New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter I - Franchise and Certain Business Taxes
Subchapter A - Business Corporation Franchise Tax
Part 4 - APPORTIONMENT
Subpart 4-2 - SPECIFIC APPORTIONMENT RULES
Section 4-2.17 - Receipts from the sale of advertising

Universal Citation: 20 NY Comp Codes Rules and Regs § 4-2.17

Current through Register Vol. 47, No. 12, March 26, 2025

(Tax Law, section 210-A(8))

(a) Receipts from the sale of advertising encompass the following activities:

(1) Receipts from providing advertising space or time in or on a medium for dissemination to the public or part of the public, whether such medium is for sale or for free consumption. Examples include:
(i) the sale of printed page space in a magazine, newspaper, or other similar periodical;

(ii) the sale of space on or in directories, bulletins, phone books, restaurant placemats, cash register receipts, maps, or any other similar medium;

(iii) the posting of material on billboards, buildings, or vehicles;

(iv) the sale of time in radio or television broadcasts; or

(v) the sale of space on a Web page, regardless of the method of compensation paid by the advertiser to the Web site host.

(2) Receipts received for providing an advertising or marketing service. For purposes of this paragraph, an advertising or marketing service includes:
(i) consultation on and development of advertising or marketing campaigns; or

(ii) securing placement of advertising or marketing materials in various forms of media.

(b) Apportionment of receipts from the sale of advertising.

(1) The amount of receipts from the publishing of advertising in newspapers or periodicals included in New York receipts is determined by multiplying such receipts by a fraction, the numerator of which is the number of newspapers and periodicals containing such advertising delivered to points within New York State and the denominator of which is the total number of newspapers and periodicals delivered to points within and without New York State. 100% of such receipts are included in everywhere receipts.

(2)
(i) The amount of receipts from the sale of space on other physical media included in New York receipts is determined by multiplying such receipts by a fraction, the numerator of which is the number of New York State locations of such media and the denominator of which is the total number of locations within and without New York State. 100% of such receipts are included in everywhere receipts.

(ii) If the physical media is rolling stock, such as buses, vans, or automobiles, the numerator of the fraction in subparagraph (i) is the number of miles operated within New York State and the denominator is the number of total miles operated within and without New York State.

(iii) Examples.

Example 1: Billboard Company owns 15 roadside billboards, 5 in New York State and 10 in State A. For a fee, Billboard Company will post advertisements from unrelated businesses for a determined length of time. It receives $150,000 from Selling Corp to allow advertisements on each of its billboards. Billboard Company must determine the amount of receipts included in New York receipts according to the ratio of billboards in New York State to all billboards. Therefore, it includes $50,000 (1/3 x $150,000) in New York receipts. All $150,000 is included in everywhere receipts.

Example 2: Bus Company allows businesses to post advertisements on the exterior and interior of its vehicles. It receives $7,000 from Company A, $4,000 from Company B, and $14,000 from Company C to have its vehicles display ads for those businesses. Bus Company knows the mileage within and without New York State for each of the vehicles containing the ads. Buses containing ads for Company A travel 30,000 miles in New York State out of a total of 60,000 miles (50% of its miles in New York). Buses containing ads for Company B travel 14,000 miles in New York State out of a total of 70,000 miles (20% of its miles in New York). Buses containing ads for Company C travel 40,000 miles, exclusively in New York State (100% of its miles are in New York). Bus Company must include $18,300 in New York receipts, which is the sum of $3,500 from Company A (50% multiplied by $7,000), $800 from Company B (20% multiplied by $4,000), and $14,000 from Company C. All $25,000 is included in everywhere receipts.

(3) The amount of receipts from the sale of advertising time in radio or television broadcasts included in New York receipts is determined by multiplying such receipts by a fraction, the numerator of which is the number of listeners or viewers in New York State and the denominator of which is the total number of listeners or viewers within and without New York State. 100% of such receipts are included in everywhere receipts.

(4)
(i) The amount of receipts from the sale of advertising not described above and furnished, provided, or delivered to, or accessed by the viewer or listener through the use of wire, cable, fiber-optic, laser, microwave, radio wave, satellite or similar successor media or any combination thereof included in New York receipts is determined by multiplying such receipts by a fraction, the numerator of which is the number of listeners or viewers in New York State and the denominator of which is the total number of listeners or viewers within and without New York State. 100% of such receipts are included in everywhere receipts.

(ii) If, after exercising due diligence, the corporation lacks sufficient information to apply subparagraph (i) of this paragraph, it may use a reasonable method to estimate the numbers of listeners or viewers to include in the numerator and denominator of the fraction described in subparagraph (i) of this paragraph. Such method should be based on data available to the corporation either as part of its operations, such as metrics or information for account holders, subscribers, or page or advertisement hits, or under the terms of the contract with the entity seeking to place the ad, such as any contractual obligations to identify ad recipients or to target the ad to specific demographics.

(iii) In any case in which a corporation uses a method of estimation to determine the amounts for the numerator and denominator of the fraction described in subparagraph (i) of this paragraph and the commissioner determines that the method employed by the corporation is not reasonable, the commissioner may substitute a method that the commissioner determines is appropriate. In this instance, the corporation bears the burden of demonstrating that the method the commissioner prescribes is not reasonable.

(iv) In any case in which the commissioner determines that a corporation's method is reasonable, but that it has not been applied in a consistent manner with respect to similar transactions, the commissioner may require that the corporation apply its method in a consistent manner.

(v) Example.

Web Corp provides digital advertisements for various retail corporations on its website. Its books and records capture a variety of advertising metrics for each ad placed, which include, but are not limited to, the number of times an ad is viewed by an IP address, the number of unique IP addresses that view an ad, and the number of times Web Corp's users click on an ad and are directed to the retailer's website based on the users' IP address.

Web Corp enters into an agreement with Retail Corp A to provide digital advertisements for Retail Corp A on Web Corp's website. Pursuant to the agreement, Web Corp will receive payment each time the advertisement is viewed, regardless of whether the ad is viewed from the same location multiple times or whether the Web Corp's users click on the advertisement or not. As the receipt is earned based on the number of views, the amount of receipts from Retail Corp A included in New York receipts is determined by multiplying the total receipts by a fraction, the numerator of which is the total number of views of the advertisement in New York State and the denominator is the total view of the advertisements. 100% of such receipts are included in everywhere receipts.

Web Corp enters into an agreement with Retail Corp B to provide digital advertisements for Retail Corp on Web Corp's website. Pursuant to the agreement, Web Corp will receive payment each time Web Corp's users click on the advertisement and are directed to Retail Corp B's website. No payment is received by Web Corp if the ad is just viewed on Web Corp's website. As the receipt is based on the number of times the ad is clicked on, the amount of Web Corp's receipts from Retail Corp B included in New York receipts is determined by multiplying the total receipts by a fraction, the numerator of which is the total number of times that Retail Corp B's ad is clicked on in New York State and the denominator is the total number of times Retail Corp B's ad is clicked on. The location where an ad is clicked on is based upon the IP address. 100% of such receipts are included in everywhere receipts.

(c) Apportionment of receipts from advertising services.

(1) The amount of receipts from the provision of advertising or marketing services (e.g., the creation and/or implementation of an advertising or marketing campaign) included in New York receipts is determined by multiplying such receipts by a fraction, the numerator of which is the number of intended targets of such advertising or marketing in New York State and the denominator of which is the total number of intended targets ("the intended target fraction"). 100% of such receipts are included in everywhere receipts.

(2) To determine the proper ratio of New York State to everywhere targets for the intended targets fraction, a corporation must primarily rely on statistics and information that are compiled or utilized as part of the market research and advertising strategy developed by the corporation for its customer. If no such statistics or information are available, a corporation may then use other sources of information that attempt to determine the location of the intended targets.
(i) In any case in which a corporation uses a method to determine the location of the intended targets and the commissioner determines that the method employed by the corporation is not reasonable, the commissioner may substitute a method that the commissioner determines is appropriate. In this instance, the corporation bears the burden of demonstrating that the method the commissioner prescribes is not reasonable.

(ii) In any case in which the commissioner determines that a corporation's method is reasonable, but that it has not been applied in a consistent manner with respect to similar transactions, the commissioner shall require that the corporation apply its method in a consistent manner.

(iii) Examples.

Example 1: Advert Corp is hired by Blower Corp to develop an advertising and marketing plan to increase sales of Blower Corp's snow blowers in the Northeast, which is a sales region defined by Blower Corp. In developing the campaign, Advert Corp obtains information from Blower Corp about the locations of Blower Corp's shipments of its units to retailers and, in some cases, directly to consumers in the Northeast sales region. The ratio of shipments to New York State locations to shipments to all Northeast locations is a reasonable method of determining the distribution of the intended targets of Advert Corp's advertising and marketing strategy. Advert Corp should multiply the receipt it receives from Blower Corp by this ratio to determine the amount of the receipt to include in New York receipts. 100% of such receipts are included in everywhere receipts.

Example 2: Advert Corp is hired by Finance Corp to produce a nationwide advertising campaign to create demand for Finance Corp's new investment product marketed to retirees. Finance Corp will not divulge location information about any of its account holders, except to say that it has account holders in every state. Advert Corp has access to information that shows the distribution of Americans of or nearing retirement age in each state. Advert Corp should multiply the receipts it receives from Finance Corp by the ratio of such Americans in New York State to all such Americans to determine the amount of the receipt to include in New York receipts. 100% of such receipts are included in everywhere receipts.

Example 3: AdCo works with local businesses to create printed advertisements that appear on paper placemats at restaurants. Businesses pay AdCo to design the ads and to secure their inclusion on placemats. Once the content and design of the ad is agreed upon, AdCo works with a printing company that produces the placemats to ensure that the ad appears on the printed placemats and that it meets the design and content specifications. As part of AdCo's responsibilities in providing this service, it determines the locations where the printed placemats will be delivered. AdCo receives a receipt from Landscaper Co to create an ad to be included on placemats. AdCo determines that the placemats will be delivered to Restaurant Company, which has 3 restaurants in New York State and 1 in State B (4 total restaurants). AdCo must include 75% of the receipts earned from Landscaper Co for designing and securing the ad on the placemats in its New York receipts. 100% of such receipts are included in everywhere receipts.

(3) Where a lump sum is received by the corporation as payment for advertising or marketing services and such advertising or marketing services consists of a combination of activities including the creating of the advertising or marketing campaign and the actual purchase of advertising space or time, the corporation must allocate the lump sum among each of the types of activities based on both the costs of purchasing the advertising or marketing space or time and the intended targets of the advertising or marketing or by some other reasonable method. Full details must be submitted with the corporation's report.
(i) Example.

Advert Corp is hired by School Supply Corp to develop an advertising and marketing plan to increase sales of students' school supplies at its retail stores. The campaign will use newspapers ads, television commercials, and in-store promotions. Advert Corp will receive one lump sum for the entire advertising and marketing campaign. It first determines how to allocate the lump sum among the various advertising strategies by multiplying the lump sum by a fraction, the numerator of which is the cost of employing the particular medium, (i.e., the cost of placing ads in newspapers), and the denominator of which is the total cost of employing all the forms of media outreach (i.e., the sum of the cost of ad buys in newspapers, ad buys on television, and deploying in-store promotions).

To determine the amount of each allocated amount of the lump sum to be included in New York receipts, the amount of each allocated amount of the lump sum is then multiplied by its own intended target fraction as described in paragraph (1) of this subdivision. Thus, for newspaper ad buys, the allocated amount of the lump sum included in New York receipts is based on the ratio of the New York State circulation of the newspapers containing the ad buys to the total circulation of such newspapers where the inserts will appear. For the television ad buys, the allocated amount of the lump sum included in New York receipts is based on the ratio of viewers in New York State to the total number of viewers within the region where the ad buys will be broadcast. For the in-store promotions, the allocated amount of the lump sum included in New York receipts is based on the ratio of New York State stores engaging in the promotions to all stores engaging in the promotions. 100% of such receipts are included in everywhere receipts.

Disclaimer: These regulations may not be the most recent version. New York may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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