Are a jeweler's charges for certificates of authenticity for its own pieces subject to NY sales tax?

Plain-English summary

The petitioner has designed and manufactured jewelry since 1940. When an owner or prospective buyer wants a piece appraised, they may pay the petitioner to examine it and issue a certificate of authenticity confirming the petitioner made it and whether it has been altered. To do this, the petitioner keeps catalogs, photographs, artisan records, and a chain-of-custody database, and compares the piece (sometimes with help from the original artisans) against its archives. The certificate is usually requested years after purchase, so the charge is for the document alone, not tied to a jewelry sale. The petitioner asked whether these certificate charges are taxable.

The Office of Counsel concluded the charges are excluded from sales tax:

• It is an information service. Collecting, compiling, or analyzing information and furnishing reports is a taxable information service, judged by its primary function (Tax Law 1105(c)(1); TSB-M-10(7)S). The certificate's primary function is to provide information, so it qualifies.
• But it falls in the personal/individual exclusion. Tax Law 1105(c)(1) excludes "the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated into reports furnished to other persons" (20 NYCRR 527.3(b)(2)). By contrast, information drawn from a common database or widely-accessible/statistical sources, recast into reports, stays taxable even if customized (ADP Collision Estimating).
• These certificates are personal/individual. Each certificate rests on the petitioner's expertise authenticating one specific piece against its own archives, is given only to the requester, and is not incorporated into reports for others. So the receipts are excluded from sales tax -- as long as the certificate isn't sold together with another taxable service or in conjunction with a sale of the jewelry.

What this means for you

Appraisers, authenticators, and experts

A genuinely one-off report -- prepared from your own examination for a single client and not folded into reports you sell to others -- can qualify as personal or individual information and escape sales tax. The line is whether the information comes from (or feeds) a shared/common database or reusable report.

Watch the bundling caveat

The exclusion holds only if the certificate stands alone. Bundle it with a taxable service, or issue it as part of selling the item, and the analysis changes.

Common questions

Q: Isn't every report a taxable information service?
A: No. Information that is personal or individual in nature -- prepared for one client and not substantially incorporated into reports given to others -- is excluded from tax.

Q: What would make my report taxable instead?
A: Drawing it from a common database or widely-accessible/statistical data and recasting that into reports -- even customized ones -- is taxable.

Q: Does it matter if I issue the certificate when I sell the piece?
A: Yes. The exclusion applies only if the certificate isn't sold in conjunction with another taxable service or the sale of the tangible property.

Citations and references

• Tax Law section 1105(c)(1) (sales tax on information services; personal/individual exclusion)
• Tax Law section 1105(a) (sales tax on tangible personal property)
• 20 NYCRR section 527.3(b)(2) (personal or individual information exclusion)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2014.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a14_2s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-14(2)S
Sales Tax
January 23, 2014

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S130102A

The Department of Taxation and Finance received a Petition for Advisory Opinion
from name and address redacted. Petitioner asks whether sales of “Certificates of
Authenticity” (Certificates) pertaining to pieces of jewelry manufactured by Petitioner are
subject to New York State sales and use tax.
We conclude that Petitioner is selling information services, but that the Certificates
are personal or individual in nature and, as such, are excluded from the sales tax.
Facts
Petitioner has been designing and manufacturing jewelry since 1940. The jewelry
is consigned to wholesale trading partners and sold to the general public. The value of the
jewelry, which is derived in part from the gemstones and metals used in the design, is
enhanced by verification that the piece was manufactured by Petitioner’s well-known
brand. Thus, when an owner of a piece of Petitioner’s jewelry or a prospective purchaser
plans to obtain an appraisal of a piece, the owner or prospective purchaser may ask
Petitioner to examine the piece and issue a Certificate, a service for which Petitioner
charges. The Certificate confirms that Petitioner was the original manufacturer and that
the piece has or has not been altered over time. To offer this service, Petitioner maintains a
catalog of each piece in its original state at the time it was manufactured and archives of
the piece’s history and owner(s) if known. Petitioner’s Certificates are created individually
for each customer or potential purchaser and individually for each piece of jewelry.
Substantially all of the pieces of jewelry were photographed upon completion. The
photographs, the date of manufacture, and the names of the artisans who worked to create
the piece are retained in Petitioner’s archives. Petitioner also attempts to trace the
ownership of the piece from its original purchase and maintains a database on the chain of
custody for each piece. When a customer or purchaser requests a Certificate, Petitioner
compares the subject piece with the information in its archives and asks the original
artisans, if available, to examine the piece as well, in order to determine authenticity.
Because the requests for such a Certificate typically are made many years after the original
purchase, the charge for the Certificate generally is for the document only and not
connected to a sale of jewelry by Petitioner.

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TSB-A-14(2)S
Sales Tax
January 23, 2014

Analysis
New York State and local sales tax is imposed on the receipts from every retail sale
of all tangible personal property, unless otherwise exempted, and on the receipts from
every sale of certain specified services.1 Generally, the furnishing of information is an
enumerated service subject to sales tax, regardless of the manner of delivery, and includes
the services of collecting, compiling or analyzing information of any kind or nature and
furnishing reports thereof to other persons.2 Whether a service qualifies as an information
service depends on its primary function, as determined by the nature of the service being
sold and on what is being paid for by the purchaser. If the primary function of a service is
to provide information, the service as a whole qualifies as an information service.3
Because Petitioner’s service primarily provides information to its customers, Petitioner’s
issuance of the Certificates is an information service that is taxable if no exclusions apply.
One such exclusion is “the furnishing of information which is personal or
individual in nature and which is not or may not be substantially incorporated into reports
furnished to other persons”4 by the person who collected, compiled, or analyzed such
information.5 In contrast, an information service generally would be regarded as taxable, if
the information conveyed was created or generated from a common database, or compiled
from information that is widely accessible.6 Likewise, a report that uses or relies on
statistical models or historical data, or a report that gathers information from a variety of
sources and recasts that information into a report, would be considered a taxable
information service,7 regardless of whether the reports are customized in some respects to
respond to the needs of a particular customer.8
The information on Petitioner’s Certificates is based on the expertise of the
Petitioner, who authenticates each piece of jewelry by comparing its present condition to
Petitioner’s archives on the piece. The information on the Certificates is provided to the
owner or prospective purchaser of the piece of jewelry and is not incorporated into reports
furnished to persons other than the person who requested it. Thus, we conclude that
Petitioner’s Certificates are personal and individual in nature within the meaning of
§ 1105(c)(1) of the Tax Law. The receipts from the provision of those Certificates,
therefore, are excluded from sales tax, provided that the Certificates are not sold in

1

Tax Law § 1105(a), § 1115, and § 1105(c).
Tax Law § 1105(c)(1).
3
TSB-M-10(7)S.
4
Id.
5
20 NYCRR §527.3(b)(2).
6
TSB-M-10(7)S.
7
Id.
8
ADP Collision Estimating Services, Inc., Tax Appeals Tribunal No. 804973, Aug. 8, 1991; aff’d 188 AD2d
245 (3rd Dept., 1993).
2

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TSB-A-14(2)S
Sales Tax
January 23, 2014

conjunction with the performance of any other taxable services and are not performed for a
customer in conjunction with the sale of tangible personal property.9

DATED: January 23, 2014

NOTE:

9

/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.

See Westwood Pharmaceuticals v. Chu, 164 AD2d 462 (4th Dept. 1990);TSB-A-03(42)S.