Is an investment advisor's telephone consulting service to newsletter subscribers a taxable information service?

Plain-English summary

The law firm Hodgson, Russ, Andrews, Woods and Goodyear asked, on behalf of a client, whether the client's telephone consulting services are subject to sales tax. The client is an SEC-registered investment advisor that publishes financial newsletters for sophisticated financial-management decision-makers and delivers them mostly through an electronic news service. Subscribers who need to go deeper can call the newsletter's authors for telephone consulting. They don't call for stock quotes or the newsletter's own content (they already have those); they call with highly individualized concerns based on their own circumstances. Consulting can be bought separately, but is usually packaged with a newsletter subscription — with the consulting charge separately stated on the invoice.

The Department's answer, under Tax Law §§ 1105(c)(1) and 1105(c)(9) and Regulation § 527.3(a):

• The consulting is not a taxable information service. Section 1105(c)(1) taxes furnishing information, but excludes information that is personal or individual in nature and not substantially incorporated into reports furnished to others. The telephone consulting is provided orally, is personal and individual, and is not incorporated into reports for other subscribers — so it's outside § 1105(c)(1). Section 1105(c)(9) (information services by telephone) can't reach it either, because it applies only if the service would be taxable under § 1105(c)(1) in printed form.
• The taxable electronic news service doesn't drag it in. The client's electronic news service is a taxable information service (following Mark S. Klein, TSB-A-91(53)S). But because the consulting can be purchased separately and is separately stated on the invoice, the Department applied Morton L. Coren, P.C. (TSB-A-90(33)S): even when the consulting is sold as a package with the newsletters, the separately stated consulting charge is not subject to sales tax.

What this means for you

Oral, individualized advice can fall outside the information-services tax

If your service is delivered orally and gives each client advice tailored to their own situation — not a report you also furnish to others — it likely qualifies for the § 1105(c)(1) exclusion for personal or individual information and isn't a taxable information service.

Telephone delivery doesn't create tax on its own

Section 1105(c)(9) taxes information services delivered by phone only if the same service would be taxable in printed form under § 1105(c)(1). If the underlying advice is personal/individual and nontaxable, delivering it by phone doesn't make it taxable.

Separately state (and let clients buy separately) nontaxable components

When a nontaxable service is bundled with a taxable one (here, a taxable electronic news service), you can keep the nontaxable piece nontaxable by making it separately purchasable and separately stated on the invoice. If the components can't be bought separately, they're treated as one taxable purchase.

Accountants and tax professionals

The opinion combines two lines: the Mark S. Klein treatment of electronic news services as taxable information services, and the Coren rule that separately purchasable, separately stated components aren't forced into a single taxable sale. The consulting's oral, personal/individual character keeps it outside § 1105(c)(1) and (c)(9).

Common questions

Q: Is telephone investment consulting taxable in New York?
A: Not on these facts. Because the advice is oral, personal and individual, and not incorporated into reports for other clients, it isn't a taxable information service under § 1105(c)(1) or (c)(9).

Q: The advisor's electronic news service is taxable — why isn't the consulting?
A: The consulting can be bought separately and is separately stated on the invoice, so under the Coren rule it isn't rolled into the taxable news service even when packaged with it.

Q: What makes information "personal or individual"?
A: It's tailored to the specific client's circumstances and isn't substantially incorporated into reports furnished to other people — unlike generic data furnished to many customers.

Q: What if the consulting couldn't be purchased separately?
A: Then it might be treated as part of a single taxable package. Separate availability and separate statement on the invoice were important to the nontaxable result.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1105(c)(1) (information services; exclusion for information personal or individual in nature and not substantially incorporated into reports for others)
• Tax Law § 1105(c)(9) (information/entertainment services by telephone or telegraph; taxable only if taxable under § 1105(c)(1) in printed form)
• Sales and Use Tax Regulations § 527.3(a) (information services; treatment of oral vs. written reports)
• Mark S. Klein, Adv. Op. Comm. T&F, July 29, 1991, TSB-A-91(53)S; Morton L. Coren, P.C., Adv. Op. Comm. T&F, June 29, 1990, TSB-A-90(33)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_31s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (31)S
Sales Tax
April 2, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S911223A

On December 23, 1991, a Petition for Advisory Opinion was received from Hodgson, Russ,
Andrews, Woods and Goodyear, 1800 One M & T Plaza, Buffalo, New York 14203.
The issue raised by Petitioner, Hodgson, Russ, Andrews, Wood and Goodyear, is whether
Petitioner's clients consulting services provided by telephone are subject to sales tax.
Petitioner's client is registered as an investment advisor with the Securities and Exchange
Commission. Petitioner's client engages in consulting and investment advisory services, investment
research and the publication of financial newsletters targeted to an audience of high-level, technically
sophisticated financial management decision-makers.
Petitioner's clients newsletters provide subscribers with almost instantaneous access to news
and analysis regarding particular financial markets. One focuses on news developments in the
corporate securities markets. A second is devoted to news of domestic money and capital markets.
Another focuses on fixed income, cash and future markets.
Newsletters received by subscribers in printed form would qualify as an exempt periodical.
However, most of Petitioner's clients subscribers receive their newsletters as part of the Petitioner's
clients electronic news service.
Individual subscribers, based on their particular circumstances, may feel the need to go
beyond the information provided in these newsletters to explore one or more specific concerns in
greater depth. Under these circumstances, subscribers can take advantage of Petitioner's clients
telephone consulting services. Some subscribers call regularly; others less frequently. In total,
Petitioner's clients staff spends approximately 35 hours per week providing consulting services over
the telephone. When subscribers call, they have access to the authors of the newsletter to which they
subscribe, highly skilled professionals in the field of financial market analysis.
Subscribers do not call these consultants to get the final closing price of a stock, or the
current movement of the yen versus the dollar. Subscribers are high level financial managers which
have ready access elsewhere to such information. Neither do subscribers call for the information
provided in the taxpayer's newsletter. All consulting subscribers are also newsletter customers, and
have access to such information. Instead, subscribers call with highly individualized concerns based
on their own particular circumstances and interests.

TP-9 (9/88)

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TSB-A-92 (31)S
Sales Tax
April 2, 1992

Consulting services can be purchased separately from newsletter subscriptions. However, this
is an exception, and not the rule. Generally, subscribers purchase the consulting service as a package
that also includes a subscription to one of Petitioner's clients financial newsletters. Charges for the
consulting service is, however, separately stated from the charges for the newsletters on the
subscriber's invoice.
Section 1105(c) of the Tax Law imposes sales tax, in part, on the receipts from every sale,
except for resale, of the following services:
(1) The furnishing of information by printed, mimeographed or multigraphed
matter or by duplicating written or printed matter in any other manner, including the
services of collecting, compiling or analyzing information of any kind or nature and
furnishing reports thereof to other persons, but excluding the furnishing of
information which is personal or individual in nature and which is not or may not be
substantially incorporated in reports furnished to other persons, and excluding the
services of advertising or other agents, or other persons acting in a representative
capacity, and information services used by newspapers, radio broadcasters and
television broadcasters in the collection and dissemination of news.
(9) The furnishing or provision of an entertainment service or of an
information service, which is furnished, provided, or delivered by means of telephone
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, mimeographed or multigraphed matter or by duplicating written or printed
matter in any other manner nor (ii) shall the provision of cable television service to
customers be taxed under this paragraph.
Section 527.3(a) of the Sales and Use Tax Regulations provides, in part, as follows:
(4) Charges for credit information services, other than those that are
transmitted orally, are subject to tax. The following rules shall apply in determining
taxability of services that include both oral and written reports.
(i) Any fee for a written report is taxable.
(ii) Any fee for an oral report is taxable if the oral report is
preliminary to the written report.

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TSB-A-92 (31)S
Sales Tax
April 2, 1992

(iii) An annual fee for subscribing to a service is taxable if it entitles
the subscriber to a certain number of free reports, or to reduced
charges on reports, unless the subscriber is entitled only to oral
reports.
In Mark S. Klein, Adv Op Comm T&F, July 29, 1991, TSB-A-91(53)S, the Commissioner
advised that an on-line news service delivered to customers by means of an electronic readout or
display rather than in printed or written form did not fall within the exemption under Section
1115(a)(5) of the Tax Law for newspapers and periodicals, but rather the receipts from the sale of
the on-line news service were subject to tax as an information service under Section 1105(c)(1) of
the Tax Law.
In Morton L. Coren, P.C., Adv Op Comm T&F, June 29, 1990, TSB-A-90(33)S, the
Commissioner advised that even though the components of a particular sale could be separately
stated, calculated or estimated, that if such components could not be separately purchased the
combination of items listed must be considered as one and subject to sales tax as a single purchase.
Accordingly, Petitioner's clients consulting service is not an information service pursuant to
Sections 1105(c)(1) and 1105(c)(9) of the Tax Law and Section 527.3(a)(4) of the Sales and Use Tax
Regulations since the information is provided orally, is personal and individual in nature, and is not
incorporated in reports furnished to subscribers. Moreover, while Petitioner's clients electronic news
service is an information service pursuant to Mark S. Klein, supra, Petitioner's clients consulting
service can be purchased separately from the electronic news service and is separately stated on
invoices given to subscribers. Therefore, pursuant to Morton L. Coren, P.C., supra, even if the
consulting service is purchased as a package with the newsletters, the separately stated charge for
the consulting service is not subject to sales tax.

DATED: April 2, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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