New York: Digital Advertising Platform Receipts Taxable

The New York State Department of Taxation and Finance issued an advisory opinion concluding that receipts from digital advertisements produced using the taxpayer’s prewritten computer software were subject to sales and use tax. The taxpayer provided customers access to a platform that allowed the customer to access packages of software tools they could use to create, deliver and manager digital advertisements. Digital advertisements created by the customers were approved by the taxpayer’s personnel and then placed through the taxpayer’s network of third-party publishers who delivered them for viewing by users. The taxpayer also provided other services to customers, including consulting services. Customers were provided a single invoice for each advertising campaign. In most cases, the charges were based on the number of times ads were viewed. Other clients were billed based on a percentage of an advertising budget, or on an hourly basis. The Department determined that the taxpayer was providing taxable prewritten computer software when customers were provided software tools to create and deliver digital ads and to track the placement and exposure of those ads.  By granting customers access to the software for their own use, the taxpayer was making a sale of taxable tangible personal property to the extent any of its customers’ employees who used the software were in New York.  Although the taxpayer’s consulting services and ad placement services were not taxable on their own, when they were invoiced along with the charges for advertising campaigns, the taxpayer’s entire receipt was subject to sales tax. Please contact Judy Cheng (212) 872-3530 for more information on TSB-A-20(22)S.