New York Advisory Opinion TSB-A-96(16)S: Is a monthly $25 administrative fee that an information-services company charges customers who choose to pay for their information units as-used (rather than a lump annual prepayment) subject to New York sales tax?

Plain-English summary

Dun & Bradstreet, Inc. is registered in all states to collect and remit sales tax on its credit and market information services, to the extent taxable. Its customers currently pay a set annual amount in advance for a set number of information units. Beginning in January 1996, D&B introduced a new billing option letting customers instead pay for information units as they actually use them. Customers who choose this "as-used" option are charged a separately stated $25 monthly fee, meant to recoup the extra administrative cost of billing monthly instead of annually, plus a 10% price premium on the information units themselves compared to D&B's regular price list -- no discounts are offered under the as-used option.

The Department ruled the $25 monthly fee is subject to New York sales and use tax, along with the rest of D&B's taxable information-service receipts. Tax Law § 1101(b)(3) defines a taxable "receipt" as the full sale price or service charge, "without any deduction for expenses," and 20 NYCRR § 526.5(e) reinforces that a vendor's own expenses incurred in making a sale -- regardless of their own tax status, and regardless of whether they're separately billed to the customer -- are not deductible from taxable receipts. Because D&B is charging the $25 fee specifically to recover its own administrative costs of billing customers monthly rather than annually for an underlying taxable information service (taxed under § 1105(c)(1)), that fee is part of what the customer pays to receive the taxable service, and so is itself subject to sales and use tax whenever the underlying information service is taxable.

What this means for you

Information-service and subscription providers

Any separately stated administrative, processing, or billing fee tied to delivering a taxable service is generally taxable along with the underlying charge -- breaking a fee out on its own invoice line, or attributing it to your own internal costs, doesn't remove it from the taxable receipt. This applies broadly to convenience fees, processing surcharges, and similar add-ons layered onto a taxable service.

Businesses restructuring billing or payment plans

If you introduce a new billing cadence (e.g., monthly vs. annual) and charge extra to cover the added administrative cost, expect that extra charge to inherit the tax treatment of the underlying service -- it's not treated as a separate, non-taxable administrative transaction.

Common questions

Q: Would the $25 fee be non-taxable if D&B's underlying information services were tax-exempt?
A: The ruling's reasoning ties the fee's taxability to the taxability of the underlying service -- it states the receipts "are subject to sales and use taxes if taxable services are sold," implying that if the specific information service purchased weren't taxable in the first place, the associated billing fee also wouldn't be reached, though the ruling doesn't work through that scenario in detail.

Q: Does it matter that D&B separately states the $25 fee on each invoice, rather than folding it into the unit price?
A: No -- separate statement doesn't change the outcome. The regulation explicitly says expenses "incurred by a vendor in making a sale ... are not deductible from the receipts ... regardless of whether they are billed to a customer" separately or not.

Q: Is the 10% price premium on information units treated the same way?
A: The ruling focuses specifically on the $25 monthly fee, but the same underlying principle -- that the full price charged for a taxable information service is taxable -- would apply to the premium pricing as part of the receipts for the units themselves.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(3) (definition of receipt; no deduction for expenses)
• Tax Law § 1105(c)(1) (tax on furnishing of information services)
• 20 NYCRR 526.5(e) (expenses not deductible from receipts)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_16s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-96 (16)S
Sales Tax
February 28, 1996

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S950908A

On September 8, 1995, a Petition for Advisory Opinion was received from Dun & Bradstreet,
Inc., 1 Diamond Hill Road, Murray Hill, NJ 07974-1218.
The issue raised by Petitioner, Dun & Bradstreet, Inc., is whether a monthly membership fee
charged by Petitioner to its customers who elect a credit sales billing option plan is subject to New
York State and local sales and use taxes.
Petitioner submits the following facts. Petitioner is registered in all states to collect and remit
sales tax on credit or market information services to the extent the services are subject to tax.
Currently, Petitioner's customers pay a set annual amount in advance for a set amount of information
units. However, beginning January 1996, Petitioner will be introducing a new billing option.
Under the new option, customers will be allowed to pay for the information units as they use
them. Petitioner will charge customers electing this option a $25.00 monthly fee to recoup
administrative costs incurred for billing the customers on a monthly rather than an annual basis. This
fee will be separately stated on each monthly invoice.
In addition to the monthly fee, customers would also be subject to a ten percent premium
charge, as compared to Petitioner's regular price list, for the actual information units purchased by
the customers. Therefore, no discounts will be offered on the information unit prices as a result of
electing to be billed on credit purchases.
Section 1101(b)(3) of the Tax Law defines receipt as "[T]he amount of the sale price of any
property and the charge for any service taxable under this article, valued in money, whether received
in money or otherwise, including any amount for which credit is allowed by the vendor to the
purchaser, without any deduction for expenses or early payment discounts .... "(emphasis added)
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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Sales Tax
February 28, 1996

(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.
Section 526.5 of the Sales and Use Tax Regulations provides, in part:
Reg. Sec. 526.5 Receipt.--(a) Definition. The word "receipt" means the
amount of the sale price of any property and the charge for any service taxable under
articles 28 and 29 of the Tax Law, valued in money, whether received in money or
otherwise. The following subdivisions of this section discuss elements of a receipt.
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(e) Expenses. All expenses, including telephone and telegraph and other
service charges, incurred by a vendor in making a sale, regardless of their taxable
status and regardless of whether they are billed to a customer are not deductible from
the receipts. (emphasis added)
In this case, Petitioner is registered to collect and remit sales tax on receipts from sales of its
credit and market information services subject to tax under Section 1105(c)(1) of the Tax Law.
Under Section 1101(b)(3) of the Tax Law and Section 526.5(e) of the Sales and Use Tax
Regulations, expenses incurred as a result of selling a taxable service are not deductible from the
receipts received from the sale of that service. Petitioner is charging the $25.00 monthly fee to its
subscribers to recoup administrative costs incurred for billing the customers on a monthly rather than
an annual basis. Since Petitioner is incurring administrative costs as a result of selling its service on
an as-used basis, pursuant to Section 1101(b)(3) of the Tax Law and Section 526.5 of the Sales and

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TSB-A-96 (16)S
Sales Tax
February 28, 1996

Use Tax Regulations, the monthly charge paid by members to cover these administrative costs
constitute receipts paid by the members to receive the taxable service. These receipts are subject to
sales and use taxes if taxable services are sold.

DATED: February 28, 1996

/s/
DORIS S. BAUMAN
Director
Technical Services Bureau

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