Were subscription fees for standardized foreclosure reports taxable when customers received them by mail, and how did electronic or custom listings differ?

Plain-English summary

A California service collected public foreclosure and lien information from county recorder offices and linked it to assessor data such as sale date, selling price, assessed value, and square footage.

Subscribers could buy standardized reports by notice type and county for set monthly prices. They could also request narrow specialty lists—for example, foreclosures in one city during a particular period involving single-family homes within a specified square-footage range. Delivery could be electronic or by daily or weekly mail.

The Board affirmed that standardized reports delivered through the mail were taxable sales of tangible personal property. Subscribers were buying the reports themselves for the intrinsic value of the information, not the listing service's research activity as such.

The letter also recorded agreement on two other treatments: electronic transmissions with no tangible property were not taxable, and mailed custom specialty listings produced through research for a subscriber's specific request were nontaxable services.

What this means for you

Foreclosure and public-record data vendors

Standardized mailed reports were taxable even though employees had gathered and combined the underlying public data.

Subscribers

Delivery format and customization mattered. An electronic feed, a specially researched list, and a standard paper subscription did not receive the same treatment.

Accountants and tax professionals

Separate standard database products from genuine customer-specific research, and identify whether any tangible report is delivered.

Common questions

Q: Were standardized foreclosure reports mailed to subscribers taxable?

A: Yes. The Board treated them as tangible reports sold for their information content.

Q: Were electronically transmitted listings taxable?

A: No, when subscribers received no tangible personal property.

Q: Were all mailed reports taxable?

A: No. The source treated specifically requested custom specialty listings as nontaxable research services.

Q: Why were standard subscriptions different from custom lists?

A: Standard subscribers bought an existing report product, while a specialty listing required research directed to the subscriber's particular request.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.1010
• Original supporting opinion: 515.1010 PDF

Original ruling text

515.1010

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
Telephone: (916) 324-2614
FAX: (916) 323-3387

DEAN ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles

July 17, 1996

KATHLEEN CONNELL
Controller, Sacramento
E. L. SORENSEN, JR.
Executive Director

REDACTED TEXT
Dear REDACTED TEXT,
Your letter to Mr. Robert L. Buntjer, Supervisor of Audit Review and Refunds, dated October 3, 1995, has been referred to me for response. We apologize for the extended delay in our reply. The application of tax to the sale of information extracted from databases has been undergoing extensive review by this agency. You request a reconsideration of the opinion given by Mr. George E. Komura, Senior Tax Auditor, in a letter dated July 10, 1995, regarding the application of sales tax to foreclosure lists provided by REDACTED TEXT to its subscribers. You state that REDACTED TEXT is a foreclosure listing service in California. REDACTED TEXT employees accumulate public information available from the County Recorder's offices. Such information includes Notices of Default, Notices of Trustee's Sale, Notices of Trustee's Deed, and federal and state tax liens. REDACTED TEXT also links information obtained from the County Assessor's offices to the information obtained from the County Recorder's offices. The information obtained from the County Assessor's offices includes the date that property was sold, selling price, assessed value and square footage. REDACTED TEXT subscribers receive foreclosure listings in a standardized format, i.e., a subscriber may choose to receive information on Notices of Default in REDACTED TEXT County for
$49.95 per month or a subscriber may choose to receive information on Notices of Default, Notices of Trustee's Sale and Notices of Trustee's Deed for all eight counties in REDACTED TEXT California for
$519.95 per month. In addition, a subscriber may specifically request "custom specialty listings" for particular information other than the standardized reports. For example, a subscriber may request all foreclosures in the city of REDACTED TEXT during a particular period of time on single family residences with square footage between 2,000 and 2,500 square feet. Each subscriber has the option to receive any of the foreclosure listings through electronic transmission on a daily basis or through the United States mail on a daily or weekly basis. You state that you agree with Mr. Komura's conclusion that where REDACTED TEXT subscribers receive foreclosure listings through electronic transmission and do not obtain possession of any tangible personal property, such transactions are not subject to tax. With respect to foreclosure listings delivered through the mail, you agree with Mr. Komura's conclusion that where REDACTED TEXT provides a subscriber with a custom specialty listing based on the subscriber's specific request for

515.1010

2

July 17, 1996

particular information, REDACTED TEXT is performing information research which is a nontaxable service. However, you disagree with Mr. Komura's conclusion that standardized reports delivered through the mail constitute sales of tangible personal property subject to tax. We thus address whether REDACTED TEXT provision of standardized reports delivered through the mail constitutes taxable sales of tangible personal property. We concur with Mr. Komura's analysis and conclusion that tax applies to the subscription fees charged for standardized reports delivered through the mail. As explained by Mr. Komura, REDACTED TEXT is selling information in the form of tangible personal property. The real object sought by the subscriber is the report (foreclosure listings) itself which has intrinsic value due to the information it contains. REDACTED TEXT subscribers are not purchasing your client's services per se; instead, they are purchasing the reports produced by the service. “Therefore, upon reconsideration, we affirm Mr. Komura's conclusion that REDACTED TEXT provision of standardized reports to its subscribers through the mail constitutes sales of tangible personal property subject to tax. If you have any further questions, please write again. Sincerely, Sophia H. Chung Tax Counsel SHC:rz REDACTED TEXT cc: Mr. Robert L. Buntjer Mr. George E. Komura REDACTED TEXT