Does it matter who sells the book -- the publisher, a wholesaler, a retailer, or a nonprofit fundraiser?
A: No -- the opinion addresses the book being obtained through any of those channels and reaches the same untaxed conclusion regardless of the specific seller in the chain.

Q: Would the answer change if the booklet contained substantial independent editorial content beyond the discount ads?
A: This opinion's facts describe a publication that is "a compilation of advertisements" with discount coupons as its primary content; a publication with more substantial independent content could raise a different analysis not addressed here.

Q: Can another discount-coupon-book publisher rely on this ruling?
A: No. This advisory opinion binds the Department only with respect to Healthy Step Directory, LLC and the specific publication and facts described.

Citations and references

Statutes and regulations:

• Tax Law § 1105 (tax on tangible personal property and enumerated services)

Prior rulings and cases referenced:

• None cited in this opinion.

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_73s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (73) S
Sales Tax
December 4, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S960809A

On August 9, 1996, a Petition for Advisory Opinion was received from Healthy Step
Directory, LLC, 568 Columbia Turnpike Suite 22, East Greenbush, New York 12061.
The issue raised by Petitioner, Healthy Step Directory, LLC, is whether the sale of its
publication, "Healthy Step Directory," is subject to sales tax.
The following facts are based on Petitioner's presentation of facts and on a copy of
Petitioner's publication submitted by Petitioner. Petitioner's publication, the "Healthy Step
Directory," is a compilation of advertisements that offers coupon-like discounts on services and
products that promote health, fitness and well-being. Petitioner's publication provides a membership
registration for purchasers, which enables Petitioner to contact purchasers to inform them of any
additions, deletions or changes in advertisers. In order for the purchaser to take advantage of the
discount coupons, the purchaser must bring the coupon book to a specific advertiser. When the
purchaser uses the advertiser's service, the advertiser signs the publication in the designated area to
acknowledge that the discount was given. Therefore, the services used by the purchaser are properly
recorded.
Petitioner is in its first year of existence. Most of the distribution of Petitioner's publication
has been through consignment sales or the result of giveaways. Not-for-profit or charitable
organizations may sell the publication as part of a fund raising project.
Section 1105 of the Tax Law imposes tax on receipts from the sale of tangible personal
property and certain enumerated services.
In this case, Petitioner sells a publication that contains advertising in the form of a discount
coupon book. The advertisements provide a description of the type of services being offered, and the
name and address of the providers. These books can be obtained from persons who sell them on
consignment, wholesalers, retailers, from exempt organizations doing fund raising projects or from
Petitioner as giveaways. The book owner is required to present the coupon book to an advertiser
when redeeming a discounted service to record the transaction. Also, Petitioner recommends the
book owner complete and return the membership registration form inside the book, to enable
Petitioner to contact the book owner regarding any additions, deletions, changes or supplements to
the publication.

-2­
TSB-A-96 (73) S
Sales Tax
December 4, 1996

Petitioner provides an advertising service to vendors of goods and services, mostly in the
health care area. When all of the individual advertisements are combined, Petitioner has developed
a discount coupon book. Since the coupon book has as its primary purpose the right to receive
discounts from independent vendors, the sale of the coupon book is not considered a taxable sale.
Therefore, the price charged for Petitioner's publication is not subject to State and local sales and
compensating use taxes.

DATED: December 4, 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.