Are customized market-research reports drawn from a common database a taxable information service, or 'personal or individual in nature' and excluded?

Plain-English summary

Rich Products Corporation buys reports from Selling Areas Marketing, Inc. ("SAMI") that track the warehouse movement of goods within designated areas. SAMI collects its data in a standardized way, but designs each client's specific reports individually — area, quantities, measurements, formats and product comparisons. Rich Products asked whether the receipts for these reports are subject to sales tax.

The Department held the reports are a taxable information service.

• Furnishing reports of compiled data is an information service. Section § 1105(c)(1) taxes the furnishing of information, "including the services of collecting, compiling or analyzing information of any kind and furnishing reports thereof to other persons" (see 20 NYCRR § 527.3(a)(2)). SAMI's reports are exactly that.
• The exclusion has two parts — both must be met. Section 1105(c)(1) excludes information that (1) is "personal or individual in nature" and (2) "is not or may not be substantially incorporated in reports furnished to other persons."
• First part met: the reports are customized. Because the reports are prepared to Rich Products' own specifications, they are "personal or individual in nature."
• Second part fails. That criterion is satisfied only if the information (a) has not previously been so used and (b) at the time of the report it could not reasonably be anticipated it would be so used. Here, even assuming (a), (b) fails: the information "would clearly be of interest to others," such as competitors, and — absent any prohibition — might well be substantially incorporated in reports for them.
• Result: taxable. The receipts are subject to tax under § 1105(c)(1). (The opinion is limited to the reports described; the buyer may still show on audit that a particular report meets the exclusion.)

What this means for you

Customization alone doesn't make a data report nontaxable. New York's information-service tax has a narrow escape hatch, and it requires two things: the information must be personal/individual and effectively not reusable in reports to others. A report tailored to your format still flunks if the underlying data could be repackaged and sold to your competitors.

"Common database" is the tell. When a vendor builds everyone's reports from one shared data pool, the information is inherently reusable, so the exclusion usually fails — even with per-client formatting. Ask whether there's a real contractual, statutory, or customary bar on the vendor reusing the data.

A contractual no-reuse clause can change the answer. The Department noted the buyer cited no prohibition against SAMI reusing the information. A genuine, enforceable restriction on reuse is part of what can move data from taxable "compiled reports" toward the excluded "personal or individual" category.

Common questions

Q: Our market-research reports are custom-built for us. Are they exempt as "personal or individual"?
A: Not automatically. Customization satisfies only the first half of the exclusion. If the underlying data could be reused in reports to others (e.g., competitors), the second half fails and the reports are taxable.

Q: What's the two-part test for the exclusion?
A: The information must be (1) personal or individual in nature, and (2) not — or not reasonably anticipated to be — substantially incorporated in reports furnished to other persons.

Q: Does a contract barring the vendor from reusing our data help?
A: It can. The Department noted the absence of any such prohibition. An enforceable no-reuse restriction supports treating the information as truly individual and outside the tax.

Citations and references

Statutes:

• Tax Law § 1105(c)(1) — tax on furnishing of information / information services, with the "personal or individual" exclusion

Regulations:

• 20 NYCRR § 527.3(a)(2) — collecting, compiling or analyzing information and furnishing reports is an information service

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a83_19s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-83(19)S
Sales Tax
April 1, 1983

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810910B

On September 10, 1981 a Petition for Advisory Opinion was received from Rich Products
Corporation, 1145 Niagara Street, P.O. Box 245, Buffalo, New York 14240.
The issue raised is whether receipts from the purchase of certain reports from Selling Areas
Marketing, Inc. (hereinafter "SAMI") by Petitioner are subject to sales tax.
Petitioner states that it is provided by SAMI with reports which track the warehouse
movements of goods within designated areas. Documents submitted by Petitioner indicate that SAMI
generally "collects its data in a standardized, pre-set method" but that "each client's specific reports
are designed individually to meet his own needs." Thus, a report, the contents of which are derived
from a common data base, is nonetheless prepared in conformity with a customer's unique needs and
interests, as, for example, with regard to such matters as "the area, quantities, measurements, formats
and product comparisons."
Section 1105(c)(1) of the Tax Law imposes a tax on receipts from every sale, except for
resale, of: "The furnishing of information by printed, mimeographed or multi-graphed matter or by
duplicating written or printed matter in any other manner, including the services of collecting,
compiling or analyzing information of any kind or nature and furnishing reports thereof to other
persons, but excluding 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. . . . ."
The collecting, compiling or analyzing information of any kind or nature and the furnishing
of reports thereof to other persons constitutes the rendering of an information service. 20 NYCRR
527.3(a)(2). SAMI reports consist of data which has been collected, compiled or analyzed. Therefore,
the sale of these reports constitutes the rendering of an information service, within the meaning of
the statutory provision set forth above.
The information provided in the reports purchased by Petitioner is prepared in a customized
format, according to Petitioner's specifications, and is thus "personal or individual in nature," thereby
satisfying the first of the two criteria for exclusion from the operation of section 1105(c)(1) of the
Tax Law. Opinion of Counsel, 1965 NYTB-3, p.24; Opinion of Counsel, 1965 NYTB-4, p.48. The
second criterion is that the information "is not or may not be substantially incorporated in reports
furnished to other persons." Petitioner has failed to cite any extant prohibition against such use of
the information by SAMI, whether contractual, statutory or customary. It therefore remains to be
determined whether the information "is not" so used. This criterion is satisfied if (a) the information
has not previously been so used, and (b) at the time of the rendering of the report in question it could
not reasonably have been anticipated that the information would be so used. State Tax Commission

ROBERT W. BOUCHARD, ACTING COMMISSIONER
GABRIEL B. DiCERBO , DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (8/82)

-2­
TSB-A-83(19)S
Sales Tax
April 1, 1983

Declaratory Ruling 79-01, TSB-H-80(97)S; Roger S. Farber, State Tax Commission Advisory
Opinion, December 17, 1981, TSB-A-82(3)S; New York Life Insurance Co. v. State Tax
Commission, 80 AD 2d 675, aff'd (no op) 55 NY 2d 760 (1982). In the present instance, based on
the information and sample reports furnished by Petitioner, it appears that even if the condition set
forth in clause (a) in the preceding sentence is satisfied, that in clause (b) is not, for the information
would clearly be of interest to others, as for example Petitioner's competitors, and barring any
prohibition might well be substantially incorporated in reports furnished to such others.
Accordingly, the receipts from the purchase of such reports as are here described are subject
to sales tax, pursuant to section 1105(c)(1) of the Tax Law. It is to be noted that the conclusion
expressed herein relates to those reports specified by Petitioner by description and sample. Petitioner
is presently under audit, and it is within the context of such audit that the present inquiry has arisen.
This Advisory Opinion in no way bars Petitioner from demonstrating on audit that any particular
report purchased by it does in fact satisfy the statutory exclusionary provision herein explicated.

DATED: March 16, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau