NY TSB-A-11(7)S Sales Tax 2011-03-21

Is a law firm's certified abstract of title (or certified continuation) a taxable information service in NY?

Short answer: No -- it's not taxable. Although the sale of an ordinary abstract of title became a taxable information service on September 1, 2010, a 'guaranteed title search' is treated as an insurance product, not an information service. Under Insurance Law 6403(b), guaranteeing the correctness of a search of instruments affecting real property is the doing of an insurance business, and the NYS Insurance Department's February 2011 General Counsel opinion confirmed that a certified abstract guaranteeing the correctness of its search is insurance -- with the same result whether the seller is an attorney or not. Because this law firm's certified abstract certifies that its listed items are correctly set forth and that nothing more affects the premises, it guarantees the correctness and completeness of the search and qualifies as an insurance product. So the certified abstracts and certified continuations aren't taxable as information services.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

The petitioner is a real estate law firm in New York's Southern Tier. In that region, sellers convey marketable title by giving the buyer a certified abstract of title prepared by the seller's attorney; attorneys also provide certified continuations of these abstracts on later sales or refinances. The firm's sample abstract certifies that the listed instruments, liens, and encumbrances "are correctly set forth" and that "there is nothing more" in the indexes affecting the premises. The firm asked whether its certified abstracts (and continuations) are taxable.

The Office of Counsel concluded they are not taxable:

Ordinary abstracts are taxable -- but guaranteed searches aren't. Since September 1, 2010, the sale of an abstract of title is a taxable information service (Tax Law 1105(c)(1); TSB-M-10(7)S). However, the Department has long held that a "guaranteed title search" is not taxable (Tax Bulletin TB-ST-5), because Insurance Law 6403(b) makes guaranteeing the correctness of searches of instruments affecting real-property title the doing of an insurance business.
A certified abstract that guarantees correctness is insurance. A February 23, 2011 Opinion of the NYS Insurance Department's Office of General Counsel held that issuing a certified abstract that "guarantees the correctness" of its search is the doing of an insurance business under 6403(b)(1) -- and that the result is the same if the seller is an attorney.
Application. Because the firm's certified abstract certifies the completeness and correctness of its search (items "correctly set forth," "nothing more" affecting the premises), it qualifies as an insurance product and is not taxable as an information service. (The Department didn't need to reach other possible grounds, like practice of law or the representative-capacity exclusion.)

What this means for you

Attorneys and abstract providers

The dividing line is the guarantee. A plain abstract (a report of what the records show) is a taxable information service since 9/1/2010. But a certified abstract that guarantees the correctness/completeness of the search is treated as title insurance -- the doing of an insurance business under Insurance Law 6403(b) -- and is not subject to sales tax. Attorneys get no special pass for an uncertified abstract, but a genuinely guaranteed certification is nontaxable whoever issues it. Look at whether your product guarantees its results, not just who signs it. (Compare the companion opinion TSB-A-11(6)S, same holding for a corporate issuer, and contrast TSB-A-11(9)S, where a plain abstract was taxable.)

Buyers

A certified, guaranteed abstract shouldn't carry sales tax; an ordinary abstract delivered to you in New York will.

Common questions

Q: Is a certified abstract of title taxable?
A: No, if it guarantees the correctness of its search -- that makes it an insurance product under Insurance Law 6403(b), not a taxable information service.

Q: Does it matter that an attorney issues it?
A: For the guarantee analysis, no -- a guaranteed certified abstract is nontaxable whether or not the seller is an attorney. (A plain, uncertified abstract is taxable regardless.)

Q: What makes the difference from a taxable abstract?
A: The guarantee. A plain abstract reports the records (taxable since 9/1/2010); a certified abstract that guarantees correctness/completeness is insurance (nontaxable).

Citations and references

Tax Law section 1105(c)(1) (information services)
Insurance Law section 6403(b) (guaranteeing correctness of title searches = insurance business)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2011.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a11_7s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-11(7)S
Sales Tax
March 21, 2011

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

PETITION NO. S101112C

Petitioner name redacted law firm asks whether its provision of certified abstracts of title or
certified abstract continuations are subject to New York State sales and use taxes. We conclude that the
services are not taxable.
Facts
Petitioner is a law firm in the Southern Tier region of New York. It has an active practice in the
area of real estate law.
In the Southern Tier, the standard real estate contract of sale requires the sellers to convey
marketable title to the real property purchaser, which is generally accomplished by providing the
purchaser with a certified abstract of title prepared by the seller’s attorney. Attorneys also search title and
provide certifications via continuations of these abstracts on subsequent property sales or mortgage
refinances.
Petitioner provided a sample of its certified abstract:
We, [Petitioner Law Firm], do hereby certify that the following continuation of abstract,
including Numbers One (1) to Three (3) sets forth all instruments, unsatisfied liens and existing
encumbrances found from an examination of the indices in the applicable County Clerk's Office
for:
DEEDS
LEASES
CONTRACTS
MORTGAGES . . .
Analysis
Tax Law section 1105(c)(1) imposes sales tax on receipts from the service of furnishing
information by printed, mimeographed or multigraphed matter, or by duplicating written or printed matter
in any other manner. Effective September 1, 2010, sales of abstracts of title are taxable as information
services (see TSB-M-10(7)S, Sales and Compensating Use Tax Treatment of Certain Information
Services). The Department has held that a “guaranteed title search” is not taxable (see Abstracts of Title
and Other Public Records Searches Tax Bulletin, TB-ST-5). That conclusion was based on Insurance
Law § 6403(b), which makes the “guarantee[ing]” of “the correctness of searches for all instruments
affecting titles to real property” the doing of an insurance business.
The issue here then is whether Petitioner’s title abstract or title abstract continuation constitutes a
guaranteed title search for purposes of Insurance Law section 6403(b). In an Opinion of the Office of

-2-

TSB-A-11(7)S
Sales Tax
March 21, 2011

General Counsel dated February 23, 2011 (“OGC Opinion”), the New York State Insurance Department
addressed the question whether the issuance of the certified abstract described therein was the doing of an
insurance business under Insurance Law section 6403(b)(1). The abstract stated that the certification was
being providing for "a valuable consideration” and that the items listed in the abstract “are correctly set
forth, and that there is nothing more in said indexes which appears to affect the premises or any part
thereof.” The OGC Opinion held that, because the abstract in that matter “guarantees the correctness”
of its search, its issuance “is the doing of an insurance business” for purposes of section 6403(b)(1). The
opinion further stated that the result would be the same if the seller of the certified abstract were an
attorney.
In its sample certified abstract, Petitioner also certifies the completeness of the information
presented. Thus, Petitioner’s abstract also qualifies as an insurance product and is not taxable as an
information service.
In light of the above conclusion, we do not address other possible bases for the non-taxability of
Petitioner’s certified abstracts, including whether the issuance of the abstract constitutes the practice of
law or that Petitioner’s sale of the certified abstract qualifies for the exclusion in Tax Law § 1105(c)(1)
for sales of information by persons functioning in a representative capacity.

DATED: March 21, 2011

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.