On September 15, 2010, the New York State Tax Commission issued an Advisory Opinion, TSB-A-10(40)S, addressing the taxability of various services offered on a professional networking website. The website enables members to create profiles, search for potential contacts, research business opportunities, and participate in discussion groups, among other things. The Commission held that charges received for premium subscriptions to the website, in-network e-mails, and customer surveys constitute taxable “information service” charges. In contrast, charges collected from employers to post job listings or to participate in online virtual job fairs constitute charges for advertising services that are not subject to sales tax.
Although information services are generally taxable, there is an exception for services that are personal or individual in nature and that may not be substantially incorporated into reports furnished to other persons. The Commission held that the first requirement (personal or individual in nature) was not satisfied because the information came from a source that was not itself confidential. The Commission applied the “common database” test to the second requirement (substantial incorporation) and found that although the data provided to one customer might be slightly different than the data provided to another customer, the information came from the same source and could be used to furnish reports for multiple consumers. Thus, the charges for premium subscriptions, network e-mails, and surveys did not meet the exception.
The Advisory Opinion follows the July 19, 2010, issuance of TSB-M-10(7)S, which provided general guidance regarding services potentially qualifying as information services and the related information services exceptions.