Are an expert network's oral consultations, consultant directory/software, and custom research reports subject to NY sales tax?

Plain-English summary

The petitioner runs an expert network: customers buy subscriptions for oral consultations with independent expert consultants (doctors, scientists, engineers, attorneys, business experts), plus custom written research reports and seminar access. The experts give advice from their own first-hand knowledge and are prohibited from using any common database to answer; nothing is archived for reuse or sale to others. Customers may use a prewritten-software portal and a consultant directory (names, bios, expertise, conflict restrictions) to select, schedule, and track consultations -- there's no separate charge for the software or directory, and customers can instead use a human research manager. Reports come in two kinds: a summary of multiple experts' answers to the customer's questions (included with the membership), and a separately charged in-depth "special project" report. The petitioner (following its earlier opinion TSB-A-08(18)S) asked whether these are taxable.

The Office of Counsel concluded the services are generally not taxable:

• Oral consultations -- not taxable. The service is principally giving guidance, advice, or historical perspective from the expert's own knowledge, specific to the customer, not reused or substantially incorporated into reports for others, and not drawn from a common database. Orally transmitted information is also excluded (20 NYCRR 527.3(b)(3)).
• Consultant directory + software portal -- not taxable. Used to select/schedule an expert, the directory is merely incidental to the consultation, and the primary function is the information the expert provides, not the software. Using the prewritten-software portal isn't necessary (a research manager is an alternative), there's no separate charge, and the fee doesn't change either way -- so the primary function remains a nontaxable consultation (TSB-A-10(40)S; 10(47)S).
• Custom written research reports -- excluded as personal/individual. Compiling and analyzing the consultants' responses to the customer's own questions and furnishing a report is an information service, but it is excluded because the information comes from responses to the customer's own questions (not a common data source) and is not provided to others or compiled for later reuse.

Where it flips to taxable: if the petitioner makes a separate charge for directory access or for the successful completion of a questionnaire/survey, that suggests the directory is sold apart from the consulting -- a taxable information service. Likewise, if the petitioner reuses the questionnaire data or furnishes the collected/compiled information to other persons, its receipts (including for offering the directory) become a taxable information service.

What this means for you

Expert networks, consultancies, and research-report providers

Selling bespoke expert advice -- oral or in a custom report built from your customer's own questions -- is generally a nontaxable personal/individual service in NY, provided the advice comes from the experts' own knowledge (not a common database) and you don't reuse or resell the work to other customers. A directory and software portal to pick and schedule experts stays nontaxable when it's incidental and not separately charged.

Don't create a taxable information service by accident

Separately charging for directory access or for a completed questionnaire/survey, or reusing/reselling the data you collect, converts the offering into a taxable information service. Keep access bundled into the consulting fee and keep each engagement's data confined to that customer.

Common questions

Q: Are our experts' oral consultations taxable?
A: No -- they're personal advice from the experts' own knowledge (not a common database), and orally transmitted information is excluded.

Q: We give customers a software portal and consultant directory -- does that tax the service?
A: No, when it's incidental to the consultation and not separately charged. The primary function is the expert's advice, not the software.

Q: Are the custom research reports taxable?
A: No, when built from the consultants' answers to your customer's own questions and not reused or furnished to others -- that's an excluded personal/individual information service.

Q: What would make it taxable?
A: Separately charging for directory access or a completed questionnaire/survey, or reusing/furnishing the collected data to other customers -- then it's a taxable information service.

Citations and references

• Tax Law section 1105(c)(1) (information services; personal/individual exclusion)
• Tax Law section 1105(c)(9) (information furnished by telephony)
• 20 NYCRR section 527.3(b)(3) (orally transmitted information excluded)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a12_22s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-12(22)S
Sales Tax
August 29, 2012

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

PETITION NO. S080725A

Petitioner, Name Redacted, asks whether access to software and a directory of
consultants that its customers use to facilitate Petitioner’s oral consultation service is subject to
sales tax. Petitioner also asks whether its receipts from its services, which include certain written
reports, are subject to sales tax.
Based upon the facts and sample contracts provided, we conclude that the customer’s use
of Petitioner’s directory of consultants and software to facilitate the provision of its oral
consultation services is not subject to tax. Petitioner’s written research reports do not constitute
a taxable information service, as long as the primary function of Petitioner’s service is obtaining
advice and analysis from Petitioner’s experts, the information provided is not derived from any
common data source, and that information is not and may not be substantially incorporated into
reports furnished to others.
Facts
Petitioner’s representative previously received an Advisory Opinion examining
Petitioner’s oral consultation services, custom written research reports, and admissions to topical
meetings and seminars. See TSB-A-08(18)S. Petitioner represents that the facts of this Advisory
Opinion are essentially the same as those in the 2008 Advisory Opinion, but in this instance
Petitioner states that in some cases there are the following additional facts:
•

Petitioner’s customers may use software (an access portal) to assist in selecting expert
consultants with whom to discuss issues and to facilitate the interactions between its
customers and consultants in furtherance of the delivery of the oral component of the
consultation services. This is accomplished through e-mail or online.

•

Petitioner may provide custom written reports detailing the responses of a number of
experts to a series of questions developed by the customer and Petitioner’s research
manager.

•

A customer may separately contract with Petitioner to have an expert draft a written
in-depth “special project” custom research report.

In addition to the relevant facts as stated in TSB-A-08(18)S, Petitioner provides oral and
written consulting services to customers using its group of independent contractor consultants
who are professionals with specialized knowledge on a wide variety of topics. These

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consultants, who are often medical doctors, research scientists, engineers, attorneys, architects,
or professional business consultants, provide a range of consultation services, from providing
background education on a particular topic to an in-depth technical analysis of a discrete issue or
subject as well as custom written research reports. They may also offer insight through
discussions at meetings and seminars. Petitioner states that these professionals do not use or
otherwise rely on any common database of information to provide their advice and expertise to
Petitioner's customers. Most of the professionals who act as Petitioner’s consultants work for
themselves or for other employers, and must therefore take certain steps to avoid conflicts of
interest. For example, they may be prohibited from providing assistance to certain competitors.
Moreover, while these experts may have access to information in databases for their other
employment, they are prohibited from using them to perform services for Petitioner or
Petitioner’s customers.
Petitioner’s consultants provide customers with insight, opinion, and knowledge through
either (i) an oral consultation with the consultants the customer selects, (ii) a custom written
research report, or (iii) a meeting or seminar with one or more consultants addressing a particular
topic. The cost of an annual subscription for a predetermined quantity of consulting services for
that year can range from redacted cost of basic package (for the basic package) to more than
redacted cost for premium package (for the premium package). (A limited scope "introductory"
subscription is also available for redacted cost for introductory subscription.) In return, the
experts offer a variety of perspectives based on their own first-hand experience in working with
various businesses, industries and technical and medical fields. According to Petitioner, no
information is archived by the Petitioner or its consultants for later reuse or sale to another
customer.
Petitioner may provide two types of custom written research reports to its customers.
The first type of report, which is included with the customer’s consultation membership, is a
report summarizing the views of a number of experts selected by a customer. This report is
prepared by Petitioner’s research manager based upon questions, prepared by the research
manager in cooperation with the customer, that are sent to consultants selected by the research
manager as having knowledge of the subject matter. In some instances, the document used to
solicit responses may take the form of a questionnaire. The consultant responses are reviewed by
the research manager, evaluated, vetted (some responses are discarded), edited, and used by the
research manager to prepare a written report to the customer.
The second type of research report is referred to by the Petitioner as a custom, in-depth
“special project” written research report on a particular topic. A consultant is selected by the
customer to prepare the special project report. A separate additional charge is made for the
completed special project report. According to Petitioner, their contract with the consultants
requires that no aspect of these reports is archived by the Petitioner or the consultants for use by
or sale to another customer. Both types of reports generally augment Petitioner’s oral
consultation services.

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In the past, Petitioner’s research manager would be assigned to a customer to facilitate its
interaction with the expert consultants. The research manager would work with a customer to
identify its needs and advise the customer on the most expedient means of obtaining the desired
information. The research manager also coordinated the delivery of Petitioner's services to the
customer, usually within the research manager’s particular area of expertise. The research
managers also help prevent the consultants from becoming involved in conflicts of interest.
Now, however, certain of Petitioner's customers may choose to use Petitioner's internally
developed proprietary software to automate certain aspects of the process by which they request
and track the use of the Petitioner's consulting services. This software allows customers to
initiate oral consultation by selecting a consultant from the consultant directory. This directory
contains the names, biographies, areas of expertise, and restrictions on employment (as noted
above, some of the experts work for other entities, and are often prohibited from being
consultants for competitors) for some of Petitioner's consultants. Once a consultant is selected,
the software may be used to request, schedule, and track the customer's use of the oral
consultation services, and track the use of Petitioner's other consulting services (i.e., to request
written reports or to participate in a seminar). For example, the customer can use the software to
identify and request a consultation with a particular consultant. Customers only have access to
this software if they have an underlying subscription to the consulting services offered by
Petitioner. The software is not, however, used in preparing or disseminating written questions to
a group of experts, because this process still requires the aid of a research manager. There is no
separate charge to the customer for the use of either the software or the directory.
Once they have access to Petitioner’s software, the customer is contractually prohibited
from using the software or accessing the directory for any purpose other than facilitating the
delivery of consultation services. Petitioner polices violations of its usage policy and enforces
the usage policy terms. The customers agree not to have contact with consultants outside of the
contractual relationship with Petitioner, or to disseminate any information obtained from the
consultant directory to any third party. Moreover, all consultants listed in the consultant
directory have also agreed to restrictions on their activities, including that they will only provide
consultation services to customers that locate them through the consultation service subscription
sold by Petitioner. Any information transferred through the use of this software application in
setting up an appointment is accessible by only that customer, the Petitioner, and the consultant.
Petitioner's customers may also contact a research manager to help them identify suitable
consultants, if they wish to do so.
Analysis
We conclude that the additional facts provided in the current Petition generally do not
change the analysis of the issues discussed previously in TSB-A-08(18)S. Petitioner’s oral
consultation services are not subject to tax, and the access to software to facilitate oral
consultation services does not change this result. Separately-stated charges for custom written
reports are not subject to tax to the extent that the information is not taken from a public data

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source, the report provided is personal or individual in nature, and it is not substantially
incorporated into reports furnished to others.
Tax Law section 1105(c)(1) imposes sales and use tax on receipts from the service of
furnishing information by printed, mimeographed or multigraphed matter, or by duplicating
written or printed matter in any manner, including the services of collecting, compiling or
analyzing information of any kind or nature and furnishing reports thereof to other persons.
Section 1105(c)(9) of the Tax Law imposes a sales tax on receipts from the service of furnishing
information by means of telephony or telegraphy or telephone or telegraph service, but only to
the extent it would otherwise be subject to tax pursuant to paragraph (c)(1) if provided in printed
form. Information services which are personal or individual in nature and which are not or may
not be substantially incorporated in reports furnished to other persons are excluded from the sales
tax imposed by section 1105(c)(1) or 1105(c)(9). Charges for information which is solely
transmitted orally are also excluded from sales tax. See 20 NYCRR §527.3(b)(3).
Petitioner’s oral consultations are not subject to tax. While the consultants provide
information to the Petitioner’s customers, the service principally involves the giving of guidance,
advice, or a historical perspective based upon the expert’s knowledge. Petitioner maintains that
the advice being given is specific to a particular customer, and it is not reused or substantially
incorporated into the reports provided to any other party. Petitioner also states that its experts
are advised not to use information from a common database in providing answers, just that of
their own expertise. Accordingly, we concluded that Petitioner’s oral consultation service was
not subject to tax.
As part of its oral consultation service, Petitioner provides access to a directory of some
of its experts to enable customers to select the expert with which it would like to consult. When
this directory is used by customers for purposes of selecting an expert for oral consultation, the
use of the directory is merely incidental to the oral consultation service. Moreover, the primary
aspect of Petitioner’s service is not the use of the software directory to select the expert, but the
information the expert provides to the customer. See TSB-A-10(47)S. Thus, when viewed as a
whole, the use of the directory as part of Petitioner’s oral consultation service is not subject to
tax.
Petitioner’s customers also use pre-written software on its website to access the
consultant directory and to facilitate interaction with the expert once selected. The use of such
software is not necessary to receive Petitioner’s consulting service, because the customer may
opt to use one of Petitioner’s research managers. There is no separate charge to use the software
and nothing in Petitioner’s subscription fee structure changes depending on whether or not the
customer uses the software or the research manager. We conclude that the primary function of
Petitioner’s service remains a non-taxable consultation service, and the use of software in this
instance does not alter the nature of the service. See TSB-A-10(40)S; TSB-A-10(47)S.
In this instance, our understanding is that any report is provided to augment Petitioner’s
consulting service, the primary aspect of which is Petitioner’s oral consultation services.
However, any separately charged fee for access to the consultant directory or for the successful
completion of a questionnaire or survey by Petitioner’s consultants may constitute a receipt from

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the sale of a taxable information service, as that would suggest that the access to Petitioner’s
directory was offered to its customers separate and apart from its consulting services. See
TSB-A-10(40)S.
In providing research reports to certain customers, Petitioner’s research manager collects,
compiles and analyzes the consultant’s responses to the customer’s questions, and furnishes this
information to the customer. The report to the customer of the responses thus constitutes an
information service. Written reports furnished by Petitioner’s consultants to its customers are
only exempt from tax to the extent that the information is personal or individual in nature, and
that the reports or survey results are not taken from a common data source and are not or may not
be substantially incorporated into reports furnished to others. Because information is derived
solely from the responses to the questions developed with the customer, rather than from a
common data source, and the reports are not provided to other customers or compiled for later
use by Petitioner in providing information to other customers, this information is considered
personal or individual in nature. Accordingly, the research reports are excluded from the
information services taxed under section 1105(c)(1) of the Tax Law. See TSB-A-10(40)S.
However, if Petitioner is providing information collected and compiled from its customer reports
to other persons, or reusing the data it collects from the questionnaires, Petitioner's receipts from
separately offering use of its consultant directory would constitute receipts from the sale of a
taxable information service.

DATED: August 29, 2012

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy 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. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.