The Department of Taxation and Finance recently issued advisory opinion numbered TSB-A-20(63)S (dated November 17, 2020) in which it concluded that the primary purpose of a marketing-consulting service was a nontaxable service, even though the taxpayer’s customers had access to software. The taxpayer assists automotive industry clients in designing and launching effective marketing campaigns and uses its proprietary software to gather sales data from its clients to identify marketing success rates and trends, which it then uses to create analytical models to develop new advertising campaigns. The taxpayer’s clients use a secure website to access personalized data reports and the results of their own campaigns, but cannot access data or reports related to any of the taxpayer’s other clients. In concluding that the taxpayer’s service was a nontaxable service, rather than the provision of a taxable information service or the taxable sale of pre-written computer software, the Department looked to the primary function of the service—the creation and development of advertising campaigns. While clients had access to the secure website to communicate with the taxpayer, and to view only their own reports and data, that access was not the primary purpose of the transaction, and was not sufficient to find the service taxable.
