Are a physician support company's per-message voice-mail lab-results service and its after-hours nurse triage-call service subject to New York sales tax?

Plain-English summary

A company (called "XYZ" in the ruling), a subsidiary of a not-for-profit health care organization, sells two services to subscribing physicians. In the laboratory test results service, a physician calls XYZ's system and records a personalized audio message with a patient's lab results; the patient, using a PIN given at the office visit, later calls in and listens to that recorded message, any time, day or night. XYZ charges physicians a flat fee per message recorded, whether or not the patient ever retrieves it. In the telephone triage service, patients of subscribing physicians can call a toll-free number (or get forwarded through the physician's regular answering service) during hours the office is closed, and reach trained triage nurses who give medical advice, tell the patient the physician is available, or refer them elsewhere — with a fax report going back to the physician after each call. XYZ bills physicians per call for this service (with a carve-out for callers who are members of the parent company's own health plan).

The Department drew a sharp line between the two. The lab-results service is a taxable telephone/voice-mail service: unlike a traditional answering service where a live person writes down a message, every step here — recording, storing, and retrieving — happens by electronic means, which the Department treats as the equivalent of ordinary voice mail (itself a taxed telephone service), not a nontaxable information or medical service. Because everything is stored and retrieved on XYZ's own system, this counts as an intrastate service taxable wherever the subscribing physician (XYZ's actual customer) is located in New York.

The triage service came out differently, even though patients also reach it by phone. Yes, it has some surface resemblance to a telephone answering service — but the Department found that resemblance is only incidental to its true purpose: connecting patients with trained medical professionals who give real medical advice and referrals. Medical advice isn't a taxable "information service," and the state doesn't tax the actual advisory service being delivered here, so the triage fee escapes sales tax entirely.

What this means for you

Physician support companies and telehealth-adjacent services

A service built entirely around electronic voice-mail-style recording and retrieval (even for something as sensitive as lab results) is treated as a taxable phone service, taxed based on where your subscribing customer (the physician practice) is located. Don't assume the medical subject matter of the message shields it from tax.

After-hours nurse triage and answer-line services

If the substance of what you're selling is genuine medical advice or triage from trained clinical staff — not simply taking and passing along messages — the phone-based delivery mechanism doesn't make the service taxable, even though patients reach it the same way (by phone) as the taxable lab-results service above.

Accountants and tax professionals structuring bundled physician-support offerings

The line the Department draws is what the customer is functionally buying: an electronic system that stores and plays back a recorded message (taxable, treated like voice mail) versus a live professional advisory service where message-taking is merely incidental (not taxable). Two services built on similar phone infrastructure can land on opposite sides of that line.

Common questions

Q: Is a physician's flat fee for recording lab results on a voice-messaging system taxable?
A: Yes — the Department treats a fully electronic recording/retrieval system like this as a taxable voice-mail/telephone service, taxable where the subscribing physician is located.

Q: Is an after-hours nurse triage line taxable just because it's phone-based?
A: No — where the core service is medical advice and triage from trained nurses, and phone-answering is only incidental to that, the charge isn't subject to sales tax.

Q: Does it matter whether the physician's patients ever actually retrieve the recorded lab results message?
A: No — the physician is charged (and the charge is taxable) per message recorded, regardless of whether the patient ever listens to it.

Citations and references

Statutes and rules:

• Tax Law § 1101(b)(13) (definition of telephone answering service)
• Tax Law § 1105(b)(1) (telephone/telegraph service; telephone answering service)
• Tax Law § 1105(c)(9) (entertainment/information services delivered by telephony)
• 20 NYCRR 527.2(a)(2), (d) (utility tax scope; telephony/telegraphy defined; incidental-element exclusion)

Prior advisory opinions relied on:

• Tigon Corporation, TSB-A-89(25)S (telephony as transmission of intelligence by electricity)
• The Beeper People, Inc., TSB-A-94(20)S; Biscotti, Toback and Co., CPA's PC, TSB-A-03(6)S (voice mail treated as a taxable telephone service)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2004.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a04_16s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-04(16)S
Sales Tax
June 16, 2004

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S030919C

On September 19, 2003, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Ernst & Young LLP, 1400 Key Tower, 50 Fountain Plaza, Buffalo, NY
14202.
The issues raised by Petitioner, Ernst & Young LLP, are:
1.

Whether the fee for the use of a voice messaging system upon which subscribing
physicians record their patients’ laboratory test results for retrieval by the patient are
subject to sales tax.

2.

Whether the fees charged subscribing physicians to triage patients’ “after hours”
telephone calls are subject to sales tax.

Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner’s client, XYZ, is a service company responsible for primarily providing support
services to private physicians and/or medical practices on a contract basis. XYZ is a wholly owned
subsidiary of Parent Company (“Parent”), a not-for-profit company in the field of health care. XYZ
is a separate and distinct legal entity from Parent and Parent’s other subsidiaries and affiliates. XYZ
operates separately and independently from Parent under its own name, and maintains its own
employees and Board of Directors, partially comprised of employees of Parent.
Laboratory Test Results Service
XYZ will provide laboratory test results services to subscribing physicians. These physicians
enter into an agreement with XYZ, whereby the physicians may record personalized audio messages
containing the results of their patients’ laboratory tests.
Patients visit their physician for various health and medical services, at which time the
physician directs the patient for laboratory testing. Before departing the physician’s office, patients
are provided with a printed instruction sheet and their own unique PIN (Personal Identification
Number) for confidential access to their results. After a patient’s laboratory testing has been
completed, the physician receives and reviews the patient’s completed laboratory results. The
physician then will access XYZ’s service via telephone to record a personalized audio message for
the patient indicating the results of the laboratory test(s). The patient may subsequently use the PIN
which was provided at the physician’s office to access XYZ’s service, and hear the physician’s
recorded message which provides the results of the patient’s laboratory test(s).

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The service will be available 24 hours a day, 7 days a week, on a perpetual basis. This
confidential service provided by XYZ allows efficiencies for the physicians, their staff and patients
in that laboratory results are communicated without delays.
After the culmination of an initial trial period, XYZ will charge physicians subscribing to
the service a flat fee per audio message posted by the physician for patient retrieval, regardless of
whether the message is ever retrieved by the physician’s patient.
Telephone Triage Service
XYZ will provide a telephone triage service to subscribing physicians. These physicians
enter into an agreement with XYZ whereby the patients of subscribing physicians are provided
telephone access to medically trained personnel and triage advisory services (the “triage service”)
at times when the offices of a subscribing physician are closed.
Physicians who subscribe to the triage service are entitled to have their daytime, after hours,
weekend and holiday telephone calls from the physician’s patients answered by a staff of trained
triage nurses. The physician indicates to XYZ which particular hours they wish to be covered by
the triage service. Each of the subscribing physician’s patients is provided a toll free telephone
number or, alternatively, the physician’s answering service forwards patients’ calls directly to XYZ.
When a patient has a medical emergency and his or her physician is unavailable, the patient can call
the toll free telephone number or the physician’s answering service to be connected to a trained
triage nurse. Registered nurses staffing the triage service are trained to use a specialized software
management system to assist in assessing a patient’s circumstances and responding to patient
inquiries. Options available to registered nurses staffing the triage service include dispensing
medical advice, informing the patient that the physician is available for consultation, and referring
the patient to those facilities preferred by their physician. Subscribing physicians are required to
maintain a fax machine, and at the conclusion of a patient call to the triage service the subscribing
physician is immediately faxed a report detailing the nature of the call and the advice provided to
the patient.
The triage service operates 24 hours a day, 7 days a week, on a perpetual basis, including
holidays. This confidential service provided by XYZ allows the subscribing physician’s patients
a place to call and seek advice from trained medical professionals when the physician is unavailable.
Each month, XYZ will invoice physicians subscribing to triage service on a per call basis.
Subscribing physicians are not billed for calls to the triage service by patients that are members of
Parent’s organization. Calls from patients that are not a member of Parent’s organization are billed
to the physician at a fixed rate per call.

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Applicable law and regulations
Section 1101(b)(13) of the Tax Law defines the term "telephone answering service" as:
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, but not including
such service if it is merely an incidental element of a different or other service purchased by
the customer.
Section 1105(b) of the Tax Law imposed sales tax, in part, upon:
(1) 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 1105(c) of the Tax Law imposes sales tax, in part, upon:
The receipts from every sale, except for resale, of the following services:
*

*

*

(9)(i) The furnishing or provision of an entertainment service or of an information
service (but not an information service subject to tax under paragraph one of this
subdivision), which is furnished, provided, or delivered by means of telephony or telegraphy
or telephone or telegraph service (whether intrastate or interstate) of whatever nature, such
as entertainment or information services provided through 800 or 900 numbers or mass
announcement services or interactive information network services. Provided, however, that
in no event (i) shall the furnishing or provision of an information service be taxed under this
paragraph unless it would otherwise be subject to taxation under paragraph one of this
subdivision if it were furnished by printed . . . matter or by duplicating written or printed
matter in any other manner. . . .
Section 527.2(a)(2) of the Sales and Use Tax Regulations provides:
Although this tax is generally known as the "consumer's utility tax," the intention of
the statute is to tax the enumerated sales and services whether or not rendered by a company
subject to regulation as a utility company. The words “of whatever nature” indicate that a
broad construction is to be given the terms describing the items taxed. The inclusion of the
word "service" indicates an intent to tax, under this provision, items that are furnished as a
continuous supply while the vendor-vendee relationship exists. (Emphasis supplied)

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Section 527.2(d) of the Sales and Use Tax Regulations provides, in part:
(2) The term “telephony and telegraphy” includes use or operation of any apparatus
for transmission of sound, sound reproduction or coded or other signals.
*

*

*

Example 3: Message switching services, transmitted to a computer over lines leased
from a communication carrier are telegraph services subject to the tax imposed under
section 1105(b) of the Tax Law.
*

*

*

(4) A service is not considered telegraphy or telephony if either of these services is
merely an incidental element of a different or other service purchased by the customer.
*

*

*

(5) The tax on utility services applies to every charge for any telephone and telegraph
service. Among these charges are monthly message rate and intrastate toll charges and
charges for special services, such as installation, change of location, conference connections,
tie-lines, WATS lines and the furnishing of equipment.
Opinion
For a flat fee per message, physicians subscribing to XYZ’s laboratory test results service
access XYZ’s system via the telephone to record an audio message. The recorded message provides
laboratory test results which a patient may access by phone with a PIN number provided by the
physician. XYZ is providing a system which allows its customers, who are physicians, to
communicate with patients by entering messages which can be retrieved by the patient. The
essential element of XYZ’s service is for its customers to electronically communicate with patients,
by means of the “transmission of intelligence to a distant point by means of electricity.” See Tigon
Corporation Adv Op Comm T & F, July 28, 1989, TSB-A-89(25)S. Unlike a conventional
telephone answering service where a person actually writes down messages for the person
purchasing the service, every element of XYZ’s service is performed by electronic means. This
service is in the nature of voice mail which is considered to be a telephone service. See The Beeper
People, Inc., Adv Op Comm T & F, April 25, 1994, TSB-A-94(20)S; Biscotti, Toback and Co.,
CPA’s PC, Adv Op Comm T&F, March 3, 2003, TSB-A-03(6)S. Therefore, XYZ is providing a
telephone or telegraph service the receipts from which are subject to the tax imposed under section
1105(b) of the Tax Law. It should be noted that since all messages are stored in and retrieved from
XYZ’s voice mail system, these services provided are intrastate services. Accordingly, XYZ’s

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receipts of a flat fee per message for this service are subject to State and local sales taxes if the place
of business of XYZ’s customer (the physician) is located in New York State.
XYZ’s telephone triage service provides subscribing physicians’ patients a toll free number
to call in order to seek advice from trained medical professionals when the physician is unavailable.
Patients may also be connected or directed to this service when they reach the physician’s answering
service. This triage service is intended to provide coverage for the subscribing physicians when the
physician is otherwise not available, giving the physician’s patients appropriate medical advice and,
if necessary, referring the patients for further health care. Although this service has some elements
of a telephone answering service, such elements are merely incidental to the primary function of the
service which is the provision of medical advice to the physician’s patients. Such medical advice
is not an information service of a kind that would be subject to tax pursuant to section 1105(c)(1)
of the Tax Law and, therefore, is not subject to tax under section 1105(c)(9) of the Tax Law. The
primary function of this service is to provide medical services to the patients of the subscribing
physicians, which are not services subject to tax under section 1105(c) of the Tax Law. Therefore,
the per call charge to XYZ’s subscribing physicians for triage service is not subject to State and
local sales taxes.

DATED: June 16, 2004

NOTE:

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

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