Are 'peer group' market-share analysis services for financial firms taxable in NY?

Plain-English summary

The provider sells "peer group analysis" to financial-services firms: it pools data contributed by a consortium of companies (on their own mutual funds, annuities, or securities), then gives each customer a report comparing its market size and share to its competitors, sliced by geography, channel, and product type. It asked whether these services are taxable. They are.

The rule: Tax Law 1105(c)(1) taxes information services -- collecting, compiling, or analyzing information and furnishing reports. There's an exclusion for information that is personal or individual in nature and not (or may not be) substantially incorporated in reports furnished to others. The provider's services fail both parts:

• Common-source data isn't personal/individual. It's the source of the information that controls (ADP Automotive). Information drawn from a common database -- here, the consortium's pooled data -- is not uniquely personal or individual, regardless of how the report is customized to the customer's request (Rich Products; Towne-Oller; Allstate; Twin Coast).
• Market-share reports incorporate competitors' information. To tell a customer its share, the report by definition uses information about its competitors -- so the information may be substantially incorporated in reports furnished to others. That defeats the second criterion too.

The fact that each result is unique to the customer and not handed to others doesn't matter -- the exclusion turns on the common source and on whether the information could be incorporated in others' reports. So the services are taxable information services, and tax must be collected beginning September 1, 2010 (TSB-M-10(7)S).

What this means for you

Benchmarking, market-share, and peer-comparison providers

If your product is built from a shared/consortium/common database, it's a taxable information service -- even if every customer's report is custom-built and never shared. Two things kill the personal/individual exclusion: drawing on a common source, and producing analysis (like market share) that inherently reflects other parties. Customization is not a cure.

Contrast -- when the exclusion does apply

The exclusion fits information that relates exclusively to one customer, comes from a source tied to that customer, and that you're barred from reselling -- not market intelligence assembled from many contributors' pooled data.

Common questions

Q: Each client's report is unique and we never share it -- isn't it personal/individual?
A: No. The exclusion turns on the source. Information drawn from a common (consortium) database isn't personal/individual no matter how customized, and a market-share report inherently incorporates competitors' data.

Q: When did tax collection start?
A: September 1, 2010, under TSB-M-10(7)S.

Q: What kind of analysis would be nontaxable?
A: Information relating only to that one customer, from a source tied to it, that you can't resell -- not benchmarking built from many firms' pooled data.

Citations and references

• Tax Law section 1105(c)(1) (tax on information services; personal/individual exclusion)
• 20 NYCRR section 527.3(a)(2) (information services)
• Matter of ADP Automotive Claims Service Inc. v Tax Appeals Tribunal (source controls; common database)
• Rich Products Corporation v Chu (information substantially incorporated in others' reports)
• Towne-Oller & Assoc. v State Tax Comm (common-source information)
• TSB-M-10(7)S (certain information services taxable from 9/1/2010)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2010.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a10_45s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-10(45)S
Sales Tax
September 24, 2010

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S100624A

Petitioner, name and address redacted, requests an Advisory Opinion about whether its name
redacted services are subject to New York State and local sales and use taxes. We conclude that these
services are subject to tax as information services, and Petitioner must collect tax on these services
beginning September 1, 2010.
Facts
Petitioner provided the following facts. Petitioner provides “peer group analysis” services, which
allows a customer to compare itself to its competitors using factors such as industry, size, revenue, and
geographic locations. The name redacted product line provides peer group analysis for firms engaged in
the sale of mutual funds, annuities, and securities. These services allow a customer to determine its
market size and market share of managed mutual funds, annuities, or securities in comparison to its
competitors in specified geographic areas. Below is a description of three of Petitioner’s services
•

Name redacted for Annuities. This product provides peer group analysis for companies offering
annuity sales. This product is best used for determining a company’s market size and share as
compared to its peer group, and to assess its performance in capturing new annuity sales. This
product can also be used for territory planning and sales force management. This product is
based on over $500 billion of direct-measured individual variable annuity assets, including nearly
$100 billion in direct-measured annual individual variable annuity sales collected from the
nation’s leading variable annuity issuers. Market size and share can be assessed by custom
geographic areas, custom distribution channel, product type, and contract size.

•

Name redacted for Securities. This product provides peer group analysis for brokerage and
mutual fund firms. This product is best used for determining a company’s market size and share
as compared to its peer group. This product is based on about $10 trillion in direct-measured
financial assets collected from the members of Petitioner’s consortium. Market size and share
can be assessed by geographic area, account type (including over 72 fund investment objectives),
and product type (including over 65 security types).

•

Name redacted for Wholesale Mutual Funds. This product provides peer group analysis for
mutual fund wholesalers. This product is best used for determining a company’s market size and
share as compared to its peer group, and to assess wholesaler performance for new fund sales by
custom wholesaler territories. This product is based on almost $40 billion in direct-measured
fund sales gathered quarterly from the nation’s leading mutual fund manufacturers. Market size
and share can be assessed by custom territory, custom distribution channel, and fund objective.

Petitioner works closely with its customers to understand the customer’s reporting hierarchy (i.e.,
market area, region), and to establish the geographic parameters (e.g, regions, territories) that the

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TSB-A-10(45)S
Sales Tax
September 24, 2010

customer wants to be incorporated into its report. Petitioner reviews this information to determine
whether it can be accurately linked to standard geographies (Census, Core Based Statistical Areas, etc.)
and Petitioner’s most current ZIP Code Roster. Petitioner prepares specifications for building custom
geographies to be integrated into a customer’s report.
Each of the products described above is a customized configuration of data based on a customer’s
specific request. A customer defines the financial attributes that it wants to be factored into a specific
analysis. Each analysis for a customer is unique and no two results are the same. The information
described in each result is proprietary to the customer for which the analysis was performed, and
Petitioner’s resources are dedicated to making each result unique. Results provided to one customer are
not provided to other customers.
Petitioner’s customers are typically financial services firms, securities firms, and wealth
management and investment advisors. In order to obtain the services described above, a customer must
be a member of a consortium of companies that provide data on their own clients. For example, if a
customer is interested in buying name redacted for Wholesale Mutual Funds, the customer must be a part
of the consortium of companies that agree to provide data about their own portfolio of managed mutual
funds. Petitioner aggregates all of the information about the mutual funds, annuities, and securities of
consortium members. Petitioner organizes, manipulates, and interprets the information, and removes any
personally-identifying information about the owners of the mutual funds, annuities and securities.
Analysis
The services Petitioner describes are information services subject to State and local sales and use
taxes. Tax Law section 1105(c)(1) imposes sales tax on the receipts for the service of furnishing of
information by printed matter, 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 that is personal or individual in nature and that is not or may not be substantially incorporated
in reports furnished to other persons. Petitioner aggregates information of the consortium members, and
provides reports to customers about their market share as compared to their peer group. The analysis and
results provided to customers are based on the aggregated information and collected by Petitioner from
consortium members. Consequently, Petitioner’s services are information services subject to sales and
use taxes. See Tax Law §1105(c)(1); 20 NYCRR § 527.3(a)(2).
The exclusion for information that is personal or individual in nature and that is not or may not be
substantially incorporated in reports furnished to other persons does not apply to Petitioner’s services.
The first criterion (information that is personal or individual in nature) is satisfied only by information
that is uniquely personal or individual in nature. Matter of Allstate Ins. Co. v. Tax Commn. of the State of
New York, 115 AD2d 831, affd 67 NY2d 999; Twin Coast Newspapers, Inc. v., State Tax Commission,
101 AD2d 977. It is the source of the information which controls whether the report prepared will meet
the criteria of "personal and individual." Matter of ADP Automotive Claims Service Inc., Tax Appeals
Tribunal, August 8, 1991. Information is not uniquely personal or individual in nature if it comes from a
common source, regardless of whether the information is customized in some manner to respond to the
raw data submitted by the customer. See Matter of ADP Automotive Claims Service Inc. v Tax Appeals
Tribunal, 188 AD2d 245 (3rd Dep’t 1993); Rich Products Corporation v Chu, 132 AD2d 175 (3d Dep’t
1987); Towne-Oller & Assoc. v State Tax Comm, 120 AD2d 873 (3d Dep’t 1986); Alan/Anthony, Inc.,
TSB-A-92(51)S. The information Petitioner provides to customers is obtained from a common database
of information of all the consortium members. Thus, Petitioner’s services do not meet the first criteria of
the exclusion.

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TSB-A-10(45)S
Sales Tax
September 24, 2010

Similarly, Petitioner’s services do not satisfy the second criterion of the exclusion. In order to
obtain Petitioner’s services, a customer must be a member of a consortium of companies that agree to
provide data about their own clients’ portfolios. The information Petitioner provides to its customers is
based on the aggregated information of all consortium members. Moreover, information about a
particular customer’s market share necessarily incorporates information about its competitors. Thus, the
information provided to customers by definition can be substantially incorporated in reports furnished to
others. See Matter of Rich Products., supra; Twin Coast Newspapers, supra. Accordingly, Petitioner’s
services do not meet the exclusion for information services that are personal or individual in nature.

DATED: September 24, 2010

NOTE:

/S/
DANIEL SMIRLOCK
Deputy Commissioner and Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set
forth therein and is binding on the Department only with respect to the person or entity to
whom it is issued and only if the person or entity fully and accurately describes all relevant
facts. An Advisory Opinion is based on the law, regulations, and Department policies in
effect as of the date the Opinion is issued or for the specific time period at issue in the
Opinion.