Does an insurance-industry auditing company owe New York sales tax on its charges to insurance carriers for premium audits, underwriting surveys, and government-mandated site inspections?

Plain-English summary

Deloitte & Touche asked the Department, on behalf of an unnamed client, whether the client's charges to insurance carriers for four kinds of work were subject to New York sales tax: (1) premium audits (reviewing an insured's payroll to verify or adjust the premium the insurer charges), (2) commercial underwriting surveys (inspecting insured commercial property and reporting findings, not appraisals), (3) residential underwriting surveys (assessing property values to manage a book of business), and (4) governmental site surveys (condition reviews often required for public-assistance or government-backed-loan programs).

The Department said none of these, as described, are taxable — but for different reasons layered on top of each other:

• Premium audits are treated like ordinary payroll or bookkeeping review services, which New York doesn't tax as an enumerated service at all.
• Government-compliance property inspections aren't taxable maintenance/repair services, and the fact that they produce a written report doesn't automatically turn them into a taxable "information service."
• Underwriting surveys and other information-gathering escape the information-service tax to the extent the underlying data is "personal or individual" to that one insured and isn't drawn from a shared, non-confidential data source — even though the client customizes and formats a report around it.

But the opinion draws sharp lines around what would flip these to taxable: if the surveys instead investigated the cause of a fire, accident, or property damage (a protective/detective-style inquiry), or if the work were bundled with actual repair, maintenance, or servicing of real or tangible property, the charges would become taxable — either as a protective/detective service or as a taxable service tied to property maintenance.

What this means for you

Insurance auditing and underwriting-survey companies

If your service is limited to gathering and reporting facts for an insurer's own premium-setting or risk-management use — and that information stays confidential to that one client rather than being drawn from or fed into a shared database — your charges likely fall outside New York's enumerated sales-tax services. But if any part of your work shifts into investigating the cause of a loss, or accompanies actual repair/maintenance work on the property, that portion becomes taxable.

Insurance carriers purchasing these services

Don't assume every vendor report is exempt. The line here turns on whether the information is personal/individual to your risk versus drawn from a common database, and whether the survey is a genuine property-condition/compliance check versus an investigation into damage causation.

Accountants and tax professionals

This opinion is a useful map of the boundaries between the taxable "information services" category (Tax Law § 1105(c)(1)), the personal-or-individual-information exclusion in 20 NYCRR 527.3(b)(2), and the taxable protective/detective-services and real-property-maintenance categories (§ 1105(c)(5), (8)) — all four categories get discussed and distinguished in the same opinion.

Common questions

Q: Are insurance premium audits taxable in New York?
A: No, in this ruling — the Department treated them as akin to payroll/bookkeeping review, not an enumerated taxable service.

Q: Are property inspection reports for insurers always exempt?
A: Not always. If the inspection is really an investigation into the cause of a fire, accident, or damage, or is tied to actual property repair/maintenance, it becomes taxable as a protective/detective service or a real-property-maintenance service.

Q: Does producing a written report automatically make a service a taxable "information service"?
A: No. The opinion says the fact that a survey results in a report doesn't automatically transform it into a taxable information service — what matters is whether the data is personal/individual to that client versus drawn from a shared, non-confidential source.

Q: Can I rely on this opinion for my own auditing business?
A: Only as an illustration. It binds the Department solely for Deloitte's client and the specific facts described; another taxpayer with even slightly different facts should request its own advisory opinion.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) (retail sales of tangible personal property)
• Tax Law § 1105(c)(1) (information services) and § 1105(c)(5) (real property maintenance) and § 1105(c)(8) (protective and detective services)
• 20 NYCRR 527.3 (information services imposition and exclusions)
• 20 NYCRR 527.5(a) (maintaining, servicing, repairing tangible personal property)
• 20 NYCRR 527.7 (maintaining, servicing, repairing real property)

Prior rulings and cases referenced:

• Virtual Systems Group, LLC, TSB-A-98(71)S
• Arteffects, Inc., TSB-A-96(10)S
• Alan/Anthony, Inc., TSB-A-92(6)S and TSB-A-92(51)S
• Maintenance Service Resources, Inc., TSB-A-98(22)S
• Commonwealth Electrical Inspection Service, Inc., TSB-A-98(82)S
• Rochester Gas and Electric Corporation, TSB-D-91(1)S
• Anne E. Steger, TSB-A-94(16)S
• ADP Automotive Claims Servs. v. Tax Appeals Tribunal, 188 AD2d 245
• ADP Collision Estimating Services, Inc., TSB-D-91(67)S
• Marvin Rosenthal, TSB-A-97(2)S
• Salomon & Leitgeb CPA's, LLP, TSB-A-97(44)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_42s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(42)S
Sales Tax
November 24, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S030520D

On May 20, 2003, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Deloitte & Touche LLP, 191 Peachtree Street, Suite 1500, Atlanta, Georgia, 30303.
The issue raised by Petitioner, Deloitte & Touche LLP, on behalf of its client (“Client”) is
whether charges for services consisting of premium audits and surveys provided to insurance
carriers located or doing business in New York are subject to sales tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Client’s activities consist of conducting premium audits and surveys for insurance carriers
providing information used to adjust premiums and manage risk. Client’s services can be grouped
into four broad categories:
(1) Premium Audit Services – Client reviews the payroll of an insured and verifies or adjusts
previously reported premium information to the insurer. Written reports are provided to the
insurer.
(2) Commercial Underwriting Surveys – Client’s personnel perform inspections of insured
property. As part of such inspections they may review historical documents, diagrams,
photographs, etc. Any additional documentation gathered by Client’s personnel (i.e., current
photographs of the property) remains with Client and only the results of the investigation are
provided to the insurer through written reports. The surveys are not appraisals.
(3) Residential Underwriting Surveys – Client performs standard and custom residential
surveys to help assess the value of properties and manage the insurance-to-value of entire
books of business.
(4) Governmental Site Surveys – Client performs condition reviews, often required of public
assistance and loan programs involving government-backed loans, on commercial and
residential properties.
The insurers use the information to compare the premium charged with the risk of coverage.
The information provides guidance with regard to whether the premium should be increased or
decreased to match the risk of coverage.
The audits and surveys performed by Client are conducted through various methods: by
company employees, by independent contractors, and/or by telephone interviews from an out-of­

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state call center. The information collected is private in nature with the final report or survey being
provided only to the insurance carrier for its own use. The report completed by Client for the
insurance carrier analyzes data provided both by the insurer and insured.
Applicable law and regulations
Section 1105(a) of the Tax Law imposes a tax on the receipts from every retail sale of
tangible personal property, except as otherwise provided.
Section 1105(c) of the Tax Law provides, in part:
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 information which is personal or
individual in nature and which is not or may not be substantially incorporated in reports
furnished to other persons. . . . (Emphasis added)
*

*

*

(5) Maintaining, servicing or repairing real property, property or land, as such terms are
defined in the real property tax law, whether the services are performed in or outside of a
building, as distinguished from adding to or improving such real property, property or land,
by a capital improvement as such term capital improvement is defined in paragraph nine of
subdivision (b) of section eleven hundred one of this article. . . . (Emphasis added)
*

*

*

(8) Protective and detective services, including, but not limited to, all services provided by
or through alarm or protective systems of every nature, including, but not limited to,
protection against burglary, theft, fire, water damage or any malfunction of industrial
processes or any other malfunction of or damage to property or injury to persons, detective
agencies, armored car services and guard, patrol and watchman services of every nature
. . . whether or not tangible personal property is transferred in conjunction therewith.
(Emphasis added)
Section 527.3 of the Sales and Use Tax Regulations provides, in part:
(a) Imposition. (1) Section 1105(c)(1) of the Tax Law imposes a tax on the receipts
from the service of furnishing information by printed, mimeographed or multigraphed matter

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or by duplicating written or printed matter in any manner such as by tapes, discs, electronic
readouts or displays.
(2) The collecting, compiling or analyzing information of any kind or nature and the
furnishing reports thereof to other persons is an information service. (Emphasis added)
*

*

*

(b) Exclusions. (1) Sales tax does not apply to receipts from sales of information
services which are for resale as such.
(2) The sales tax does not apply to the receipts from the sale of information which
is personal or individual in nature and which is not or may not be substantially incorporated
into reports furnished to other persons by the person who has collected, compiled or
analyzed such information. (Emphasis added)
Section 527.5(a) of the Sales and Use Tax Regulations provides, in part:
Imposition. (1) The tax is imposed on receipts from every sale of the services of
installing, maintaining, servicing or repairing tangible personal property. . . .
*

*

*

(3) Maintaining, servicing and repairing are terms used to cover all activities that
relate to keeping tangible personal property in a condition of fitness, efficiency, readiness
or safety or restoring it to such condition. (Emphasis added)
*

*

*

Example 6: A company operates a diagnostic service in which it tests an appliance
for a set fee, but does not repair the appliance. The charge for the diagnostic service is
taxable. (Emphasis added)
Section 527.7 of the Sales and Use Tax Regulations provides, in part:
(a) Definitions. (1) Maintaining, servicing and repairing are terms which are used
to cover all activities that relate to keeping real property in a condition of fitness, efficiency,
readiness or safety or restoring it to such condition. . . .
(2) Real property, property and land are defined as in subdivision 12 of section 102
of the Real Property Tax Law. . . .

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*

*

*

(b) Imposition. (1) The tax is imposed on receipts from every sale of the services of
maintaining, servicing or repairing real property, whether inside or outside of a building.
Opinion
Client’s business activities consist of conducting premium audits and surveys for insurance
carriers. The insurers use the information to compare the premium charged with the risk of coverage
and further use the results to adjust premiums and manage risk.
The audits and surveys performed by Client are conducted through various methods: by
company employees, by independent contractors, and/or via telephone interviews from an out-of­
state call center. The information collected appears to be private in nature with the final report or
survey being provided to the insurance carrier for its own use.
All sales of tangible personal property and certain sales of enumerated services are subject
to sales tax. See sections 1105(a) and 1105(c) of the Tax Law. Charges for performing nontaxable
services will not be subject to sales tax provided that the services are not sold in conjunction with
the performance of any other taxable services, and are not performed for a customer in conjunction
with the sale of tangible personal property. See Virtual Systems Group, LLC., Adv Op Comm T&F,
October 9, 1998, TSB-A-98(71)S; Arteffects, Inc., Adv Op Comm T&F, February 21, 1996,
TSB-A-96 (10)S; Alan/Anthony, Inc. Adv Op Comm T&F, January 31, 1992, TSB-A-92(6)S.
Client’s “premium audit” services appear similar to payroll, accounting and bookkeeping
services. Services which merely audit payroll and premium information of insured parties for the
insurer are not among the enumerated services subject to sales tax under section 1105(c) of the Tax
Law. See Maintenance Service Resources, Inc., Adv Op Comm T&F, March 24, 1998,
TSB-A-98(22)S.
Client’s surveys of government sites and surveys for residential and commercial
underwriting include inspections as well as the collection and analysis of pertinent information.
Real property inspection services performed by Client solely for purposes of governmental code
compliance, and real property inspection services performed by Client for insurers which are not
related to or performed in conjunction with repairing, maintaining or servicing tangible personal or
real property are likewise not among the enumerated taxable services. See Commonwealth
Electrical Inspection Service, Inc., Adv Op Comm T&F, December 2, 1998, TSB-A-98(82)S. The
fact that such surveys may result in the issuance of a report does not automatically transform such
services into information services subject to sales tax. See Rochester Gas and Electric Corporation,
Dec Tax App Trib, January 4, 1991, TSB-D-91(1)S.

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To the extent Client’s services furnish information which is personal and individual in nature
and is not substantially incorporated by Client in reports furnished to other persons, charges for such
services would qualify for the exclusion provided by section 1105(c)(1) of the Tax Law. See
Anne E. Steger, Adv Op Comm T&F, April 6, 1994, TSB-A-94(16)S. However, if the information
comes from a common source or a data repository that is not confidential, then the information
provided is not personal and individual in nature despite the fact that the results may be customized
for each client. See ADP Automotive Claims Servs. v. Tax Appeals Tribunal, 188 AD2d 245, lv
denied 82 NY2d 655; ADP Collision Estimating Services, Inc., Dec Tax App Trib, August 8, 1991,
TSB-D-91(67)S.
According to the facts provided, it appears that Client’s charges to insurance carriers for its
various surveys would qualify for exclusion from tax as either inspections performed for purposes
of governmental code compliance, information services which are personal or individual in nature
(provided the information is not furnished to others by Client), or real property inspections of a kind
not related to the maintenance or servicing of real or tangible personal property (e.g., engineering
surveys, OSHA compliance, utility usage evaluations, valuation appraisals, etc.). Client’s premium
audit services appear to be payroll or bookkeeping services which are not enumerated as taxable
under section 1105(c) of the Tax Law.
If Client’s services were related to the servicing and repair of real or tangible personal
property, or if Client’s personnel investigated the causes or origins of, or responsibility for, fires,
losses, accidents, or damage or injuries to real or personal property, Client’s charges would be
taxable under section 1105(c) of the Tax Law. See Commonwealth Electrical Inspection Service,
Inc., supra; Marvin Rosenthal, Adv Op Comm T&F, January 24, 1997, TSB-A-97(2)S. Similarly,
if Client’s services were performed in conjunction with the sale of taxable tangible personal property
or other taxable services, the entire receipt from the sale would be subject to tax unless the charges
for the nontaxable service and tangible personal property or taxable service were separately stated
and reasonable, and such services and property could be separately purchased. See Salomon &
Leitgeb CPA’s, LLP, Adv Op Comm T&F, July 23, 1997, TSB-A-97(44)S; Alan/Anthony, Inc., Adv
Op Comm T&F, June 19, 1992, TSB-A-92(51)S.

DATED: November 24, 2003

NOTE:

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

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