Attention financial services providers in New York: Please note that the Department of Taxation and Finance requires the application of sales tax on your services when they are considered to encompass a combination of taxable and nontaxable components, and when associated fees are quoted as a single, unified price. 

In Advisory Opinion: TSB-A-24(43)S, a financial services firm (“Firm”) provided an investment and risk management online platform to clients The Firm provided this platform to both “buy side” institutions (i.e., investment managers, mutual funds, pension funds, hedge funds, insurance companies, etc.) and “sell side” institutions (i.e., broker-dealers). Included in the Firm’s offerings are three products (“Products”) that are made available only to clients who subscribe to Petitioner’s professional service

These Products, which are distinct and billed separately from Petitioner’s professional services, provide clients with fully integrated enterprise portfolio management support, and are: (1) Trade Order Management Solutions (Product 1), (2) Sell-side Execution and Order Management Solutions (Product 2), and (3) Asset and Investment Manager (Product 3).

The Department noted that because the components of Petitioner’s Products (such as their trading platform and various functionalities) are not separately available for sale, each of Petitioner’s Products should be taxed as a single unit. The Department further noted that the principal aspect of each Product is that it gives the client access to the investment management platforms – which consist of software – to analyze information and make business decisions, such as buying a stock, or implementing a risk management trading rule. While the platforms use the individualized data of the clients, the software is not designed to the specifications of those clients.

The functionality of Petitioner’s Products is essentially the same; the primary difference between them is who the Product is designed for. Product 1 is designed for sell-side fixed income institutions (e.g., broker-dealers that are market-makers), while Product 2 is designed for sell-side equity institutions (e.g., a broker-dealer that makes a market in stocks). By contrast, Product 3 is designed for certain types of buy-side institutions (e.g., asset managers, pension funds, etc.). Each Product provides customers with investment analysis and reporting, data control and operations, compliance evaluation and reporting, trade management workflow, daily support and ongoing service enhancements, and ancillary services. Each Product is accessed via the Internet through a software interface that is hosted on Petitioner’s servers, and generally is made available to clients 24 hours a day, seven days a week.