When a business sells its subscriber list to a competitor, is that both a taxable sale of information and a bulk sale of business assets?

Plain-English summary

A C.P.A. asked, on behalf of a client that sells a taxable information service, whether the client's planned sale of its subscriber accounts is both a taxable information service and a bulk sale of business assets. The client publishes a semi-monthly publication with about 200 subscribers and plans to sell those accounts to its major competitor, which produces a nearly identical publication.

The Department held the sale is both things at once.

• A customer list is a business "asset" — so the bulk-sale rule applies. Under § 1141(c), when a person required to collect tax sells or transfers business assets in bulk (outside the ordinary course of business), the purchaser must notify the Tax Commission at least ten days before taking possession or paying, and give the price, terms, and conditions. A customer list is an "asset" within this rule (Matter of Long Island Reliable v. State Tax Commission).
• Selling a customer list is a taxable sale of information. It is well established that a customer list is a business asset whose sale constitutes the sale of information, taxable under § 1105(c)(1) (Long Island Reliable; Wowkowych; Troiano Fuel Oil).
• Result: the sale of the client's customer list is both a bulk sale of a business asset and a sale subject to tax under § 1105(c)(1).

What this means for you

Selling a customer or subscriber list can trigger sales tax. New York treats a customer list as information; selling it is a taxable information service, not a tax-free transfer of goodwill.

A bulk sale of business assets has its own notice trap — on the buyer. When assets are sold in bulk outside the ordinary course of business, the purchaser must give the Tax Commission at least ten days' advance notice. Skipping that step can leave the buyer exposed for the seller's unpaid sales tax.

The two characterizations stack. The same transaction can be both a taxable information sale and a bulk sale — meeting one set of rules does not excuse the other.

Common questions

Q: We're selling our subscriber list to a competitor. Is that taxable?
A: Yes. The Department treats the sale of a customer/subscriber list as a taxable sale of information under § 1105(c)(1).

Q: Do we also have to worry about the bulk-sale rules?
A: Yes. A customer list is a business asset, so a sale in bulk outside the ordinary course of business triggers § 1141(c) — the buyer must notify the Tax Commission at least ten days in advance.

Q: Who has to give the bulk-sale notice?
A: The purchaser, transferee, or assignee — at least ten days before taking possession or paying, including the price, terms, and conditions.

Citations and references

Statutes:

• Tax Law § 1105(c)(1) — taxes the furnishing of information (the sale of a customer list)
• Tax Law § 1141(c) — bulk-sale notice requirement for transfers of business assets outside the ordinary course of business

Cases and determinations cited:

• Matter of Long Island Reliable Corp. v. State Tax Commission, 72 A.D.2d 826 — a customer list is an "asset," and its sale is a taxable sale of information
• Wowkowych Enterprise Disposal Services, Inc., Decision of the State Tax Commission, Jan. 3, 1986, TSB-H-86(12)S
• Troiano Fuel Oil Co., Advisory Opinion of the State Tax Commission, Oct. 20, 1981

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a87_3s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-87(3)S
Sales Tax
January 5, 1987

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S861009A

On October 9, 1986, a Petition for Advisory Opinion was received from Jeffrey A. Farkas,
C.P.A., 105-04 Metropolitan Avenue, Forest Hills, New York 11375.
The issue raised is whether the sale of accounts by Petitioner's client constitutes a sale of a
taxable information service as well as a sale in bulk of business assets.
Petitioner's client is in the business of selling an information service which is subject to tax
under 1105(c)(1) of the Tax Law. Petitioner's client services approximately 200 subscribers to its
semi-monthly publication and contemplates the sale of these accounts to its major competitor who
produces a similar, almost identical, publication.
Section 1141(c) of the Tax Law provides that "Whenever a person required to collect tax
shall make a sale, transfer, or assignment in bulk of any part or the whole of his business assets,
otherwise than in the ordinary course of business, the purchaser, transferee or assignee shall at least
ten days before taking possession of the subject of said sale, transfer or assignment, or paying
therefor, notify the tax commission... of the proposed sale and of the price, terms and conditions
thereof...."
It is well established that a customer list is an "asset" within the meaning of section 1141 of
the Tax Law. "The word 'asset' given its ordinary meaning, means an item of value owned
(Webster's Third New International Dictionary Unabridged). We conclude that asset includes such
items as a customer list and the various other items sold...." (Matter of Long Island Reliable v. State
Tax Commission, 72 AD2 826).
It is also well established that a customer list is a business asset the sale of which constitutes
the sale of information and is, therefore, taxable under section 1105 (subd. (c)) of the Tax Law.
Long Island Reliable Corp v. Tax Commission, supra; Wowkowych Enterprise Disposal Services,
Inc. Decision of the State Tax Commission, January 3, 1986, TSB-H-86(12)S; Troiano Fuel Oil Co.
October 20, 1981, Advisory Opinion of the State Tax Commission.

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

-2­
TSB-A-87(3)S
Sales Tax
January 5, 1987

Accordingly, the sale of Petitioners' client's customer list is both a sale in bulk of a business
asset and a sale subject to tax under 1105 (c)(1) of the Tax Law.

DATED: January 5, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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