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

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:

• Guaranteed searches differ from ordinary abstracts. The opinion cites guidance treating the sale of an abstract of title as a taxable information service since September 1, 2010 (Tax Law 1105(c)(1); TSB-M-10(7)S). It also cites the Department's treatment of a "guaranteed title search" as nontaxable (Tax Bulletin TB-ST-5), because Insurance Law 6403(b) makes guaranteeing the correctness of title searches the doing of an insurance business. The opinion did not decide whether an attorney's uncertified abstract may qualify for another exclusion.
• 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 Department held that this firm's certified abstract, which guaranteed the completeness and correctness of its search, was an insurance product and was not taxable as an information service. It expressly left open whether issuing an abstract constitutes the practice of law or qualifies for the representative-capacity exclusion. It did not decide the tax treatment of this firm's uncertified abstracts.

Buyers

The ruling's result applies to the described certified, guaranteed abstracts and continuations. It does not resolve every possible basis for excluding an attorney's other abstract work from sales tax.

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. The Insurance Department opinion cited here said the result was the same if the seller was an attorney. The Tax Department did not decide whether this firm's uncertified abstracts were taxable.

Q: What makes the difference from a taxable abstract?
A: For this firm, the guarantee of completeness and correctness made its certified abstract an insurance product rather than a taxable information service. The opinion left other possible grounds for nontaxability undecided.

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

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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.