Is a teleservices firm's purchase of telephone-number verification and correction services — which append or fix phone numbers on the firm's own customer lists — taxable as an information service?

Plain-English summary

Colwell & Salmon Communications, a teleservices and marketing research firm, receives customer name lists (sometimes with phone numbers) from its own clients. For some clients, Colwell & Salmon sends those lists out to third-party telephone-number verification services, which fill in any missing numbers and correct any outdated or wrong ones, then send the corrected list back for Colwell & Salmon's exclusive use — it's unlikely any other customer of the verification service gets the identical list. Colwell & Salmon argued this made the corrected information "personal or individual" to its own unique list of names, which would exclude it from New York's information-services tax.

The Department rejected that framing, leaning on a controlling appellate case: even a report tailored to a specific client's request isn't "personal or individual" if it's built from the same underlying raw database used to serve other customers' similar requests. Here, it's reasonable to assume the verification services check submitted names against a common source (like telephone company records or directory-publisher databases) used to answer everyone's verification requests — so even though the specific list of names is unique to Colwell & Salmon, the underlying phone-number data being supplied isn't personal or individual in the sense the exclusion requires.

That puts the purchase squarely inside the taxable information-services category. Since Colwell & Salmon buys this service for its own use (to build accurate call lists for its teleservices and market-research work), not to resell to its own clients, the full purchase price is taxable — at the ordinary 4% state rate if the corrected information comes back in written, electronic, or printed form, or at the higher 9% rate if delivered orally by telephone (an information service can only be taxed under one of these two provisions, not both), plus whatever local sales tax applies.

What this means for you

Marketing, teleservices, and list-management firms buying address/phone verification or append services

Don't assume a service is exempt just because the delivered file is uniquely tailored to your specific customer list — if the vendor pulls from a shared database used to answer many customers' similar requests, the underlying information isn't "personal or individual," and the purchase is a taxable information service.

Businesses evaluating data-append or list-hygiene vendors

Check the delivery method: phone-based (aural) delivery of taxable information carries a materially higher state tax rate (9%) than the same information delivered in written or electronic form (4%) — worth knowing when comparing vendor delivery options.

Accountants and tax professionals

This is a useful, compact citation for the "same raw database, tailored output" rule from Towne-Oller and Assoc. v. State Tax Commission — a report can be built specifically for one client and still fail the personal/individual exclusion if its underlying data source serves many customers.

Common questions

Q: Does tailoring a report specifically to one client's list of names make the information "personal or individual"?
A: Not by itself — if the underlying data comes from the same general database used to answer other customers' similar requests, the information isn't personal or individual just because the finished output is unique to that one client.

Q: Is a service ever taxed under both the printed-information provision and the telephony provision?
A: No — an information service is taxed under one or the other, never both; which one applies depends on how the information is actually delivered (written/electronic vs. aural/telephone).

Q: Does buying this kind of service for your own internal use change the tax treatment compared to reselling it?
A: Yes in principle — a service purchased for the buyer's own use and consumption (as here) is taxed to that buyer; if it were instead purchased for resale, a resale certificate could apply, but that wasn't the fact pattern here.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(1) (information services); § 1105(c)(9) (information/entertainment services via telephony)

Cases referenced:

• Towne-Oller and Assoc. v. State Tax Commission, 120 AD2d 873

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2002.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a02_53s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-02(53)S
Sales Tax
November 6, 2002

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S020221A

On February 21, 2002, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Colwell & Salmon Communications Inc., 24 Computer Drive West, Albany,
New York, 12205.
The issue raised by Petitioner, Colwell & Salmon Communications Inc., is whether the
telephone number verification services described below are subject to sales and compensating use
tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a teleservices and marketing research firm. Names of individuals are provided
to Petitioner by its clients. Some of Petitioner’s clients request that Petitioner verify the accuracy
of the telephone numbers that are on the clients’ files. A client sends Petitioner a list of customers
and, if available, the customer’s phone numbers. Petitioner sends a list of names to any of several
companies that provide telephone number verification services which append missing telephone
numbers and update inaccurate telephone numbers.
The names and telephone numbers are corrected by the service providers and then returned
to Petitioner to be used only by Petitioner. It is unlikely that other customers of the verification
services will receive the identical list of names and numbers.
Applicable Law
Section 1105 of the Tax Law provides, in part:
On and after June first, nineteen hundred seventy-one, there is hereby
imposed and there shall be paid a tax of four percent upon:
*

*

*

(c) The receipts from every sale, except for resale, of the following services:
(1) The furnishing of information by printed, mimeographed or multigraphed
matter or by duplicating written or printed matter in any other manner, including the
services of collecting, compiling or analyzing information of any kind or nature and
furnishing reports thereof to other persons, but excluding the furnishing of

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information which is personal or individual in nature and which is not or may not be
substantially incorporated in reports furnished to other persons, and excluding the
services of advertising or other agents, or other persons acting in a representative
capacity, and information services used by newspapers, radio broadcasters and
television broadcasters in the collection and dissemination of news, and excluding
meteorological services.
*

*

*

(9)(i) The furnishing or provision of an entertainment service or of an
information service (but not an information service subject to tax under paragraph
one of this subdivision), which is furnished, provided, or delivered by means of
telephony or telegraphy or telephone or telegraph service (whether intrastate or
interstate) of whatever nature, such as entertainment or information services
provided through 800 or 900 numbers or mass announcement services or interactive
information network services. Provided, however, that in no event (i) shall the
furnishing or provision of an information service be taxed under this paragraph
unless it would otherwise be subject to taxation under paragraph one of this
subdivision if it were furnished by printed, mimeographed or multigraphed matter
or by duplicating written or printed matter in any other manner nor (ii) shall the
provision of cable television service to customers be taxed under this paragraph.
(ii) Notwithstanding the rate and date set forth in the opening undesignated
paragraph of this section and notwithstanding the opening undesignated paragraph
of this subdivision, on and after September first, nineteen hundred ninety-three, in
addition to any other tax imposed under this section, and in addition to any other tax
or fee imposed under any other provision of law, there is hereby imposed and there
shall be paid an additional tax at the rate of five percent upon the receipts which are
subject to tax under subparagraph (i) of this paragraph on the furnishing or provision
of an entertainment or information service which is received by the customer
exclusively in an aural manner. Such additional tax shall not be imposed by section
eleven hundred seven, eleven hundred eight or eleven hundred nine of this article and
shall not be included among the taxes authorized to be imposed pursuant to the
authority of article twenty-nine of this chapter.
Opinion
Petitioner subscribes to several address and telephone number verification services. The
service provider receives a list of individuals’ names and telephone numbers from Petitioner. If a
telephone number is missing from the list that Petitioner provides, the service provider adds the
number. If a telephone number is not current or otherwise incorrect, the service provider corrects

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it and adds it to the listing. It is reasonable to assume that Petitioner’s lists are compared by the
service providers to a database obtained from an overarching source, such as publishers of telephone
books or telephone companies. Petitioner contends that its listing of individuals’ names is unique
and, therefore, the information furnished to Petitioner regarding corrected telephone numbers
represents information which is personal or individual in nature.
In Towne-Oller and Assoc. v. State Tax Commission, 120 AD2d 873, the court held that the
reports at issue, although tailored to satisfy the information request of the client, were not of a
personal or individual character since the reports were created from the same raw data base used in
preparation of similar reports to other customers, and such data base was derived from one general
source.
In the instant case, Petitioner, as a subscriber to a telephone number verification service
contacts its service provider to receive information pertaining to an individual’s telephone number.
The service provider furnishes updated and correct telephone numbers to assist Petitioner in
compiling an accurate and up-to-date telephone listing for the individual names provided by
Petitioner. Such information is presumably made available to Petitioner from a common data base
which is used to satisfy all of the service provider subscriber inquiries.
In accordance with Section 1105(c)(1) of the Tax Law, the furnishing of information by
printed, mimeographed or multigraphed matter or by duplicating written or printed matter in any
other manner, including electronic readout or display, is subject to sales and use tax unless the
information provided is personal or individual in nature and is not or may not be substantially
incorporated into reports furnished to other persons. In accordance with Section 1105(c)(9) of the
Tax Law, the furnishing of information aurally by means of telephone is subject to sales tax
provided it would otherwise be subject to taxation under Section 1105(c)(1) if it were furnished by
printed, mimeographed or multigraphed matter or by duplicating written or printed matter in any
other manner. An information service may be subject to tax under either Section 1105(c)(1) or
Section 1105(c)(9), but not both.
Pursuant to Towne-Oller and Assoc. v. State Tax Commission, supra, information, although
tailored to satisfy the request of a particular client, is not personal or individual in nature if created
from the same raw database used in preparation of similar reports to other customers. Accordingly,
since Petitioner presumably receives information from the same database used by its service
providers for other subscribers, the information furnished in printed form, orally or on-line is not
personal or individual in nature. If Petitioner purchases this information for its own use and
consumption in performing teleservices and market research for its clients, and not for resale by
Petitioner to its clients, the purchases are subject to the State and local sales and use taxes imposed
pursuant to Section 1105(c)(1) or 1105(c)(9) of the Tax Law. It is noted that if the purchases are
subject to the tax imposed under Section 1105(c)(1) the State rate is 4% and if the purchases are
subject to the tax imposed under Section 1105(c)(9) on information services provided aurally by

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means of telephone, the State rate is 9%. In addition, Petitioner’s purchases of telephone
verification service are subject to the applicable local tax rate.

DATED: November 6, 2002

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinion are
limited to the facts set forth therein.