The New York State Department of Taxation and Finance has issued an Advisory Opinion concluding that space provided at a facility that provides a reliable, fail-safe place for customers to place their computer servers, along with telecommunications accessibility, is generally not subject to sales tax. Advisory Opinion, TSB-A-15(34)S (N.Y.S. Dep’t of Taxation & Fin., Aug. 17, 2015). The Department concluded that separately stated charges for space within the facility are not subject to sales tax because they are charges for the lease of real property. The Department further concluded that charges for a hardwire connection within the facility, such as cross-connecting cabling so that a customer can connect to its own Internet service provider (“ISP”), are not charges for “telephony and telegraphy,” and therefore not subject to sales tax.

The Department found that where the facility operator itself purchases bandwidth from an ISP and resells that connection to its customers, those charges are for telephony and telegraphy, but are not subject to sales tax if the connection is used solely for Internet access and not voice communications.