Is reformatting electronic data and transmitting it to third parties taxable, and must a mailing-list vendor collect tax from a customer who resells the information?

Plain-English summary

The Petitioner sells mailing-list information and asked two questions, in two scenarios:

1. Reformat + transmit (company T): The Petitioner hires company T to reformat its mailing-list data into a more marketable format and transmit the reformatted data to a company that sells the lists on the Petitioner's behalf.
2. Buy + resell (company V): Company V sells mailing-list information to the Petitioner, which combines it with its own lists and resells the aggregated information to end users.

The Office of Counsel concluded:

• Reformatting + transmitting = not taxable. The service of merely reformatting electronic data is not taxable, and it doesn't become taxable as a telephony/telegraphy service (section 1105(b)(1)) just because the vendor transmits the reformatted data to a third party. So company T's service is not taxable.
• Selling mailing lists = taxable information service. The online sale of information is taxable under section 1105(c)(9), and selling mailing lists by someone in that business is a taxable information service (Alan Drey Co. v. State Tax Commission). So company V is selling a taxable information service.
• Resale exclusion + resale certificate. A taxable information service is not a taxable retail sale if the buyer will resell the information as such or as part of a taxable information service (20 NYCRR 527.3(c)(3)). The Petitioner resells company V's data as part of its own taxable information service, so it may give company V a resale certificate (Form ST-120). Because such sales are presumed taxable, the vendor should obtain a resale certificate from any customer claiming resale.

What this means for you

Data-formatting / transmission services

Reformatting electronic data and sending it on to a third party is not taxable -- neither the formatting nor the transmission. Don't treat the hand-off as taxable telecom.

Selling lists / information is taxable

If you're in the business of selling mailing lists or compiled information, that's a taxable information service -- collect tax on all your New York sales unless the buyer is reselling.

Document resale

Because these sales are presumed taxable, get a resale certificate (ST-120) from any customer who says it will resell the information (including reselling it as part of its own information service). That's what protects you on audit.

Common questions

Q: Is reformatting our data and transmitting it taxable?
A: No -- reformatting isn't taxable, and transmitting the reformatted data to a third party isn't taxable telephony.

Q: Do I charge tax when I sell mailing lists?
A: Yes -- selling mailing-list information is a taxable information service. Collect tax on New York sales unless the buyer is reselling.

Q: My customer resells the lists -- can I avoid charging tax?
A: Yes, if you get a resale certificate (Form ST-120). The customer can resell the information as such or as part of its own taxable information service.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(c)(9) (sales tax on the online sale of information)
• Tax Law section 1105(c)(1) (information services)
• Tax Law section 1105(b)(1) (telephony/telegraphy services)
• 20 NYCRR section 527.3(c)(3) (resale of a taxable information service)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_12s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(12)S
Sales Tax
March 17, 2015

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S131031A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTED “Petitioner”. Petitioner asks whether the
service of changing the format of electronic data and transferring the reformatted data to third
parties that market the information is subject to sales tax, and whether a vendor selling mailing
list information in an electronic format must collect sales tax from its customer if the customer
resells the information.
We conclude that the combined service of reformatting electronic data and transferring
the reformatted data to third parties is not subject to sales tax. A vendor in the business of selling
mailing list information must collect sales tax on all New York sales of the information unless
the sale is for resale. Because all sales of taxable information services are presumed subject to
sales tax, an information service vendor should obtain a resale certificate from any customer that
purports to resell the information.
Facts
Petitioner presents two different scenarios. Petitioner hires company T to reformat
Petitioner’s mailing list information stored in electronic media to a format that makes the
information more marketable on on-line marketplaces and then to transmit the reformatted data
to a company that sells mailing list information on behalf of Petitioner.
In the other scenario, company V, which is in the business of selling mailing list
information, sells mailing list information to Petitioner, which combines this information with its
own mailing list information and then resells the aggregated information to end users.
Analysis
The service of merely reformatting electronic data is not a service subject to sales tax.
Compare TSB-A-10(20)S. Nor does the service become subject to sales tax under Tax Law §
1105(b)(1) as a telephony and telegraphy service if the vendor transmits the reformatted data to a
third party. See TSB-A-97(86)S; see also TSB-A-08(39)S. Therefore, the service provided by
company T to Petitioner is not subject to sales tax.

-2-

TSB-A-15(12)S
Sales Tax
March 17, 2015

The on-line sale of information is subject to sales tax under Tax Law §1105(c)(9). The
sale of mailing lists by a person in the business of selling such lists constitutes an information
service. See Alan Drey Company, Inc. v. State Tax Commission, 67 AD2d 1055 (3d Dep’t 1979).
Thus, company V is selling a taxable information service. The sale of a taxable information
service is not a retail sale subject to sales and use tax if the purchaser will resell the information
as such or as part of a taxable information service. 20 NYCRR § 527.3(c)(3). Petitioner is
reselling the information it purchases from company V as part of a taxable information service.
Therefore, Petitioner may provide company V with a resale certificate (Form ST-120).

DATED: March 17, 2015

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.