The New York State Department of Tax and Finance Office released an Advisory Opinion on June 30, 2020 that granting access to a digital advertising platform to create, deliver and manage its own digital advertisements and to track the placement and exposure of those advertisements through an advertising campaign management platform is subject to New York sales tax as sale of tangible personal property. TSB-A-20(22)S, N.Y.S. Dept. of Tax. & Fin., Office of Counsel (6/30/20).
The petitioner’s receipts are mostly based on the number of impressions (views) of ads on a publisher’s website by visiting users. Additional digital advertising products are billed at a percentage of an advertising budget or an hourly rate. The petitioner provides access, but doesn’t on the invoice charges for access to the software platform.
Regardless the Petitioners’ language on the contract referring to its offering as “Services”, the State confirmed that the Petitioner is providing access to an online ad platform and is considered to be prewritten computer software not customized to the specifications of a particular customers. By allowing access to customers to prewritten software for their own use, the taxpayer is making sales of tangible personal property. NY Tax Law §1101(b)(5).
The state determined the consulting services and advertisement place services the Petitioner provides were not among the services that are subject to sales tax if the charges are separately stated from any charge for prewritten software or other tangible person property provided to the customer. N.Y. Tax Law §1115(o).
It was determined by the State, as a result of the information provided by the Petitioner, that the entire receipts from the digital ad campaign platform for access of prewritten software and other related charges are taxable due to taxable and nontaxable services being bundled together in one invoice. TSB-A-20(22)S, N.Y.S. Dept. of Tax. & Fin.