Which fees in a computerized securities-trading information network — directory listings, oral transmissions, delivery-instruction processing, broker referral premiums, and corporate-release fees — are subject to New York sales tax?

Plain-English summary

A financial-networks company ran several electronic services for securities traders — the Autex "Trading Information System" (TIS), which let brokers advertise interest in buying or selling large blocks of stock and let institutions receive that information; an "Alert" delivery-instruction service; broker referral arrangements; and a corporate news-release service. It asked how New York sales tax applied to five different fee streams. The Department worked through each, applying the same core distinction: advertising is exempt, but furnishing or receiving compiled information is a taxable information service (Tax Law § 1105(c)(1)).

1. Fees to be listed in the TIS directory (providers). Many TIS message formats are advertising and not taxable, but two — "Recap Messages" and "Display Messages" — are taxable information services delivered by electronic readout. Because the company's billing bundled all formats and providers could not buy them separately, the whole provider fee is taxable as a single purchase (the Morton L. Coren rule). Charges to receivers for TIS are likewise a taxable information service. (If Recap and Display could be bought separately, only those would be taxed.)

2. Oral transmissions of TIS. Taxable. Under § 1105(c)(9), an information service delivered by telephone is taxable if it would be taxable in printed form — and TIS would be, so the oral version is too.

3. Alert delivery-instruction processing. Taxable, on the same § 1105(c)(9) logic: the Alert messages would be a taxable information service if furnished in printed form, so transmitting and retrieving them is taxable.

4. Broker referral premiums. Not taxable. Referring customers to executing brokers is not one of the services listed in § 1105(c), so the premium is not taxed — unless it is really an offset against the charges brokers owe for the taxable information service.

5. Corporate news-release fees. Charges to providers to list and display their releases are advertising — exempt. Charges to receivers to obtain the releases are a taxable information service. A firm that is both must separately state and separately purchase the two, or the whole charge is taxable.

What this means for you

Electronic data, trading, and financial-network operators

Tax follows function, not format. Charging someone to receive compiled information is a taxable information service whether you deliver it by screen readout, printout, or over the phone (§ 1105(c)(9) closes the "we said it out loud" gap). Charging an advertiser to be listed is exempt. And bundling matters enormously: if taxable and exempt features are sold as one package that cannot be unbundled, New York taxes the entire fee.

Businesses that both advertise on and receive from a platform

When you sit on both sides — paying to advertise and paying to receive — keep the advertising charge and the information-service charge separately stated and genuinely separately purchasable. Otherwise the exempt advertising piece is swept into the taxable whole.

Accountants and tax professionals

Three levers recur: § 1105(c)(1) (advertising exempt vs information service taxable), § 1105(c)(9) (telephony delivery taxed if the printed version would be), and the single-purchase bundling rule from Morton L. Coren. Referral/finder compensation is off-list under § 1105(c) unless disguised as an offset. This opinion is a companion to the First Call Corporation opinion (TSB-A-93(20)S), which it cites and which reaches the same result on referral premiums and directory advertising.

Common questions

Q: Are the provider directory-listing fees taxable?
A: Yes, in full here. Although much of TIS is advertising, the "Recap" and "Display" message formats are taxable information services, and because providers could not buy the formats separately, the entire bundled provider fee is taxed as one purchase.

Q: Are fees charged to receivers taxable?
A: Yes. Receiving the compiled TIS information is a taxable information service under § 1105(c)(1).

Q: Does delivering the information orally avoid the tax?
A: No. Under § 1105(c)(9), an information service delivered by telephone is taxable if it would be taxable in printed form. TIS and the Alert messages qualify, so oral or transmitted delivery is taxable.

Q: Are the broker referral premiums taxable?
A: No. Referral of customers to brokers is not an enumerated service under § 1105(c), so the premium is not taxed — unless it functions as an offset against the taxable information-service charges the broker owes.

Q: How are corporate-release fees treated?
A: Charges to providers to list/display releases are exempt advertising; charges to receivers to obtain the releases are a taxable information service. A firm that is both must separately state and separately purchase the two, or the whole charge is taxable.

Q: Can another company rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described. It shows the Department's reasoning, but your facts may differ.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(1) (tax on furnishing/receiving information services; advertising services excluded)
• Tax Law § 1105(c)(9) (tax on information services delivered by telephony, if taxable when furnished in printed form)
• 20 NYCRR § 527.3 (information services and advertising services)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_24s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-93 (24)S
Sales Tax
April 12, 1993

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920513C

On May 13, 1992, a Petition for Advisory 0pinion was received from Thomson Financial
Networks, Inc., 11 Farnsworth Street, Boston, MA 02210.
The issues raised by Petitioner, Thomson Financial Networks, Inc., are:
1.

Whether fees paid to Petitioner for the right to be listed in the Autex computerized
information directory ("Trading Information System" hereinafter "TIS") are subject
to sales tax.

2.

Whether oral transmissions of TIS are subject to sales tax.

3.

Whether fees paid to the Alert Division of Petitioner for processing
institution/investor delivery instructions to broker dealers are subject to sales tax.

4.

Whether sales lead referral fees ("Premiums") paid to Petitioner by executing brokers
used in the Petitioner computerized information directory are subject to sales tax.

5.

Whether fees paid to the Corporate Service Division of Petitioner for processing
corporate news releases are subject to sales tax.

In reference to issues "1" and "2", Petitioner operates a TIS through its Autex Division. The
TIS service enables brokers (the "providers") and institutions and money managers (the "receivers")
engaged in buying or selling large blocks of securities to communicate interest in such transactions
to others on a selective basis through a system of telephone and computer equipment and electronic
display screens owned by or leased to Autex.
The messages of the providers are communicated to Autex in Massachusetts via interstate
telephone lines leased by Autex from the telephone company. Such communication may be made
orally to Autex by telephone or, for those providers having such equipment by means of a computer
terminal supplied by Autex. In Massachusetts, the information is entered in Autex's computer,
processed and from there transmitted via telephone lines leased by Autex to PC terminals supplied
by Autex to the receivers. If a receiver does not have a direct connection with Autex the information
may be transmitted through a modem to the receiver's PC. If the receiver does not have the
appropriate equipment to receive the information via computer, it will be transferred orally by
telephone.
The prices charged for the TIS service does not subsidize the provider or the receiver.
Providers are charged based upon the number of advertisements placed on TIS. Receivers are
charged based upon the number of advertisements received on TIS.

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Providers
The TIS service allows providers to input advertisements/announcements on their open
securities positions. After the purchase/sale is made, they can advertise that they have made a market
in that security by announcing the completed trade on TIS. Currently, Petitioner's billing system
cannot separately charge providers for each category listed below. The provider receives one
invoiced amount for message formats used even though they may use one or more (or all) of the
features listed.
A.

Interest Messages (65%)

Allows providers to announce/advertise to receivers their interest to buy or sell large blocks
of equity securities or bonds.
B.

Advertised Trade Messages (15%)

Allows providers to announce/advertise that they have executed a trade to a provider or
receiver.
C.

Super Messages (6%)

Allows providers an open format to announce/advertise a detailed interest to sell or buy
securities to a receiver.
D.

Recap Messages (8%)

If requested to do so, Autex will supply a provider with a recapitulation of 5 types of current
(and recently canceled) communications Autex has received, organized in accordance with the
provider's requests.
1.
2.
3.
4.
5.

Receiver's Super Messages.
Receiver's Direct Messages.
All Providers Advertised Trade Messages.
Provider's Interest Messages.
Provider's Super Messages.

E.

Direct Message (1%)

Allows providers an open format to announce/advertise a detailed interest to sell or buy
securities to one receiver only.
F.

Canceled Message (4%)

Allows provider to cancel or Expunge a Interest, Super, Direct or Advertised Trade Message.
G.

Error Message (1%)

An invalid message format, (i.e. a provider ending a message to a nonexistent receiver).

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H.

Display Message (negligible)

Allows provider to display the Autex computerized information directory. The computerized
information directory contains a list of all providers who have paid Autex to be listed in their
information publishing service and a list of all TIS receivers. The directory contains the trader's
name address, phone # and stock exchanges used.
Autex charges fees to providers for leased equipment and rights to announce/
advertise/disseminate information on TIS. Sales tax is collected based on the specific equipment
being leased.
Receivers
The TIS service allows receivers to retrieve information so that they can obtain the best
advertised price and volume information available to properly manage their portfolios and do
business with the providers (i.e. obtain the optimal price for their purchase or sales of equity
securities). Currently Petitioner's billing system cannot separately charge receivers for each category
listed below. The receiver receives one invoiced amount even though they may use one or more (or
all) of the features listed.
A.

Super Messages (negligible)

Allows receivers an open format to communicate a detailed response to a provider's
announcement/advertisement.
B.

Recap Messages (98%)

If requested to do so, Autex will supply a receiver with a recapitulation of 6 types of current
(and recently canceled) communications Autex has received, organized in accordance with the
provider's request.
1.
2.
3.
4.
5.
6.

Receiver's Super Messages.
Receiver's Direct Messages.
All Providers Advertised Trade Messages.
Provider's Super Messages.
Provider's Direct Messages.
Provider's Interest Messages.

C.

Direct Message (negligible)

Allows receivers an open format to communicate a detailed response to one provider's
announcement/advertisement.
D.

Display Message (l%)

Allows receiver to display the Autex computerized information directory. The computerized
information directory contains a list of all providers who have paid Autex to be listed in their
information publishing service and a list of all TIS receivers. The directory contains the trader's
name, address, phone # and stock exchanges used.

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E.

Error Message (negligible)

An invalid message format, (ie., a receiver is not allowed to send an interest message or
announce an advertised trade).
Autex charges fees to receivers for leased equipment and rights to receive information on
TIS. Sales tax is collected on equipment based on the specific equipment being leased.
In reference to issue "3", Petitioner operates the Alert service through its Trading Support
Division (hereinafter "TSD"). The Alert service enables investors (the "providers") and broker
dealers (the "receivers") engaged in settling security transactions to communicate delivery
instructions of such transactions to others on a selective basis through a system of telephone,
computer equipment modems and electronic display screens owned by them. Providers use the Alert
system to announce to receivers their delivery instructions.
Receivers use the Alert service to input their account numbers (cross referencing) so the
providers indexed data can be referenced to receivers back office indexing. This ensures that
receivers information is up to date for successful trade settlement.
The messages of providers are communicated to the TSD in Massachusetts via facsimiles,
mail, or, for those providers having such equipment by a computer terminal or modem they supply.
In Massachusetts, the "account information" is entered in the TSB computer, processed and from
there an "Alert" is transmitted via telephone lines leased by the TSB to PC terminals owned by
receivers or by facsimiles for receivers not having such equipment.
Due to the number of TIS transactions (some 2,000,000 in one month) and the time sensitive
nature of the placement and receipt of messages, the computer time delay processing burden to track
provider with receiver would effect the integrity of the TIS service.
While it may be possible to link the Alert providers with receivers, this would require a
complete rewrite of the host software and billing software at a considerable cost to Petitioner. This
rewrite would add nothing to the value or integrity of the product since the market does not need or
require this information.
An Alert is a message indicating that information in the delivery instructions is new or has
been changed. It contains information on the name of account and the changed or new fields. The
receiver can either delete the Alert (not view the message) or view the changed fields by retrieving
the Alert (ie. subscriber ID #8086, bank account).
Account information is the actual detailed delivery information. If a receiver wishes to see
the account information (ie. bank account # 004-367, Chase Manhattan) it must access the database
in Massachusetts and retrieve that account information.

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The TSD charges providers a monthly registration fee, a monthly usage fee based on the #
of accounts retrieved (no fee is charged for the retrieval of Alerts), and a telecommunication fee
based on the # of minutes logged onto the Alert system.
With reference to issue "4", Petitioner contacts institutional investment firms (the
"customers") that would like to receive the information provided by Petitioner, but do not want to
pay the required fees. In such instances, the customers are advised that the information service may
be provided to them and the cost would be underwritten by a specific executing broker (the
"brokerage"). In return it is expected that the customer will use such brokerage when making trades
motivated by access to the information service. Because such arrangements are ultimately beneficial
to the brokerage company, in addition to paying the fees charged by Petitioner for their information
services they also pay a premium to Petitioner for each customer that is referred to them in this
manner. Each charge is separately charge invoiced. Sales tax is only collected upon fees paid by the
brokerage for receiver services provided to customers.
In reference to issue "5", Petitioner operates the Corporate Release Service (the "service")
through its Corporate Services Division. The service enables corporations (the "providers") to
publish time-sensitive corporate news releases or other similar information (the "releases") to
corporations, portfolio managers, analysts and traders who work for institutional investment firms
and other financial institutions or corporations (the "receivers"). Petitioner charges fees to both
providers and receivers to process and deliver this information publishing service. Sales tax is
collected upon fees charged to receivers only.
The messages of providers are communicated to Petitioner in Massachusetts via facsimiles,
electronic mail, or, for those providers having such equipment by a 3rd party delivery network. After
provider information is received, Petitioner employees index, headline and format the information.
In Massachusetts, the information is entered into a third party delivery network by Petitioner
employees, processed and from there delivered to receivers through PC terminals owned by the 3rd
party delivery network.
Petitioner charges providers a monthly fee of $625.00 for processing corporate releases.
Petitioner charges receivers a monthly fee of 750.00 for receiving releases and other 3rd party
information.
Since Corporate Releases are delivered on a third party network Petitioner does not have
control over the linking process. Thus, Petitioner could not administratively link providers with
receivers.
Section 1105 of the Tax Law states, in part:
Imposition of sales tax.-- ... there is hereby imposed and there shall be paid a tax ...
upon:
*

*

*

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(c) 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. (emphasis added)
*

*

*

(9) The furnishing or provision of an entertainment service or of an
information service, 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 massannouncement 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 of the Sales and Use Tax Regulations provides, in part, as follows:
(a) Imposition. (1) Section 1105(c)(1) of the Tax Law imposes a tax on the receipts
from the service of furnishing information by printed, mimeographed or
multigraphed matter or by duplicating written or printed matter in any manner such
as by tapes, discs, electronic readouts or displays.
(2) The collecting, compiling or analyzing information of any kind or nature
and the furnishing reports thereof to other persons is an information service.
(3) Among the services which are information services are credit reports, tax
or stock market advisory and analysis reports and product and marketing surveys.
Example 1: A company distributes newsletter to its
subscribers weekly, showing the range of daily market prices for
certain commodities. The newsletter comprises a taxable information
service.

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Example 2: A company publishes bound volume monthly,
which it furnishes to its subscribers. The volume contains information
with respect to current advertising rates of various media in different
localities. This publication is a taxable information service.
Example 3: A firm which supplies to business concerns
listings of prospective customers' telephone numbers is providing a
taxable information service and must collect the appropriate tax on
the charges for such service.
Example 4: A computer service company owns a service
program consisting of analyses of law cases and statutes. It is asked
by a customer to research all references to the word "assessment".
The fee for the printout received by the customer constitutes a taxable
receipt from an information service, as the citations listed may be
given to another subscriber requesting the same information.
*

*

*

(5) Fees for the services of advertising agencies or other persons acting in a
representative capacity are excluded from the tax. Advertising services consist of
consultation and development of advertising campaigns, and placement of
advertisements with the media without the transfer of tangible personal property ....
(emphasis added)
In Morton L. Coren, P.C., Adv 0p 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, concerning issue "1", while many of the message formats provided by Petitioner
to providers under its TIS service constitute advertising, a service not subject to sales tax pursuant
to Section 1105(c)(1) of the Tax Law and Section 527.3 of the Sales and Use Tax Regulations, the
particular message formats for "Recap Messages" and "Display Messages" constitute the furnishing
of an information service through electronic readout or display, which are subject to sales tax under
Section 1105(c)(1) of the Tax Law and Section 527.3 of the Sales and Use Tax Regulations.
Pursuant to Morton L. Coren, P.C., supra, where components of a particular sale cannot be purchased
separately, the combination of items listed must be considered as one and subject to sales tax as a
single purchase. Therefore, the entire fee paid by providers to Petitioner for the right to be listed in
the Autex computerized information directory is subject to sales tax. It is noted that if the "Recap
Messages" and "Display Messages" functions of TIS could be purchased separately from the
remaining functions of TIS and vice versa then only the charges for the "Recap Messages" and
"Display Messages" functions would be subject to sales tax.

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It is further noted that the TIS service provided to receivers through electronic readout or
display or written or printed matter, constitutes the furnishing of an information service subject to
sales tax pursuant to Section 1105(c)(1) of the Tax Law and Section 527.3 of the Sales and Use Tax
Regulations. Therefore, charges to receivers for the receipt of Petitioner's TIS service are subject to
sales tax.
With respect to issue "2", pursuant to Section 1105(c)(9) of the Tax Law an information
service, which is furnished, provided or delivered by means of telephony or telegraphy or telephone
or telegraph service (whether intrastate or interstate) of whatever nature and would be otherwise
taxable under Section 1105(c)(1) of the Tax Law were it furnished by printed, mimeographed or
multigraphed matter or by duplicating written or printed matter in any other manner would be taxable
even if transmitted orally. Therefore since TIS, as discussed in issue "1", would be taxable as an
information service when furnished by printed, mimeographed, or multigraphed matter or by
duplicating written or printed matter in any other manner, it is also subject to sales tax when
transmitted orally.
Concerning issue "3", pursuant to Section 1105(c)(9) of the Tax Law an information service,
which is furnished, provided or delivered by means of telephony or telegraph or telephone or
telegraph service (whether intrastate or interstate) of whatever nature and would be otherwise taxable
under Section 1105(c)(1) of the Tax Law were it furnished by printed, mimeographed or
multigraphed matter or by duplicating written or printed matter in any other manner would be taxable
even if transmitted orally. Accordingly, since the Alert messages would be subject to sales tax as an
information service if furnished by printed, mimeographed or multigraphed matter or by duplicating
written or printed matter in any other manner, the transmitting of Alert messages to and from
Massachusetts via telephone lines to PC terminals owned by receivers constitutes an information
service which is subject to sales tax. Therefore, fees paid to the Alert Division for the transmittal
and retrieval of such messages are subject to sales tax.
Concerning issue "4", Section 1105(c) of the Tax Law imposes tax upon the receipts from
every sale, except for resale, of certain enumerated services. The referral of customers to executing
brokers is not one of the services enumerated under Section 1105(c) of the Tax Law. Therefore, the
premium received from brokers for customer referrals is not subject to sales and use taxes, provided,
however, that the premium paid by brokers is not an offset against the chagres the brokers are
required to pay to have the information service furnished to their customers. First Call Corporation,
Adv Op Comm T & F, March 22, 1993, TSB-A-93(20)S.
Regarding issue "5", Section 1105(c)(1) of the Tax Law imposes a tax on the receipts from
the sale of the service of the furnishing of information by printed, mimeographed or multigraphed
matter but excluding the services of advertising.
The listing and displaying of providers time-sensitive corporate news releases constitutes
advertising. Accordingly, the charges to providers for listing and displaying their information is

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exempt from sales tax pursuant to Section 1105(c)(1) of the Tax Law. First Call Corporation, Adv
Op Comm T & F, March 22, 1993, TSB-A-93(20)S.
It should be noted, however, that the fee paid by receivers to receive the corporate news
releases is subject to sales tax pursuant to Section 1105(c)(1) of the Tax Law as a charge paid to
receive an information service.
Moreover, where a provider of such information is also a receiver of such taxable information
service, that the charges for advertising through the corporate news releases must be separately stated
from the charges for receiving the taxable information service and such services must be able to be
purchased separately. Otherwise, the entire charge for such services is subject to sales tax.

DATED: April 12, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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