Ruling 94-22

Sales and Use Taxes
Sales Agent Services
Advertising Services

This Ruling is obsoleted in part by AN 2000(8)

FACTS:

An individual ("the Operator") operates a "phone flea market." In the "phone flea market," sellers of various goods submit to the Operator an application in which they provide their name, address, telephone number, description of items for sale, and their asking price. The Operator maintains a listing of such information, and sellers pay the Operator a fee when they are included on such listing. The Operator does not seek buyers for sellers included in the "phone flea market" listing; prospective buyers call the Operator for information on items for sale. The Operator matches prospective buyers with sellers on his list. If interested, a prospective buyer will contact a seller directly.

Buyers and sellers negotiate their own sales. A seller's information remains on the phone flea market list until the seller notifies the Operator that its item listed for sale has been sold or otherwise is no longer for sale.

ISSUES:

Whether "phone flea market" services are "sales agent services" subject to sales and use taxes under section 12-407(2)(i)(U) of the Connecticut General Statutes.

Whether "phone flea market" services are "advertising services . . . not related to the development of media advertising" subject to sales and use taxes under section 12-407(2)(i)(W) of the Connecticut General Statutes.

DISCUSSION:

Conn. Gen. Stat. § 12-407(2)(i)(U) imposes sales and use taxes on the "services of the agent of any person in relation to the sale of any item of tangible personal property for such person" subject to certain exceptions. In Ruling No. 93-3, the Department determined that taxable sales agent services are performed when an individual or a company acts on behalf of a seller and is paid for services which lead to the actual sale of tangible personal property, as long as the transfer of title takes place in Connecticut. Under the facts of this ruling, the Operator is paid only to provide information about goods for sale and the identity of the seller to prospective buyers. The amount paid by sellers to the Operator is not contingent upon the actual sale of tangible personal property. Furthermore, the Operator does not know whether a sale has actually occurred until so notified by the seller. Therefore, the Operator's "phone flea market" services are not "sales agent services" subject to sales and use taxes under section 12-407(2)(i)(U) of the Connecticut General Statutes.

Conn. Gen. Stat. §12-407(2)(i)(W) imposes sales and use taxes on "advertising or public relations services . . . not related to the development of media advertising . . . " Whether the services provided by the Operator to sellers are advertising requires the identification of the true object of the contract. See Hartford Parkview Associates Limited Partnership v. Groppo, 211 Conn. 246, 558 A.2d 993 (1989).

The true object of the Operator's "phone flea market" services is to provide a forum in which sellers may list their goods for sale and prospective buyers may learn about specific goods for sale, their cost, and how to contact the seller. Sellers pay the Operator for such services when they ask to be included on the "phone flea market" listing, not when their items for sale are actually sold. The Operator disseminates information about items for sale on demand by prospective buyers. Therefore, under the facts of this ruling, the true object of the Operator's "phone flea market" is to provide a type of advertising service.

As a general rule, advertising is "media advertising" if there is (i) a sale of time or space (ii) in or on a preexisting medium (iii) for broadcast or dissemination to all or a segment of the public. See Ruling No. 93-8 at 4.

Under the facts of this ruling, the Operator sells space in the "phone flea market" listing. The Operator uses a preexisting medium, the "phone flea market," to advertise the sellers' goods. The Operator disseminates information about goods for sale to that segment of the public that calls the Operator and requests it. This scenario is analogous to an individual who turns on the radio, selects a radio station, and hears an advertisement broadcast over the air waves. Accordingly, the true object of the Operator's "phone flea market" services is to provide "media advertising." Therefore, the Operator's "phone flea market" services are not subject to sales and use taxes under section 12-407(2)(i)(W) of the Connecticut General Statutes.

RULING:

The Operator's "phone flea market" services are not "sales agent services" or "advertising services" subject to sales and use taxes under section 12-407(2)(i)(U) or (W), respectively, of the Connecticut General Statutes.

LEGAL DIVISION

November 30, 1994