Connecticut State Department of Revenue Services

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Ruling 94-9, Sales and Use Taxes / Business Public Relations Services / Marketing Services

FACTS:

A company ("Company") provides marketing consulting services which consist of assessing a client's marketing of a product, giving advice on how to better market the product and then conducting "workshops" in which members of the general public are utilized as a test-market to gain feedback about the client's product using some of the new marketing strategies recommended by the Company.

ISSUE:

Whether the service of providing marketing advice and consultation is taxable pursuant to Conn. Gen. Stat. §12-407(2)(i)(J) as a "business public relations service";

Whether the service of conducting "workshops" to test the marketing strategies developed for a client on members of the general public is taxable pursuant to Conn. Gen. Stat. §12-407(2)(i)(J) as a "business public relations service."

DISCUSSION:

Conn. Gen. Stat. §12-407(2)(i)(J) includes in the definition of "sale" and "selling" "business analysis, management, management consulting and public relations services." Subsection (g) of Conn. Agencies Regs. §12-407(2)(i)(J)-1 excludes from the definition of "business public relations services":

business marketing services, which in contrast to business public relations services involve the performance of testing, research or analysis of existing or potential consumer markets in connection with the development of particular products, property, goods or services for sale to others by the service recipient, including consulting in connection therewith.

In Ruling No. 91-17 the Department held that marketing research services are not subject to sales and use taxes. The facts in Ruling No. 91-17 were similar to the instant facts in that the taxpayer there prepared random samples drawn from demographic groups and geographic regions. The distinction between those facts and these, however, is that in Ruling No. 91-17 the marketing samples were prepared according to the client's specifications.

By also assembling and conducting client "workshops," the Company does more than prepare marketing samples. The Company first consults with its client on how to better market the product and then complements this advice with "workshops" in which, among other things, the new marketing ideas suggested by the Company are explored and "tried out" on consumers.

Although the Company provides a great deal of consulting advice to its clients, this advice is given directly in connection with the product marketing activities of its clients. Furthermore, the "workshops" it conducts are essentially for the purpose of analyzing "existing or potential consumer markets in connection with the development of particular products..." Conn. Agencies Regs. §12-407(2)(i)(J)-1(g).

RULING:

The service of providing marketing advice and consultation is not a "business public relations service" subject to sales and use taxes pursuant to Conn. Gen. Stat. §12-407(2)(i)(J).

The service of conducting "workshops" to test a marketing approach on members of the general public is not a "business public relations service" subject to sales and use taxes pursuant to Conn. Gen. Stat. §12-407(2)(i)(J).

Ruling No. 91-17 has been distinguished by this Ruling.

LEGAL DIVISION

May 6, 1994