Are custom satellite imaging analysis reports made for a single client subject to New York sales tax?

Plain-English summary

An Illinois company sells a satellite imaging analysis service in two flavors: standard reports sold to many customers (it already collects tax on those) and custom reports built for a single client about a specific business facility. A typical custom-report buyer is an investment firm studying a particular facility. Under the contract, the company special-orders high-resolution images of that facility, performs quantitative analysis, and delivers the report only to that client; the company is barred from sharing or reusing the analysis. The company asked whether the custom reports are taxable.

The Office of Counsel concluded the custom reports are not taxable:

• Furnishing information is generally a taxable information service (Tax Law section 1105(c)(1), (9)), and the custom reports are an information service because their primary function is to disseminate information.
• But section 1105(c)(1) excludes information that is personal or individual in nature and that is not, and may not be, substantially incorporated into reports furnished to others. Courts apply the exclusion only when the information relates exclusively to the customer and the provider is barred from selling the same information to third parties (New York Life), and the information must not come from a common source or widely accessible repository (ADP; RetailData, where pricing data that sat on shelves did not qualify).
• The custom reports qualify: each is made for one customer, the company is contractually prohibited from disclosing or reusing the images and analysis, and each image is special-ordered for that facility — not pulled from a common database. So the custom reports are exempt.

What this means for you

Data, analytics, and research providers

The dividing line under section 1105(c)(1) is personal/individual vs. common-database. A report is non-taxable when it is unique to one client, the provider cant reuse or resell it, and the raw inputs arent drawn from a shared repository. The moment the same information could be (or is) recycled to others, it becomes a taxable information service.

Same provider, two answers

This taxpayer correctly taxed its standard reports (sold to many) and didnt tax its custom reports (one client, no reuse). Selling both is fine — just apply the test product by product.

Contracts matter

The contractual ban on reuse and disclosure was central. Strong confidentiality and no-reuse terms support the exclusion; their absence undermines it.

Common questions

Q: Both reports use satellite imagery — why is only the custom one exempt?
A: The custom report is built for one client, cannot be reused or resold, and its images are special-ordered for that facility. The standard report is sold to many customers, so it is a taxable information service.

Q: The client keeps the satellite images — doesnt that make it a sale of property?
A: No. The primary function is disseminating information (an information service), and because it is personal/individual and not reusable, it falls within the section 1105(c)(1) exclusion.

Q: What would make a custom report taxable?
A: If the information came from a common source or widely accessible repository, or the provider could reuse or resell the same information to others.

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)
• Tax Law section 1105(c)(9) (furnishing information services)
• Matter of New York Life Ins. Co. v. State Tax Commn, 80 AD2d 675 (1981) (exclusion applies only when information relates exclusively to the customer and may not be resold)
• Matter of ADP Automotive Claims Servs. v Tax Appeals Tribunal, 188 AD2d 245 (3d Dept 1993) (information from a common source does not qualify)
• Matter of RetailData, LLC (Tax Appeals Tribunal, Mar. 3, 2016) (widely accessible information that sat on shelves did not qualify)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2017.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a17_12s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-17(12)S
Sales Tax
July 31, 2017

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

PETITION NO. S140324B

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED R(Petitioner).
Petitioner asks about the sales taxability of its custom satellite imaging reports. We conclude
that the custom reports are nontaxable information services because they qualify for the
exclusion for information services that are personal or individual in nature and are not and may
not be substantially incorporated into reports furnished to other persons.
Facts
Petitioner is an Illinois limited liability company that provides a satellite imaging analysis
service. Petitioner provides two types of reports to its customers: (1) standard reports that are
provided to multiple customers; and (2) custom reports that are tailored to the needs of an
individual customer and are provided only to that customer. Petitioner maintains that it collects
sales tax on its sales of the standard reports and requests an opinion on the sales tax treatment of
only the custom reports.
A typical customer for a custom report is an investment company that wants information
about a particular business facility that the customer may use to make investment decisions.
Petitioner enters into a Research Agreement ("Agreement") with the customer, which specifies
the facility to be imaged and requires Petitioner to provide monthly custom reports about the
facility. Under the agreement, Petitioner obligates itself to obtain high-resolution satellite
images with respect to the specific business facility requested by the customer and perform
quantitative analysis of the images. This analysis involves evaluating activities, change, growth,
and trends at the facility. The report also will identify key areas, activities, and assets for
continued monitoring based on Petitioner's research specific to the customer. The custom report
includes copies of the satellite images on which the analysis is based.
Petitioner must place a special order with a satellite imagery company in order to obtain
the satellite images provided as part of its customer report. The satellite imagery company
typically grants Petitioner a license to reproduce the satellite images it provides as part of its
custom report service, but Petitioner is prohibited from transferring to its customers the right to
reproduce the satellite imagery. Petitioner incorporates the magnified, high resolution satellite
imagery, along with corresponding analysis, in the custom report. The custom reports are sent to
the customer in the form of an Excel file and/or a PDF slide deck. Petitioner reviews the custom
report with the customer to determine key areas, activity, and assets for continued monitoring.
Petitioner also recommends the minimum frequency with which monitoring is required in the

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event the customer wants to continue with Petitioner's consulting services. On its payment
schedules and invoices for custom reports, Petitioner describes its service as professional fees for
imagery analysis of the facility.
Under the Agreement, the customer is prohibited from providing information contained
in the custom reports to others or otherwise disclosing Petitioner's information to any third
parties. However, the customer does have the right to use the information provided as part of
Petitioner's consulting services in providing advice to its investment customers. The Agreement
provides the customer with a worldwide, non-transferable, non-exclusive perpetual license to
make internal use of the materials provided in connection with the custom reports. The customer
also may use the custom reports to manage its investment customers' portfolios. However,
Petitioner’s customer may not provide its customers with copies of the custom reports prepared
by Petitioner pursuant to the Agreement.
The Agreement prohibits Petitioner from providing any information from a custom report
to anyone other than the customer that purchased it. Petitioner also is prohibited from (1)
disclosing or licensing any of the consulting research, (2) using the custom research for any
purpose other than for providing consulting services to the customer, and (3) disclosing that it is
aware of or possesses any of the custom research to any person other than the customer.
Petitioner also is prohibited from reusing any analysis, materials, or reports created as a result of
the Agreement.
Analysis
Tax Law § 1105(c)(1) imposes sales tax on receipts from the sale of the service of
furnishing information by printed, mimeographed, or multi-graphed matter, or by duplicating
written or printed matter in any other manner. See also Tax Law § 1105(c)(9). Excluded from
the tax on information services, however, is an information service that is “personal or individual
in nature and which is not or may not be substantially incorporated in reports furnished to . . .
persons” other than the customer. Tax Law § 1105(c)(1). The exclusion has been held to apply
only when the information conveyed to the customer relates exclusively to the customer in
question, and the service provider is prohibited from selling the same information to thirdparties. See Matter of New York Life Ins. Co. v. State Tax Comm’n, 80 AD2d 675, aff’d sub nom.
Matter of Metropolitan Life Inc. Co. v. State Tax Comm’n, 55 NY 2d 758 (1981). Furthermore,
the information must not be derived from a common source or a widely accessible repository that
could cause the same information to be substantially incorporated in a report furnished to others.
See Matter of ADP Automotive Claims Servs. v Tax Appeals Tribunal, 188 AD2d 245 (3rd Dep’t
1993); Matter of Towne-Oller and Assocs,120 AD2d 873, supra.
Petitioner’s custom reports qualify as an information service since their primary function
is to disseminate information. See Matter of Towne-Oller and Assocs., 120 AD2d 873, supra.
Thus, the only issue is whether its custom report service qualifies for the exclusion in Tax Law §
1105(c)(1), i.e., whether such reports furnish information that is personal or individual in nature
and that is not or may not be substantially incorporated in reports furnished to other persons.
Petitioner provides its facility image and analysis as a result of a request from a specific

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customer. It is precluded by contract from providing the facility images or its analysis to others
and it may not reuse any of its analysis or materials for other customers. Moreover, its facility
images do not come from a common source or database, as each facility image must be special
ordered from a third-party satellite imagery company, which then must take the image at the next
suitable opportunity. This distinguishes it from Matter of RetailData, LLC (Tax Appeals
Tribunal, March 3, 2016), where, in concluding that the pricing information at issue there was
widely accessible and thus did not qualify for the exclusion, the Tribunal emphasized that the
information there “sat on shelves.” Accordingly, Petitioner’s custom report service qualifies for
the exclusion for personal or individual information in Tax Law § 1105(c)(1) and is not subject
to tax. See Westwood Pharmaceuticals, Inc. v. Chu, 164 AD2d 462 (4th Dep’t, 1990); TSB-A92(51)S.

DATED: July 31, 2017

/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 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.