Is a report analyzing a clients customers that benchmarks against industry data a taxable information service?

Plain-English summary

An online information-services company sells clients reports analyzing their potential customers behavior and how to grow their customer base. It pulls from the clients own website traffic and surveys, but also from general, industry-specific information and public sources, and the reports benchmark the clients performance against competitors. The same general information can be reused in reports for similar clients. It asked whether the report fee is taxable.

The Office of Counsel concluded the reports are a taxable information service:

• Collecting, compiling, or analyzing information and furnishing reports is an information service taxable under Tax Law section 1105(c)(1) (20 NYCRR 527.3(a)(2)).
• There is an exclusion for information that is personal or individual in nature and not, and may not be, substantially incorporated into reports furnished to others. But it has two criteria, and these reports fail them: the information must be uniquely personal/individual, judged by its source — information from a common source or non-confidential repository is not personal/individual (ADP; Rich Products; Towne-Oller). Here a portion comes from public sources, and the industry information may be included in reports to similar clients.
• Even customized reports stay taxable if substantially derived from a common, non-confidential data source (Rich Products).
• The public/industry information is not de minimis (compare the general-tax-tables example, 20 NYCRR 527.3(b)(2)): the whole point — benchmarking against competitors — is impossible without the non-personal industry data, so that data is an integral component of the service. The reports are therefore not personal/individual and are taxable.

What this means for you

Analytics, benchmarking, and research providers

The exclusion for personal/individual information turns on the source of the data. If your report depends on a common database, industry data, or public sources — especially data you reuse for other clients — it is a taxable information service, even if each report is customized and contains some client-only data.

Benchmarking is the tell

A service whose value is comparing a client to competitors necessarily uses non-personal, common-source information, which is not de minimis. That pushes it into taxable territory. Contrast a report drawn exclusively from the clients own confidential data and not reusable (compare TSB-A-17(12)S), which can qualify for the exclusion.

De minimis is a narrow safe harbor

A trivial amount of public data (like using general tax tables in a payroll calc) wont taint an otherwise personal report — but anything the service depends on is not de minimis.

Common questions

Q: My report contains data unique to the client — isnt that personal and individual?
A: Not if the report also depends on common-source or public information that you reuse for other clients. The exclusion fails when non-personal, common-source data is an integral part of the service.

Q: We customize each report. Does that make it exempt?
A: No. A customized report is still taxable if it is substantially derived from a common, non-confidential data source.

Q: What counts as de minimis public data?
A: Something trivial like using general tax tables in a payroll calculation. Data the service depends on (like benchmarking information) is not de minimis.

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)(1) (tax on information services; personal-or-individual exclusion)
• 20 NYCRR 527.3(a)(2) (collecting/compiling/analyzing information is an information service)
• 20 NYCRR 527.3(b)(2) (de minimis public-source data example)
• Matter of ADP Automotive Claims Service v Tax Appeals Tribunal, 188 AD2d 245 (3d Dept 1993) (common-source information is not personal/individual)
• Matter of Rich Products Corp. v Chu, 132 AD2d 175 (3d Dept 1987) (customized report still taxable if drawn from a common source)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_33s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-16(33)S
Sales Tax
December 7, 2016

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

PETITION NO. S141009A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTED (“Petitioner”).
Petitioner asks whether the fee charged for a report analyzing a specific client’s customers’
habits and how to improve the client’s customer base is subject to sales and compensating use
tax.
We conclude that Petitioner’s fee for a report analyzing customer data that incorporates
some information personal to the client, but also includes general information that is an integral
part of the service, is a service subject to sales and compensating use tax under Tax Law §
1105(c)(1).
Facts
Petitioner is an online information services company that provides clients with detailed
reports of their potential customers’ behavior. Petitioner uses a variety of sources to obtain this
information, including Internet traffic to the client’s website, surveys designed to answer
questions specific to the client, and general information pertaining to the industry of the client.
This information then is compiled into a report that is provided to the client for a fee.
The general information used in these reports is industry specific, but not client specific,
and therefore may be utilized by the Petitioner in other reports for similarly-situated clients.
According to Petitioner, the primary purpose of this service is to provide clients with the analysis
of personal data. Therefore, all reports contain client specific data that will not be utilized in any
other reports as well as general information. In order to provide clients with information specific
to their websites, Petitioner analyzes publicly available sources to create benchmarks and to
measure how a particular client’s website traffic rates compare to others. Petitioner maintains
that the information available from publicly obtained sources is “inconsequential” to the
provision of its service.
Analysis
Tax Law § 1105(c)(1) imposes sales and compensating use tax on information services.
However, this section excludes from the imposition of sales tax “the furnishing of information
which is personal or individual in nature and which is not or may not be substantially
incorporated in reports furnished to other persons.”

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TSB-A-16(33)S
Sales Tax
December 7, 2016

Petitioner’s reports are information services subject to sales tax under Tax Law section
1105(c). “The collecting, compiling or analyzing information of any kind or nature and the
furnishing reports thereof to other persons is an information service.” 20 NYCRR 527.3(a)(2).
Petitioner’s reports are compilations of data that include information specific to a client, as well
as industry related information that may be included in reports provided to multiple clients.
The exclusion pertaining to information that is personal or individual in nature, and that
is not or may not be substantially incorporated in reports furnished to other persons, is
inapplicable to Petitioner’s reports. The first criterion is satisfied only by information that is
uniquely personal or individual in nature. Matter of Allstate Ins. Co. v. Tax Commn. of the State
of New York, 115 AD2d 831 (3d Dep’t 1985), aff’d 67 NY2d 999 (1986); Twin Coast
Newspapers, Inc. v. State Tax Commission, 101 AD2d 977 (3d Dep’t 1984). It is the source of
the information that controls whether the report prepared will meet the criteria of "personal and
individual." Matter of ADP Automotive Claims Service Inc., Tax Appeals Tribunal, August 8,
1991. Information is not uniquely personal or individual in nature if it comes from a common
source or a data repository that itself is not confidential. See Matter of ADP Automotive Claims
Service Inc. v Tax Appeals Tribunal, 188 AD2d 245 (3d Dep’t 1993); Rich Products Corporation
v Chu, 132 AD2d 175 (3d Dep’t 1987); Towne-Oller & Assoc. v State Tax Comm, 120 AD2d 873
(3d Dep’t 1986); Alan/Anthony, Inc., TSB-A-92(51)S. A portion of the information in
Petitioner’s reports comes from public sources and, thus, is not personal or individual in nature.
In addition, the industry-specific information contained in the reports may be included in reports
to similarly-situated clients Thus, Petitioner’s reports do not satisfy the second criterion of the
exclusion. See Matter of Rich Products., supra; Twin Coast Newspapers, supra.
Even when the information provided in a report is customized in some manner, the
information service would still be taxable if customized information is substantially derived from
a common data source that is not confidential, e.g., a common data source maintained by the
information service provider. See Matter of Rich Products., supra; Matter of Towne-Oller and
Associates, supra; Economic Cycle Research Institute, Inc., TSB-A-97(42)S. Because
Petitioner’s reports include general information pertaining to certain industries, or from the
Internet, the reports would be subject to sales tax as taxable information services.
An information service can be considered “personal or individual in nature” if a de
minimis amount of the data incorporated in the reports is derived from public sources. See 20
NYCRR 527.3(b)(2) (example 2) (stating that the use of general tax tables in calculating client’s
payroll withholdings falls within this exception); Matter of the Petition of Automatic Data
Processing, Inc. TSB-H-85(164)S (May 8, 1985); see also TSB-A-12(24)S. However, that is not
the case here. Petitioner’s description of its service states that non-personal information may be
included in reports provided to multiple clients. While Petitioner contends that the public
information is “inconsequential” to its service, its website states that its service provides the
ability to “monitor competition and benchmark performance.” Without the use of non-personal
information about a client’s particular industry, a comparison of the client’s performance relative
to its competitors would not be possible. Thus, the use of non-personal information to provide
such reports does not appear to be de minimis; rather, it is an integral component of the

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TSB-A-16(33)S
Sales Tax
December 7, 2016

Petitioner’s services. Therefore, Petitioner’s reports are not “personal and individual” in nature
and are subject to sales tax under Tax Law § 1105(c)(1).

DATED: December 7, 2016

__/S/____
DEBORAH R. LIEBMAN
Deputy 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 of 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.