Is a workplace drug-and-alcohol-testing program administrator's consulting, sample collection, and reporting services subject to New York sales tax?

Plain-English summary

Safe Systems Corporation helps businesses set up and run federally mandated internal drug and alcohol testing programs. Its services span consulting on how to implement a testing program, writing the company's testing policies, sending certified technicians to collect blood or urine samples at mobile units or clinics (instead of a hospital), sending those samples to independent labs, delivering the lab results back to the company, and handling all the recordkeeping needed to complete federal DOT audit reports. Safe Systems asked whether any or all of these services are subject to sales tax.

New York's sales tax only reaches services that are specifically listed in the statute -- services that aren't named on that list simply aren't taxed, no matter how comprehensive or business-oriented they are. The Department walked through each of Safe Systems' five service categories -- program consulting/training, policy writing, sample collection, lab report delivery/communication, and DOT compliance recordkeeping -- and found none of them fits any category the sales tax law actually enumerates, whether performed alone or bundled together as a package. As a result, the entire suite of services Safe Systems provides is outside the scope of New York sales and use tax.

What this means for you

Drug and alcohol testing program administrators and similar compliance service providers

Consulting, policy drafting, sample collection logistics, lab-result communication, and regulatory recordkeeping services are all outside New York's enumerated sales tax categories -- bundling them into one comprehensive service offering doesn't change that, since none of the individual pieces is separately taxable either.

Employers using third-party compliance or testing administrators

You shouldn't expect to see sales tax charged on a vendor's fees for these kinds of workplace compliance services -- if a vendor is charging tax on this type of service, it's worth asking why given this precedent.

Accountants and tax professionals

This ruling is a clean, multi-part illustration of New York's "specifically enumerated services only" principle -- useful for any compliance, consulting, or administrative-service business wondering whether a bundle of individually nontaxable service components could somehow become taxable when packaged together (it doesn't).

Common questions

Q: Is sample collection for drug testing a taxable service in New York?
A: No -- collecting blood or urine samples by certified technicians for testing at an independent lab isn't a specifically enumerated taxable service.

Q: Does bundling several nontaxable services together into one package make them taxable?
A: No -- the Department confirmed all five service categories here are nontaxable whether provided individually or in combination with each other.

Q: Are lab report delivery and test-result communication services taxed?
A: No -- delivering laboratory reports and communicating test results (performed by an independent lab) isn't a specifically enumerated taxable service.

Q: Does this ruling apply to my compliance or testing-administration business?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Your own services would need their own analysis.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_63s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(63)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S970715C

On July 15, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Safe Systems Corporation, 21 Walker Way,
Albany, NY 12205.
The issues raised by Petitioner, Safe Systems Corporation, are:
(1)

Whether the service of consulting with a company and providing
training for establishing an internal drug and alcohol testing
program is subject to New York State Sales Tax.

(2)

Whether, in addition to (1), the writing of policies for a
company regarding drug and alcohol testing is subject to New
York State Sales Tax.

(3)

Whether, in addition to (1) and (2) above, the collection of
samples from a company's employees by certified technicians at
mobile units, or at clinics, for testing at an independent
laboratory is subject to New York State Sales Tax.

(4)

Whether, in addition to (1), (2) and (3) above, the service of
delivering laboratory reports and communicating test results
to a company is subject to New York State Sales Tax.

(5)

Whether, in addition to (1), (2), (3) and (4) above, handling
all record keeping and management of information necessary for
a company to complete Federal DOT Audit Reports on Drug and
Alcohol testing is subject to New York State Sales Tax.

Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner provides the service of assisting businesses in establishing and
complying with internal drug and alcohol testing programs. In many cases the
testing is Federally mandated.
The initial services consist of consultation with respect to implementing
an internal testing program, writing company policies and training company
employees.
Petitioner also helps many companies implement their internal testing
program by the provision of ongoing consulting services; collection of samples
by certified technicians at a mobile unit brought to the company's facility or

-2­
TSB-A-97(63)S
Sales Tax

at a clinic; delivery of samples to qualified laboratories; delivery to the
company of the laboratory report; and communication to the company of the test
results. The information provided pertains only to the samples tested and is
confidential and cannot be provided to any party other than the company hiring
Petitioner or such company's designee.
These services are provided as an alternative to hospital-based drug and
alcohol testing services. The services are substantially similar to hospital­
based testing except that the collection of samples occurs at the customer's
place of business. Samples taken by Petitioner for federally mandated drug tests
are analyzed by independent laboratories.
In some cases Petitioner handles all record keeping and management of files
to ensure compliance with Federal mandates.
Opinion
Section 1105(c) of the Tax Law imposes tax on the receipts from every sale,
except for resale, of certain enumerated services.
Services which are not
specifically described in the statute are not subject to sales tax.
With respect to issues one through five (whether provided individually or
in conjunction with each other) of the Petition:
(1) Petitioner's services provided to its clients consisting of consulting
and providing training for establishing an internal drug and alcohol testing
program are not specified services subject to tax under Section 1105(c) of the
Tax Law and thus are not subject to sales or use tax.
(2) Petitioner's services provided to its clients consisting of writing
policies regarding drug and alcohol testing (which we take to entail consulting
with the client to identify what policies the client wants and then setting forth
those policies in a written document to be furnished to the client) are not
specified services subject to tax under Section 1105(c) of the Tax Law and thus
are not subject to sales or use tax.
(3)
Petitioner's services provided to its clients consisting of the
collection of blood or urine samples for drug and alcohol testing from company
employees by certified technicians at mobile units or at clinics for testing at
independent laboratories are not specified services subject to tax under Section
1105(c) of the Tax Law and thus are not subject to sales or use tax.
(4)
Petitioner's services provided to its clients consisting of the
delivery of laboratory reports and the communicating of test results, performed
by independent laboratories, are not specified services subject to tax under
Section 1105(c) of the Tax Law and thus are not subject to sales or use tax. See
Scientific Services, Adv Op Comm T&F, August 25, 1997, TSB-A-97(51)S.

-3­
TSB-A-97(63)S
Sales Tax

(5)
Petitioner's services provided to its clients consisting of
recordkeeping and management of information necessary for such clients to
complete Federal DOT Audit Reports on Drug and Alcohol testing are not specified
services subject to tax under Section 1105(c) of the Tax Law and thus are not
subject to sales or use tax.

DATED: September 29, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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