New York – Taxability of Clinical Medical Trial Services

SALT Report 1539 – The New York Department of Taxation and Finance has issued an advisory opinion regarding the taxability of services provided by a taxpayer who facilitates clinical medical trials. More specifically, the taxpayer provides patient recruitment and retention services for drug and medical equipment companies that need patients to participate in drug studies.
As a part of his services the taxpayer conducts advertising campaigns using television, radio, newspaper, direct mail, caller outreach, and all forms of online advertising.  The New York Department of Taxation determined the taxability as follows:
TV and Radio Ads
The taxpayer creates and outsources ads and websites on behalf of pharmaceutical companies or medical equipment providers for the purpose of recruiting patients for clinical trials. Typically, ad development includes copyrighting, image selection, and graphic design services which are not taxable services.  Therefore, since the ads are transferred to the customer electronically and do not involve the sale of tangible personal property the ad development is not taxable.
Website Development
Developing and operating a website is not a taxable service.  In this case the taxpayer maintains exclusive control over the website.  The development and operation of the website does not involve any transfer of pre-written computer software, and thus is not subject to sales or use tax.
E-Mail and Direct Mail Campaigns
Under Tax Law §1105(c)(1) charges for e-mail campaigns and direct mail campaigns are not taxable because they qualify for the exclusion for advertising services.  However, the taxpayer’s purchases of tangible personal property that is used to conduct the campaigns are taxable if the property is delivered to the taxpayer in New York.
Call Centers
The primary function of this service is the staffing and operation of call centers that screen potential patients and refers those that are qualified to a doctor’s office.  The department determined that this is not a taxable service.  The taxpayer also provides reports to their clients.  However, because there is no separately stated charge for that service and that service is incidental to the call centers primary function, the presence of those reports does not render the service taxable.
Advertising Response Tracking System
This service is an information service, but it is not taxable as it qualifies for the “personal or individual exclusion.”   New York Tax Law §1105(c)(1) provides and exclusion from sales and use tax for information gathered for a single customer if that information is not drawn from a common database, relates only to that customer, and is not provided to anyone other than the customer to whom it relates.
Site Kit Production
The taxpayer creates and produces site kit materials for its clients.  A site kit may include items such as posters, flyers, brochures, letters to patients, letters to colleagues, appointment reminders, etc. Because the kits are tangible personal property, sales and use tax would be due based on the number of kits delivered to locations in New York. Consequently, when the kits are delivered to addresses outside New York, the kit is not subject to sales and use tax. The taxpayer’s purchases of tangible personal property that is included in the site kit qualify for the resale exclusion if the taxpayer provides the subcontractor with a resale certificate.
Translation Services
The taxpayer provides translation services for all printed materials. While translation services are not typically subject to tax, an additional charge for translation services made in relation to any tangible personal property, such as the site kits, is considered part of the charge for those items and would be subject to sales and use tax.
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