Sales, Use and International Tax Activity Update - November 2009

New York Opens House on Real Estate Internet Advertising Taxability

The New York Department of Taxation and Finance has issued a memorandum discussing the sales and use tax treatment of various Internet advertising, set-up, support, and service fees relating to real estate listings. Charges to advertisers, agents, owners or individuals for advertising services are not subject to sales tax. Likewise, sales tax does not apply to separately stated set-up fees charged when the taxpayer sends a photographer to a property to take pictures that will be used on the property listing. However, where copies of such photographs provided to the customer, other than exclusively in electronic form, the setup charges for the photograph may be subject to tax as charges for the sale of tangible personal property.

Customer support fees for access to sales and contact databases used to provide support are nontaxable to the extent that they are for proprietary sales information that is personal or individual in nature and not made available to other persons. However, if the taxpayer adds information to a customer's data that is derived from a common database, the client's database product may be subject to the tax on information services. Since the point of delivery determines taxability, only receipts attributable to the client's customers who receive the information from the taxpayer in New York would be subject to tax. When the information is delivered by electronic means to customers both within and without New York, sales tax should be allocated between the two locations.

In addition, the taxpayer's sales of information services exclusively for resale are not subject to tax. The taxpayer would not be required to collect sales tax on any portion of the information services that were exempt, provided that the charges for the exempt portion were separately stated and reasonable from the charges for the taxable items. Otherwise, the entire receipts for the services would be subject to tax.

The taxpayer's application service provider (ASP) fees for Web site functionality are considered receipts from the sale of prewritten computer software and are subject to tax. Charges for processing credit card payment transactions are similar to bank processing fees and are not subject to sales tax, provided the charges are separately stated and reasonable.

The Advisory Opinion can be viewed on the New York State Department of Taxation and Finance Website.

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