Are reports from searching computerized databases — like trademark or legal research — taxable as an information service, or exempt like a professional service?

Plain-English summary

Corsearch Inc. is an information brokerage that holds rights to hundreds of computerized databases and searches them, project-by-project, for clients — for example, trademark-infringement searches and Westlaw/Lexis legal searches for litigators. After the Department told it (in a July 1, 1988 letter) that its services are taxable, Corsearch sought review, arguing its work is a professional service like an attorney's. The question: are its reports a taxable information service under Tax Law § 1105(c)(1)?

The Department held the reports are taxable.

• This is an information service. § 1105(c)(1) taxes collecting, compiling, or analyzing information and furnishing reports of it. Corsearch's reports are exactly that (20 NYCRR § 527.3(a)(2)).
• It doesn't fit the "personal or individual" exclusion. The statute excludes information that is personal or individual in nature and not (or not likely to be) substantially incorporated in reports to others. Corsearch fails both prongs. The information is not uniquely personal — it is compiled from common, publicly available databases. Merely compiling public data to a client's specifications doesn't make it personal (Twin Coast Newspapers; Towne-Oller & Associates; and Allstate Insurance, where DMV records were public and not personal). And because the same database information can be given to other clients searching for the same thing, it is or may be substantially incorporated in reports to others (§ 527.3(a)(3), Example 4 — a legal-research printout is taxable because the same citations may go to another subscriber).
• It's not an exempt attorney's service. While a licensed attorney's professional services are outside the sales tax, Corsearch is not a licensed attorney, so that exemption doesn't apply.

What this means for you

Selling research pulled from shared databases is generally a taxable information service. If you search, compile, or analyze information and hand clients a report, § 1105(c)(1) taxes it — trademark searches, legal-citation research, market/records pulls, and the like.

The "personal or individual" escape hatch is narrow. To be excluded, the information must be uniquely personal (not just gathered for one client) and unlikely to be reused in reports to others. Anything drawn from a common database or public records — which can be searched again for the next customer — will usually flunk the test and stay taxable.

Calling it "professional" doesn't exempt it. The professional-services exemption is tied to the actual licensed profession (e.g., a licensed attorney). Doing research that resembles what a lawyer might do doesn't make your firm's output an exempt professional service.

Common questions

Q: We search databases and sell research reports. Is that taxable in New York?
A: Yes. Collecting, compiling, or analyzing information and furnishing reports is a taxable information service under § 1105(c)(1).

Q: Our reports are prepared for one specific client. Doesn't that make them "personal or individual"?
A: No. Compiling common or public information to a client's specifications isn't enough — the information must be uniquely personal and unlikely to be reused in reports to others. Common-database results fail that test.

Q: We do the kind of legal research a lawyer does. Isn't that an exempt professional service?
A: No. The exemption applies to a licensed attorney's professional services. An information broker that isn't a licensed attorney doesn't qualify.

Citations and references

Statute, regulation, and case law:

• Tax Law § 1105(c)(1) — taxes furnishing information, including collecting, compiling, or analyzing information and furnishing reports, but excludes information that is personal or individual in nature and not (or not likely to be) substantially incorporated in reports furnished to others
• 20 NYCRR § 527.3 — information services; the personal-or-individual exclusion and Example 4 (a legal-research printout is taxable because the same citations may be furnished to another subscriber)
• Twin Coast Newspapers, Inc. v. State Tax Commission, 101 AD2d 977 — information isn't personal or individual merely because compiled for a specific person; it must be uniquely personal
• Matter of Towne-Oller & Associates, Inc., TSB-H-85(36)S, aff'd 120 AD2d 873 — reports prepared to a customer's specifications from common data are not uniquely personal
• Allstate Insurance Co. v. Tax Commission, 115 AD2d 831 — DMV records filed as public records with unlimited public access are not personal or individual
• New York Life Insurance Co. v. State Tax Commission, 80 AD2d 675 — contrasting example where tailored, confidential detective-agency reports were personal or individual

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a88_58s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88 (58)S
Sales Tax
November 16, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S880826B

On August 26, 1988, a Petition for Advisory Opinion was received from Corsearch Inc, 19
West 21st St., Suite 302, New York, New York 10010.
The issue raised is whether the services performed by Petitioner are subject to the sales tax
imposed under section 1105(c)(1) of the Tax Law.
Petitioner is an information brokerage firm which receives the rights to hundreds of
computerized databases. Petitioner searches these data bases on a project-by-project basis for its
clients. Some of Petitioner's clients maintain the same type of system that they use for preliminary
screening of information prior to ordering complete research reports from a vendor such as
Petitioner. Examples of some of Petitioners projects include searches of potential trademark
infringements and Westlaw and Lexis searches for litigators.
On July 1, 1988 Petitioner received a letter from Mr. William Myers, Chief, Sales Tax
Instructions and Interpretations Unit of the Department of Taxation and Finance, stating that
Petitioner's services are subject to sales tax. Petitioner does not agree with the conclusions reached
in Mr. Myer's letter and seeks review of said letter.
In its Petition, Petitioner argues that its services are professional in nature and similar to those
offered by an attorney and that if its services were performed by an attorney, they would be exempt
from sales and use tax.
Section 1105(c)(1) of the Tax Law imposes a tax on the receipts from every sale, except for
resale, of:
"The furnishing of information by printed, mimeographed or multigraphed 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 of 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). The reports furnished by Petitioner consist of information 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 first of the two criteria which must be met to exclude Petitioner's reports from taxation
is that the information supplied must be "personal or individual" in nature.
In the Matter of New York Life Insurance Co. v. State Tax Commission, 80 AD

TP-9(9/88)

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TSB-A-88 (58)S
Sales Tax
November 16, 1988

2d 675, aff'd no op 55 NY 2d 760, confidential character reports prepared by licensed detective
agencies were deemed to be personal or individual in nature by virtue of the fact that the interview
phase of the investigations, the primary basis of the report, was tailored in each instance to the
specifications of the client. However, in the Matter of Twin Coast Newspapers, Inc., v. State Tax
Commission, 101 AD 2d 977, the Court held that information is not personal or individual in nature
merely because it is compiled for a specific person. The information must be of the uniquely personal
nature contemplated by the statute in order to come within the purview of the exclusion. Thus,
information which has been published elsewhere and which is merely compiled to the specifications
of a particular person is not personal or individual in nature.
The requirement that the information furnished be of a uniquely personal nature also formed
the basis for the determination of the State Tax Commission in the Matter of Towne-Oller &
Associates, Inc., TSB-H-85(36)S; aff'd. 120 A.D.2d 873, 502 NYS2d 544(1986). In that instance,
Towne-Oller provided information reports to manufacturers of health and beauty aids. The
information provided by Towne-Oller was used by its customers to determine whether the
manufacturers' products were in stock in the appropriate distribution outlets. The Tax Commission,
citing Twin Coast, concluded that the fact that some of the reports were prepared to a customer's
specifications did not in and of itself, render the reports personal or individual in nature and held
further that the information provided by Towne-Oller was not of the uniquely personal nature
contemplated by the Tax Law Sll05(c)(1).
Additionally, in Allstate Insurance Company v. Tax Commission of the State of New York,
115 A.D.2d 831 (1985), Department of Motor Vehicle reports (MVR's) were held to not qualify as
personal and individual in nature. The court held that "[t]his exclusion (Tax Law Sll05(c)(1)) refers
to uniquely personal information and does not apply to information filed with a governmental agency
as a public record to which there is unlimited public access" (citations omitted).
The second criterion of the exclusionary portion of the statute is that the information "is not
or may not be substantially incorporated in reports furnished to other persons."
Sales tax regulation section 527.3(a)(3) provides the following example:
Example 4:

A computer service company owns a service program consisting of analyses
of law cases and statutes. It is asked by a customer to research all references
to the word "assessment". The fee for the printout received by the customer
constitutes a taxable receipt from an information service, as the citations
listed may be given to another subscriber requesting the same information.

As stated in Mr. Myers' letter of July 1, 1988, "[i]nformation reports prepared from a
common data base fail to meet the requirement for exclusion from sales tax since the information
from which the report is compiled is readily available for incorporation into reports sold to
subsequent customers."

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TSB-A-88 (58)S
Sales Tax
November 16, 1988

Accordingly, since Petitioner's services consist of information which is not personal or
individual in nature and which is or may be substantially incorporated in reports furnished to others,
Petitioner's services are subject to the tax imposed under §1105(c)(1) of the Tax Law,
Finally, while professional services rendered by a licensed attorney have always been deemed
to be outside of the scope of the sales and use tax, it is noted that Petitioner's services are not
professional services rendered by a licensed attorney notwithstanding Petitioner's position regarding
the professional nature of its services.

DATED: November 16, 1988

FRANK J. PUCCIA
Director
Technical Services

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.