Which local jurisdiction's sales tax rate applies to a telephone answering service — the location where the phone company technically routes the original call, or the customer's own business or home address?

Plain-English summary

A.A. Answer Phones, Inc. provides telephone answering services using several technical setups — ordinary call forwarding from the customer's own line, "remote call forwarding" where the customer's number is redirected to the answering service without ever ringing anywhere else first, and dedicated numbers the answering service controls that customers advertise directly to the public. The company argued that its local sales tax rate should be determined the same way phone utilities determine their taxing jurisdiction: based on the "original ring demarcation" — essentially, wherever the phone company's equipment first directs an incoming call, which in some of these setups would be the answering service's own location rather than the customer's.

The Department rejected that approach. A telephone answering service is a distinct, separately defined taxable service under the Tax Law — not the same thing as "telephony" or "telegraph" service — so the rules phone utilities use to determine tax situs don't apply to it. Instead, per the Department's own published guidance (TSB-M-91(13)S), the tax rate for a telephone answering service is always based on the physical location of the customer being served — the customer's business address, or for an individual customer, their personal residence — regardless of where any particular phone call is technically routed or where the answering service itself is located.

Applying that rule here: A.A. Answer Phones must charge the combined state and local sales tax rate for the county where each of its New York customers' business or residence is located, for every customer physically located in New York, regardless of which of the three technical call-routing setups is used. For customers located outside New York, no New York sales tax applies at all, even though the answering service itself operates from within the state.

What this means for you

Telephone answering services and similar businesses billing across multiple tax jurisdictions

The tax rate you charge doesn't follow your own equipment or where a call is technically routed — it follows your customer's physical location. This matters even when a customer's calls are rerouted, forwarded, or given a number that never technically "rings" anywhere but your own facility; none of that changes where the tax situs sits.

Businesses serving customers both inside and outside New York

If your customer is physically located outside New York, your telephone answering service charges to that customer aren't subject to New York sales tax at all — even if your own business operates entirely within the state and even if that out-of-state customer happens to receive their messages while visiting New York.

Accountants and tax professionals

This tracks the Department's long-standing published position in TSB-M-91(13)S and prior opinions (Marken Properties, Total Recall Message Center) that a telephone answering service is legally distinct from telephony/telephone service for sales tax purposes — don't let a client apply telecommunications-industry sourcing rules (like "original ring demarcation") to what is, for New York sales tax purposes, a different enumerated service with its own sourcing rule based on customer location.

Common questions

Q: Does the location of my answering service's own equipment or number determine the tax rate I charge?
A: No. The tax rate is based on your customer's own business or residential address, regardless of your equipment's location or how the call is technically routed to you.

Q: What if my customer is physically outside New York but sometimes receives their messages while visiting New York?
A: The service remains untaxed by New York — the customer's home/business location controls, not where they happen to be when they actually receive messages.

Q: Does the specific technical method (call forwarding vs. remote call forwarding vs. a dedicated number) change the tax analysis?
A: No. Regardless of which of the three technical setups is used, the tax rate is always based on the served customer's physical business or residence location.

Q: Can another telephone answering service rely on this ruling?
A: No. This advisory opinion binds the Department only for A.A. Answer Phones, Inc. on the facts described, though it reflects the Department's general published guidance (TSB-M-91(13)S) applicable to the industry generally.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(13) (definition of "telephone answering service")
• Tax Law § 1105(b)(1) (tax on telephone answering service)
• Tax Law § 1110(a) (use tax on telephone answering service)
• Tax Law § 1131(4) (property and services the use of which is subject to tax)

Prior guidance/rulings referenced:

• TSB-M-91(13)S, Oct. 11, 1991 (Telephone Answering Services Subject to Sales Tax Effective September 1, 1991)
• Marken Properties, Inc., et al., Adv Op Comm T&F, June 26, 1997, TSB-A-97(37)S
• Total Recall Message Center, Adv Op Comm T&F, Feb. 28, 1996, TSB-A-96(14)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2001.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a01_7s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-01(7)S
Sales Tax
January 31, 2001

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S000927F

On September 27, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from A.A. Answer Phones, Inc., 1230 Central Avenue, Albany, NY 12205-5316.
The issue raised by Petitioner, A.A. Answer Phones, Inc., is how the rate (local jurisdiction)
of sales or compensating use tax charged with respect to its telephone answering service should be
determined.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is a telephone answering service. Petitioner contends that the sales or
compensating use tax rate (local jurisdiction) at which tax should be computed on its services should
be determined in the same manner in which standard telephone utilities determine their taxing
jurisdictions, i.e, based on the location to which the phone company routes a customer’s incoming
caller’s original ring (original ring demarcation).
Petitioner currently provides its services through the following technical means:

1. “Call forwarding” from a local telephone company is the primary means by which
   Petitioner’s telephone answering service is provided. Call forwarding is a mechanical
   service provided by the telephone company which allows Petitioner’s customer to reroute its
   calls from their original ring demarcation (the customer’s business or personal residence) to
   another telephone of the customer’s choice. The taxing jurisdiction in this case, Petitioner
   contends, is the original ring demarcation address where the caller is directed by the phone
   company which is the customer’s address.
2. “Remote call forwarding” is handled by the mechanics of the telephone company, not the
   customer, and is permanent. Similar to call forwarding but lacking a ring demarcation, the
   customer will have its own 800, local, or out-of-area telephone number, but the number rings
   in no location. The telephone company which owns the number directs the number to a ring
   demarcation point of the customer’s choosing. Petitioner then becomes the original ring
   demarcation point for the customer’s callers. Here, Petitioner contends that it becomes the
   office of the customer and the taxing jurisdiction is Petitioner’s service address because it
   is the original ring demarcation address where the caller is directed by the phone company.

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January 31, 2001

3. Petitioner gives its business customer a number that is controlled by Petitioner. The
   customer advertises or distributes such number in the form of business cards, flyers,
   newspaper/magazine/TV or radio advertising, message machine recordings, verbal
   communication, etc. The telephone company advertises Petitioner’s address as the location
   of the business advertising this number. Since Petitioner is the original ring demarcation for
   the callers again in this case, Petitioner contends that it becomes the office of the customer
   and its service address is the proper taxing jurisdiction as described above in number 2.
   Applicable Law and Regulations
   Section 1101(b) of the Tax Law states, in part:
   When used in this article for the purposes of the taxes imposed by
   subdivisions (a), (b), (c) and (d) of section eleven hundred five and by section eleven
   hundred ten, the following terms shall mean:
   *

*

*

(13) Telephone answering service. 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. . . .
Section 1105(b)(1) of the Tax Law imposes sales tax, in part, on:
The receipts from every sale, other than sales for resale, of . . . (B) telephony
and telegraphy and telephone and telegraph service of whatever nature except
interstate and international telephony and telegraphy and telephone and telegraph
service; (C) a telephone answering service. . . .
Section 1110(a) of the Tax Law provides, in part:
Except to the extent that property or services have already been or will be
subject to the sales tax under this article, there is hereby imposed on every person a
use tax for the use within this state . . . except as otherwise exempted under this
article . . . (E) of any telephone answering service described in subdivision (b) of
section eleven hundred five. . . .
Section 1131(4) of the Tax Law provides:

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Sales Tax
January 31, 2001

“Property and services the use of which is subject to tax” shall include . . . (e)
all telephone answering service rendered to a person within the state, whether or not
such services are performed within the state, the use of which is subject to tax under
section eleven hundred ten or will become subject to tax when such service is
received by or comes into possession or control of such person within the state. . . .
(Emphasis added)
Technical Services Bureau Memorandum TSB-M-91(13)S, dated October 11, 1991, entitled
Telephone Answering Services Subject to Sales Tax Effective September 1, 1991, provides, in part:
In general, it is the location for which the telephone answering service is
being provided (the customer's business or the customer's personal residence) that
will determine whether the service is subject to tax in New York State and the rate
(local jurisdiction) at which tax is to be computed.
The rate of tax to charge with respect to telephone answering services is determined as
follows:
If telephone answering service is being provided to a business, the physical location (address)
of that business determines the tax rate, regardless of the physical location of the phone that is being
answered. (Emphasis added)
Example (1): Mr. Smith, doing business as County Realty, purchases an answering
service for calls which would normally ring through the number of the real estate
business. Mr. Smith's personal residence is in County A which has a 7 percent tax
rate and the answering service is also located in County A; but Mr. Smith's real estate
office is located in County B, which has a tax rate of 6 percent. The telephone
answering service is required to collect sales tax at 6 percent and report such sale as
a sale in County B.
Example (2): A major bank, headquartered in County A, with branches in other
counties throughout the state, contracts with a telephone answering service located
outside the state to answer a special "800" phone number the bank advertises to
receive comments, compliments, or complaints about any of its tellers and service
representatives. These messages are then provided to the customer service
department located at the headquarters in County A, for processing. Since the
telephone answering service is being provided for the service department located in
County A, the answering service must add to its charges the combined New York
State and local sales tax in effect in County A.

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Sales Tax
January 31, 2001

If a telephone answering service is being provided for an individual, the physical location of
the individual's personal residence determines the tax rate. (Emphasis added)
Example (3): Ms. Jones, a nonresident of New York State, purchases an answering
service from a service located in New York State. Ms. Jones is frequently away from
her home. When Ms. Jones leaves her personal residence (which is located outside
New York State), her personal calls are answered by the service in this state.
Ms. Jones is made aware of her calls through a pager. Virtually all Ms. Jones'
personal messages from the service are received by her while she is in New York.
The telephone answering service rendered for Ms. Jones' personal residence located
outside New York State is not subject to this state's sales tax even though the
answering service business providing the service is located in this state, and even
though Ms. Jones may receive her messages while she is in New York.
Opinion
Petitioner is providing a telephone answering service. Section 1105(b) of the Tax Law was
amended by Chapter 166 of the Laws of 1991 to specifically add telephone answering services to the
enumerated services subject to tax in this section.
As a result of Chapter 166, Laws of 1991, in October 1991, the Department of Taxation and
Finance published TSB-M-91(13)S, supra, for purposes of stating its policy as to when sales tax is
imposed upon receipts from telephone answering services and how the rate of tax is determined. As
indicated in TSB-M-91(13)S, supra, the location for which the telephone answering service is being
provided, i.e., the customer’s physical business location or physical personal residence location
(address) determines whether receipts from the sale of the service are subject to tax and the rate at
which the tax is to be computed.
Although Petitioner contends that the tax rate (local jurisdiction) at which tax should be
computed on its services should be determined in the same manner in which standard telephone
utilities determine their taxing jurisdictions, i.e., original ring demarcation locations, Petitioner is
not providing its customers with telephony, telegraphy or telephone or telegraph services (see
Marken Properties, Inc., et al., Adv Op Comm T&F, June 26, 1997, TSB-A-97(37)S; Total Recall
Message Center, Adv Op Comm T&F, February 28, 1996, TSB-A-96(14)S). Considering the
Department’s interpretation of the provisions of Section 1105(b) of the Tax Law as embodied in
TSB-M-91(13)S, supra, where Petitioner provides telephone answering services for locations of
customers in New York State, Petitioner is required to collect sales or compensating use tax at the
combined state and local tax rate in effect in the locality of the physical location of the customer’s
business or personal residence for which its service is being provided. Where Petitioner provides

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January 31, 2001

telephone answering services for locations of customers outside of New York State, no New York
sales tax is due on these services (TSB-M-91(13)S, supra; Total Recall Message Center, supra).

DATED: January 31, 2001

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist III
Technical Services Division

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