Does a company that manages conference calls (reserving lines, monitoring audio quality, running the bridge equipment) have to charge New York sales tax on its fees, the way a phone company charges tax on the calls themselves?

Plain-English summary

Frontier Confer Tech runs the logistics of conference calls for its customers -- reserving the date, time, and duration, taking a roll call of participants, adding people mid-call on request, and using bridge equipment and its own software to keep the audio quality clean (balancing volume, killing echo and background noise) when a call has many participants. It doesn't supply the underlying phone transmission itself; its customers separately pay their phone company for that. Frontier asked whether its own management fee -- billed by the minute reserved times the number of participants, even if the call is cancelled -- is subject to New York sales tax.

New York taxes telephone and telegraph service under Tax Law § 1105(b), defined by regulation as "use or operation of any apparatus for transmission of sound, sound reproduction or coded or other signals." The Department drew a clean line: Frontier isn't transmitting anything -- it's managing and quality-controlling a call that travels over lines the phone company (already taxed separately) provides. Because conference-management service isn't telephone/telegraph service, and isn't any other service the sales tax law specifically lists as taxable, Frontier doesn't have to collect sales tax on its management fees.

What this means for you

Conferencing and meeting-technology providers

If your service is coordinating and quality-controlling a call or meeting -- reservations, bridge/mixing equipment, live monitoring -- rather than supplying the underlying transmission line itself, this ruling supports treating your fees as a non-taxable service, distinct from the phone company's own taxable transmission charge.

Business customers of conferencing services

Don't assume every line item on a conferencing invoice is taxed the same way. The phone company's transmission charge and a separate conference-management vendor's fee can get different sales-tax treatment even for the same call.

Accountants and tax professionals

This is a useful example of New York's "enumerated services" approach to sales tax: a service is only taxable if it fits squarely within a specific statutory category (here, telephone/telegraph service under § 1105(b)) or another enumerated service; a related but functionally distinct service (call management vs. transmission) escapes tax even though it depends on the taxed service to function.

Common questions

Q: Does the phone company's transmission charge stay taxable even though the conference manager's fee isn't?
A: Yes -- customers are still charged sales tax by their phone companies for the local and long-distance transmission itself; only the separate conference-management fee is untaxed here.

Q: What if the conferencing company also sold or leased its own transmission lines?
A: This ruling doesn't address that -- it's limited to a company that only manages calls and doesn't itself provide telephone transmission service.

Q: Can another business rely on this ruling directly?
A: No. It's an advisory opinion binding only as to Frontier Confer Tech and the facts it described; a similarly structured business should still confirm its own facts match.

Citations and references

Statutes and regulations:

• Tax Law § 1105(b) (tax on telephony/telegraphy and telephone/telegraph service)
• 20 NYCRR § 527.2(d) (telephone and telegraph service)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a99_30s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(30)S
Sales Tax
May 21, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S980325A

On March 25, 1998, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Frontier Confer Tech, Inc., 12110 N. Pecos Street, Westminister, Colorado
80234.
The issue raised by Petitioner, Frontier Confer Tech Inc., is whether its receipts from the
service of audio conferencing is subject to sales tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner provides conferencing management services to customers engaging in simple or
complex audio conferencing. In simple audio conferencing, as few as three geographically dispersed
individuals participate in a conference call, and in complex conferences there may be thousands of
participants. When required by law, the customers of Petitioner are charged sales taxes by the
telephone companies for transmitting local and long distance telephone calls. Petitioner does not
supply transmission services and is not subject to the supervision of the Public Service Commission
of New York. Rather, Petitioner furnishes conference management services.
Conference calls can be placed directly without the services of a company like Petitioner.
For example, two people in one office can participate in a conference call on a speaker phone with
a third person at a different location. Similarly, instead of two people, ten people at one location can
use a sophisticated speaker phone to speak with another person at a different location. Finally, a
person with two telephone lines can call one person, place that person on hold, call a third person
on the second line and press one or more buttons on the initiator’s telephone. In the last example,
the person initiating the conference spends time in setting up the conference. In the second example,
the sophisticated speaker phone controls audio quality ensuring that the volume is effectively
regulated. Petitioner’s services represent a more elaborate type of management and quality control
than described in those two examples. Petitioner supplies voice quality monitoring services to be
sure that all participants can be heard at the same volume level and that echo and background noise
are eliminated. This function is similar to that performed by the sophisticated speaker phone in the
second example. Petitioner will also set up and manage the conference as more fully described
below, much like the initiator of the conference in the last example.
Petitioner’s resources consist of its reservation and conference administration personnel and
its hardware and software. The reservation staff receive the customer’s requests for the date, time
and anticipated duration of a conference, and the number of participants. Generally the conference

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TSB-A-99(30)S
Sales Tax
May 21, 1999

administration personnel receive the calls of each participant, obtain their names and the
identification number of the particular conference, place the participants on hold until the
conference, and if requested, will take a roll call of the participants. The conference administrator
will also attempt to add on additional participants if requested to do so during the call. Petitioner’s
hardware consists of bridge equipment and computers. Bridge equipment performs the function of
the sophisticated speaker phone, controlling the quality and volume of the call, and is used when
there is a substantial number of participants. Bridge equipment does not change the form, content
or composition of the communication. Large companies with a significant volume of audio
conferencing often purchase their own bridge equipment. The computers and software developed
by Petitioner provide the guidance and control input for the operation of the bridge equipment.
Petitioner’s customers buy the one service of audio conference management and pay a fee
that is based on the management and bridge time reserved by the customer. The charge is calculated
on the number of minutes reserved multiplied by the number of participants and this charge is billed
even if the audio conference is canceled. The conference management fee is charged on a
cancellation since Petitioner’s resources (personnel and bridge time) have been committed. There
is also an increase in those charges for requesting Petitioner’s administrators to add extra persons
to the scheduled audio conference.
Applicable Law and Regulations
Section 1105(b) of the Tax Law imposes a tax upon:
The receipts from every sale, other than for resale, of gas, electricity,
refrigeration and steam, and gas, electric, refrigeration and steam service of whatever
nature, and from every sale, other than for resale, of telephony and telegraphy and
telephone and telegraph service of whatever nature except interstate and international
telephony and telegraphy and telephone and telegraph service and from every sale,
other than sales for resale, of a telephone answering service.
Section 527.2(d) of the Sales and Use Tax Regulations provides, in part:
Telephone and telegraphy; and telephone and telegraph service. (1) The
provisions of section 1105(b) of the Tax Law with respect to telephony and
telegraphy and telephone and telegraph service impose a tax on receipts from
intrastate communication by means of devices employing the principles of telephony
and telegraphy.
(2) The term telephony and telegraphy includes use or operation of any
apparatus for transmission of sound, sound reproduction or coded or other signals.

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TSB-A-99(30)S
Sales Tax
May 21, 1999

Opinion
Petitioner’s audio conferencing service is not a telephone or telegraph service for purposes
of Section 1105(b) of the Tax Law and Section 527.2(d) of the Sales and Use Tax Regulations.
Petitioner is providing a conference management service that is not one of the enumerated services
subject to tax under Section 1105 of the Tax Law. Accordingly, Petitioner is not required to collect
sales tax on the sale of this service.

DATED: May 21, 1999

NOTE:

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

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