Are sales of title abstracts taxable in NY, at what rate, and what happens when a customer never pays?

Plain-English summary

The petitioner is a corporation that sells abstracts of title for real property in many New York counties (and occasionally to out-of-state customers). It asked when it must collect sales tax on title abstracts, what rate applies, what to do when a customer doesn't pay, and when it can claim a bad-debt credit.

The Office of Counsel concluded:

• Title abstracts are taxable (since Sept. 1, 2010). Tax Law 1105(c)(1) taxes the service of furnishing information. The Department changed its policy (TSB-M-10(7)S) to better reflect the case law: effective September 1, 2010, the sale of an abstract of title is the sale of a taxable information service (whether sold to a prospective purchaser or to an attorney for use in giving an opinion of title). The vendor must collect tax on abstracts delivered in New York.
• Rate = where delivered (destination tax). New York sales tax is a destination tax: the rate is the combined state and local rate where delivery of the abstract occurs (20 NYCRR 525.2(a)(3)). It does not matter that the vendor's office is in New York, that the abstract is prepared in New York, or where the property is (TSB-A-09(55)S) -- services are taxed by where they're delivered, even if performed elsewhere. Abstracts delivered outside New York are not subject to NY tax (the customer may owe use tax), but the vendor must keep records proving out-of-state delivery.
• Accrual tax -- remit even if unpaid. New York sales tax is a transaction/accrual tax: the vendor must report and remit the tax with the return for the period of the sale, even if the customer hasn't paid by the time the return is due (20 NYCRR 533.4(a)(1)).
• Bad-debt credit. If a receipt is later uncollectible ("worthless," as for federal income tax; a likely-futile lawsuit isn't required), the vendor may claim a bad-debt sales tax credit or refund within three years of when the tax was payable (20 NYCRR 534.7).

What this means for you

Abstract and title-search providers

Since September 1, 2010, a plain abstract of title is a taxable information service. Collect at the rate where you deliver the abstract (not where you sit or where the land is), don't charge NY tax on out-of-state deliveries (but document them), and remember the tax accrues at the sale -- you must remit even if the customer hasn't paid, with a bad-debt credit available later if the bill goes truly uncollectible. (Note: a certified/guaranteed abstract can be treated differently -- see TSB-A-11(6)S and 11(7)S, where a guaranteed search was a nontaxable insurance product.)

Buyers (including attorneys)

Expect sales tax on abstracts delivered to you in New York; an abstract bought by an attorney to support an opinion of title is still a taxable sale (the opinion of title itself is a nontaxable legal service).

Common questions

Q: Are title abstracts taxable in New York?
A: Yes, as a taxable information service since September 1, 2010.

Q: Which local rate do I charge?
A: The rate where you deliver the abstract to the customer -- not where your office is or where the property is located.

Q: A customer never paid -- do I still owe the tax?
A: Yes, you must remit it for the sale period (accrual tax), but you can claim a bad-debt credit or refund (within three years) once the receipt is uncollectible.

Citations and references

• Tax Law section 1105(c)(1) (information services)
• 20 NYCRR section 525.2 (transaction/accrual tax; destination tax)
• 20 NYCRR section 533.4(a)(1) (accrual of tax)
• 20 NYCRR section 534.7 (bad debt refund/credit)

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_9s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-11(9)S
Sales Tax
April 7, 2011

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

PETITION NO. S110103A

On December 29 2010, the Department of Taxation and Finance received a Petition for Advisory
Opinion from name and address redacted. Petitioner asks when it is required to collect sales tax on the sale
of title abstract services, what rate of sales tax must be collected on taxable sales, whether it must remit sales
tax when a customer does not pay the bill for taxable services, and when it may claim a sales tax bad debt
credit/refund. Effective September 1, 2010, Petitioner is required to collect sales tax on the sale of title
abstracts that are delivered to customers in New York. The sales tax rate applicable to a taxable sale is the
combined state and local rates in the jurisdiction where the delivery of the abstract is made. Petitioner must
remit to the Tax Department the sales tax due on all taxable sales irrespective whether it collects sales tax
from the customer; however, Petitioner would be entitled to claim a sales tax bad debt credit or refund once a
taxable receipt becomes uncollectible.
Facts
Petitioner sells abstracts of title. The corporation’s customers request abstracts for real property
located in many counties in New York. On occasion, Petitioner will deliver an abstract to a customer located
outside the State. Some customers do not timely pay the amount due for abstracts. Some customers never
paid Petitioner for an abstract.
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. TSB-M-10(7)S, Sales and Compensating Use Tax Treatment of Certain Information Services,
provides in part:
Previous correspondence from the Tax Department indicated that sales of abstracts
of title were not subject to sales tax. To better reflect controlling judicial case law, the Tax
Department has changed this policy. Therefore, beginning on September 1, 2010, the sale of
an abstract of title to real property is the sale of a taxable information service. This includes
the sale of an abstract of title to either a prospective purchaser of real property or to an
attorney representing a prospective purchaser. However, opinions of title offered by an
attorney are considered legal services and are not subject to tax. Therefore, the sale of an
abstract of title to an attorney for use in conjunction with rendering an opinion of title or
providing other legal services is a retail sale subject to sales tax as described herein.
Thus, effective September 1, 2010, Petitioner’s charges for title abstracts are receipts from the sale
of information services that are subject to sales tax when the abstracts are delivered in New York.
The New York sales tax is a destination tax. 20 NYCRR §525.2(a)(3). The point of delivery or point
at which possession is transferred by the vendor to the purchaser or designee controls both the tax incidence
and the tax rate. Id. The sales tax rate applicable to the sale of an abstract of title in New York is the
combined state and local rates in effect in the location where delivery of the abstract occurs.

-2-

TSB-A-11(9)S
Sales Tax
April 7, 2011

The New York sales tax is a transaction tax; liability for the tax occurs at the time of the transaction.
20 NYCRR §525.2(a)(2). Generally speaking, the taxed transaction is an act resulting in the receipt of
consideration for the transfer of title, or possession, or both to property or rendition of an enumerated service.
Id. The time or method of payment is immaterial. Id. When Petitioner makes a taxable sale, it must report
the receipts for transaction on the sales tax return covering the period in which the sale is made, even if
payment is not received at the time of sale.
The sales tax is an accrual tax. Id. This means Petitioner must remit the tax with its sales tax return
that covers the period during which the sale occurred, even if the customer has not yet paid for the service by
the time the return is due. 20 NYCRR §533.4 (a)(1).
The facts that Petitioner’s office is located in New York, the abstracts are prepared at this office in
New York, and the location about which an abstract is requested is either within or without New York are
not relevant to whether New York sales tax is imposed on the sale. See TSB-A-09(55)S. It is the point of
delivery of the abstract that determines the imposition of tax. See 20 NYCRR §525.2(a)(3). Services are
taxed based upon the location to which they are delivered notwithstanding that the service may have been
performed elsewhere. Petitioner’s deliveries of abstracts to customers in New York are subject to sales tax
regardless of whether the location of the property that is the subject matter of the report is within or without
the State. If Petitioner delivers an abstract to a customer outside New York, it does not have to collect sales
or use tax from the customer, even if the customer uses the abstract in New York after purchase; however,
the customer would be required to remit use tax directly to the State. All sales of enumerated services within
the state are presumed subject to tax until the contrary is established. 20 NYCRR § 533.2. Therefore,
Petitioner must maintain records sufficient to verify that the abstracts were delivered outside the state and
that sales tax was not required to be collected on that basis.
Where a receipt has been ascertained to be uncollectible, either in whole or in part, the vendor of the
tangible personal property or services may apply for a refund or credit of the tax paid on such receipt within
three years from the date the tax was payable by such person to the Tax Department. 20 NYCRR
§534.7(b)(1). The term “uncollectible” means worthless, as used for federal income tax purposes. 20
NYCRR §534.7(a)(1). Legal action to enforce payment when it would probably not result in satisfaction of a
judgment upon a showing of underlying facts is not a necessary prerequisite in determining worthlessness.
Id. Refund claims for bad debts must be filed with Department of Taxation within three years from the date
was payable by the applicant to the Department. 20 NYCRR §534.7(d)(2). If Petitioner’s bad debt refund
claim is timely, it may claim a sales tax bad debt credit on the sales tax return for the period during which the
taxable receipt becomes uncollectible.

DATED:

April 7, 2011

/S/
DANIEL SMIRLOCK
Deputy Commissioner and Counsel

NOTE:

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.