Are consumer-marketing analysis reports built from a large shared database a taxable information service, or an exempt personal/individual service?

Plain-English summary

National Demographics and Lifestyles, Inc. (NDL) sold manufacturers a set of marketing reports — a Consumer Analysis Report (CAR), an NDL F/O/C/U/S report, and a Market Development Index (MDI) — plus annual subscriptions. The raw material came from product-registration questionnaires packaged with the manufacturers' goods, asking consumers for demographic data (income, age, marital status), product-purchase data, and lifestyle data. NDL kept a separate database for each manufacturer's product data, but fed the demographic and lifestyle answers into its own "large" database of more than 25 million consumers, then drew on that shared database (and national norms) to build the reports.

The Department held the reports are a taxable information service under Tax Law § 1105(c)(1) — they fail both requirements of the personal/individual exclusion:

• Not "uniquely" personal or individual. The information isn't uniquely personal to the client, unlike the confidential character reports tailored to each client's specifications in New York Life Insurance Co. v. State Tax Commission.
• Drawn from a common database, so substantially incorporated in others' reports. Because the data is entered into and retrieved from NDL's "large" common database, the information is or may be substantially incorporated into reports furnished to other clients. The courts have repeatedly held that reports built from a shared, widely accessible data repository are taxable even when customized for each customer (Twin Coast Newspapers; Towne-Oller & Associates; Rich Products / SAMI, where a common data base alone defeated the exclusion).

So NDL's total charges — the annual subscription fee and all three reports — are subject to New York State and local sales tax.

What this means for you

The source of the data decides taxability, not the amount of customization

An information report is a taxable service when it's built from a common database you also use for other customers — even if you tailor the format or the selection of statistics to each client. The personal/individual exclusion is narrow: it protects information that is uniquely personal to one client and not pooled into a shared repository used to serve others.

Compare this to genuinely client-specific reports

Reports generated from information collected only about one client's own subject matter, and not fed into a database reused for others, can qualify for the exclusion. The dividing line the Department applies is whether the underlying information lives in — and is drawn from — a common source. Here it did, so the reports were taxable.

Even a "test" report and subscription are part of the taxable charge

The Department treated the entire package — subscription fee and each report — as the taxable information service. Don't assume a bundled subscription or introductory report escapes tax when the core deliverable is a taxable information service.

Common questions

Q: We customize each client's marketing report — isn't that a personal, individual service?
A: Not if the report is built from a database you also use for other clients. Customization doesn't save it; a shared, widely accessible data source makes it a taxable information service.

Q: What would make our reports exempt?
A: The information would have to be uniquely personal to the one client and not substantially incorporated into reports furnished to others — i.e., not drawn from a common repository serving multiple customers.

Q: Is the annual subscription taxable too?
A: Yes. The Department treated the subscription fee and all the reports together as the taxable information service.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(1) — tax on information services; exclusion for personal/individual information not substantially incorporated in reports furnished to others
• 20 NYCRR § 527.3 — information services include credit reports and product and marketing surveys

Cited authority:

• New York Life Insurance Co. v. State Tax Commission, 80 AD2d 675, aff'd 55 NY2d 760 — tailored confidential character reports were uniquely personal (contrast)
• Twin Coast Newspapers, Inc. v. State Tax Commission, 101 AD2d 977 — reports from a source available to everyone were not uniquely personal
• Towne-Oller & Associates, Inc., TSB-H-85(36)S, aff'd 120 AD2d 873 — reports from one general data source were a taxable information service despite some customizing
• Rich Products Corporation v. Chu, 132 AD2d 175 — a common data repository alone defeats the exclusion (substantial incorporation)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1989.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a89_37s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-89(37)S
Sales Tax
October 19, 1989

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S890104B

On January 4, 1989, a Petition for Advisory Opinion was received from National
Demographics and Lifestyles, Inc., 1621 18th Street, Denver, Colorado 80202.
The issue raised is whether Petitioner, National Demographics and Lifestyles Inc.'s charges
to its clients for its Consumer Analysis Report, its NDL F/O/C/U/S report, its Market Development
Index report and annual subscription fees are subject to New York State and local sales tax pursuant
to Section 1105(c) of the Tax Law as charges for information services that are not personal or
individual in nature and which are not or may not be substantially incorporated in reports furnished
to other persons.
Petitioner and certain manufacturers of consumer hard goods have entered into agreements
whereby the manufacturers package a questionnaire with their products. Consumers of the products
are requested to provide specific information when completing the questionnaire and upon
completion to forward the questionnaire to Petitioner.
The questionnaire consists of three sections. The first section requests the name and address
of the consumer as well as demographic information (Demographic Data) such as the consumer's
income, age, marital status, etc. The second section requests information regarding the purchase of
the product (Product Data), such information subsequently being intended exclusively for the
manufacturer (except that portion used in aggregated research and modeling, in which the data
cannot be identified as belonging to the client). The information requested in the second section
varies depending upon the individual manufacturers. It may request the model number of the
product, date of purchase, and whether the individual completing the questionnaire is the actual
purchaser or a recipient of a gift. The third section is a list of certain lifestyle patterns (Lifestyle
Data). The individual completing the questionnaire is requested to check those items which are
descriptive of the individual's life-style. Some of the categories are hunting/shooting, foreign travel,
devotional reading, crafts and tennis.
Petitioner maintains a separate data base for each manufacturer client and a "large" data base
for use in generating mailing lists for the direct marketing industry. Petitioner accesses the data bases
to obtain information for use in preparing reports for manufacturer clients.
Upon receipt of a completed questionnaire, Petitioner enters the Product Data information
from the second section of the questionnaire into a data base maintained for the manufacturer to
whom the information applies. Petitioner enters the information from the first and third sections of
the questionnaires into Petitioner's "large" data base, which contains demographic and life-style
information pertaining to more than 25,000,000 consumers. Petitioner contends that sales tax is

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collected on all sales of the mailing lists, generated from the large data base, where delivery of such
lists occurs within New York State.
The initial agreement between Petitioner and client provides that the client must pay an
annual subscription fee to Petitioner, payment thereof entitling the client to receive a "test"
Consumer Analysis Report (CAR) and thereafter semi-annual CAR's for the duration of the two year
term of such initial agreement. The agreement is renewable for four consecutive periods of three
years each, such renewal being automatic unless either party notifies the other, in writing, at least
sixty (60) days prior to the lapse of the then effective term. In addition to the annual subscription fee,
the client will be charged separate fees for any additional reports or services provided by Petitioner.
The agreement also provides that all CAR's and other analyses provided to the client and all
Product Data (except in aggregated research and modeling, in which the Product Data cannot be
identified as belonging to the client) shall become the sole property of the client.
Under the agreement, all names, addresses, Demographic Data and Lifestyle Data, and other
information on or derived from the questionnaires at any time (excluding only Product Data as
limited in the preceding paragraph), including any compilations, lists, derivations, extrapolations and
excerpts thereof, shall become the sole property of Petitioner for use by Petitioner at its sole
discretion. However, the client shall have the non-exclusive right to use the names and addresses and
Product Data of its consumers for its own purposes. In no event shall Petitioner sell, rent or
otherwise release to anyone other than the client, a complete or partial list of names identified by
their purchase of a product or service of the client.
Petitioner prepares and delivers reports to the manufacturer clients. Such reports include the
CAR's, the NDL F/O/C/U/S and the Market Development Index.
Petitioner submitted a sample copy of each report. The following is a synopsis of the sample
reports submitted:
Consumer Analysis Report (sample report)
The sample Consumer Analysis Report submitted by Petitioner consists of information
reflecting the results of consumer responses to questions posed on all three sections of the
questionnaire enclosed with the client's product. The data providing the basis for computing the
information in the CAR was entered into the data bases Petitioner maintains for this manufacturer
and for the direct marketing industry ("large" data base). Petitioner subsequently retrieved data from
those data bases for the purpose of computing the information shown in the CAR.
The sample CAR is made up of 4 pages of information derived from Product Data, and 20
pages of information derived from Demographic and Lifestyle Data.

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The CAR provides information, indicated by percentages of the total consumers responding,
such as where the product was purchased, how the consumer became aware of the product, the
primary reason for purchasing this product instead of another brand, other products of this brand
previously purchased by the consumer, consumer gender, age, marital status, occupation of consumer
and spouse, ages of all children living at home, annual family income, use of credit cards, primary
residence, activities which consumer and spouse regularly participate in on a regular basis and a
listing of states by census division indicating the percentage of consumers in each state.
NDL F/O/C/U/S (sample report)
The sample NDL F/O/C/U/S report submitted by Petitioner contains information which,
although presented in a different format than that in the CAR, also reflects results of consumer
responses to questions on the first and third sections of the questionnaire enclosed with the client's
product. Petitioner accessed its "large" data base for information which was used to make
comparisons of the client's consumers to the total consumers nationwide (per "large" data base) who
purchased like products of different brands.
The sample NDL F/O/C/U/S is made up of 33 pages of information derived from
Demographic and Lifestyle Data.
The sample report provided includes a demographic profile of the client's consumers. The
information shown lists various categories and indicates the percentage of the client's total male and
female respondents to whom each category applies. The report also provides a demographic
comparison of the client's male and female respondents to the national "norm" for each category as
determined by Petitioner through accessing the "large" data base. The categories used in both the
demographic profile and comparison included such subjects as sex (gender), marital status, age,
occupation, income, home ownership, children at home, credit cards, county type and census
division.
Other information lists various activities and shows, by percentages, the client's total male
and female respondents interested in each activity. Among the activities listed are gardening,
watching tv sports, crafts, home workshop, fishing, golf, photography, personal computer,
automotive work, tennis, electronics, etc.
The sample NDL F/O/C/U/S also provides a geographic analysis (map), by percent,
indicating the highest to lowest concentration of the client's consumers, nationwide, by states and
by direct marketing areas.
The sample report also includes a demographic comparison and an activity interest
comparison of the client's consumers to the total applicable consumers in Petitioner's "large" data
base. The results indicate how the client's consumers "score" in numerous categories when compared
to the national consumer "norm". The client's consumers were "scored" by total group (including
both male and female), by male group and by female group.

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Geographic analysis (maps) based on highest to lowest "score" by states and by direct
marketing areas are also provided in this report.
The sample NDL F/O/C/U/S presents additional demographic, activity interest, and state and
direct marketing area analysis data which also reflects the results of consumer responses to questions
posed on the first and third sections of the questionnaire enclosed with the client's product.
Petitioner uses this data and data retrieved from the "large" data base or from other sources to
determine how the client's consumers "score" when compared to the applicable national "norm".
Market Development Index (sample)
The Market Development Index (MDI) provides Petitioner's clients with a means to access
the relative strengths and weaknesses of their product's in its retail markets.
Petitioner works with the client to design or model a Buying Power Index (BPI) which will
best represent buyer potential for the product category in which the client's product competes.
The BPI chosen can be selected from a variety of available data sources. The CARs are used
to identify the client's consumers by demographic, geographic and lifestyle characteristics. Other
factors which best relate to the client's product are then reviewed. For example, homeowners might
serve as the "standard benchmark" for a lawnmower manufacturer, or the hunter/shooting interest
profile derived from the Lifestyle Census data base (Petitioner's "large" data base - 25,000,000 +
consumers) may be a benchmark for a rifle manufacturer.
The client has the option of selecting which time frame the Market Development Index
Report will include. The options offered are semi-annual (current year compared to prior year),
annual (current year compared to prior year), year to date (current year compared to prior year), and
custom periods (current period compared to benchmark period).
The reports may also use selected information from public or private research sources such
as ADI - Area of Dominant Influence (Arbitron Ratings Company), DMA - Designated Market Area
(A.C. Nielsen Company), MSA - Metropolitan Statistical Area (Department of Commerce), County Counties within United States only (Department of Commerce), and Sales Territories - Client
Company Definition (Client Company).
Other information may be obtained from Market Statistics, NDL's Lifestyle Census Database
and from Client or Industrial Sources.
The sample Market Development Index report submitted by Petitioner compares the client's
retail sales from the years 1986 and 1985. The report lists all of the client's retail market areas by
order of potential sales from highest to lowest. The report compares actual sales to expected sales
and indicates the level of achievement by percentage for each market area for both years. The report
also shows the percentage of change from 1985 to 1986. Petitioner arrived at the potential sales or

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demand by applying pertinent elements from the public or private research resources indicted above.
Section 1105 of the Tax Law states as follows:
Imposition of sales tax. ...there is hereby imposed and there shall be paid a tax ...
upon:
*
(c)

*

*

The receipts from every sale, except for resale, of the following services:

(1)
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, ...
Section 527.3 of the Sales and Use Tax Regulations states:
Sales of information services. (Tax Law, §1105[c][1])
*

*

*

(a)
Imposition. (1) Section 1105(c)(1) of the Tax Law imposes a tax on the
receipts from the service of furnishing information by printed, mimeographed or
multigraphed matter or by duplicating written or printed matter in any manner such
as by tapes, discs, electronic readouts or displays.
(2)
The collecting, compiling or analyzing [of] information of any kind or nature
and the furnishing [of] reports thereof to other persons is an information service.
(3)
Among the services which are information services are credit reports, tax or
stock market advisory and analysis reports and product and marketing surveys.
*
(b)

*

*

Exclusions.

(2)
The sales tax does not apply to the receipts from the sale of information
which is personal or individual in nature and which is not or may not be substantially

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into reports furnished to other persons by the person who has collected, compiled or
analyzed such information.
The various reports Petitioner furnishes to clients consist of information which Petitioner has
collected, compiled and analyzed. Accordingly, Petitioner is considered to be engaging in the
furnishing of information and the sales of its reports constitute the sale of an information service
within the meaning of the statutory provisions set forth above.
The first of the two criteria which must be met to qualify Petitioner's reports for exclusion
from taxation is that the information supplied must be "personal or individual" in nature.
The second criteria 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."
In the Matter of New York Life Insurance Co. v. State Tax Commission, 80 AD 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 in reports compiled for specific subscribers was not exempt
as information of a personal or individual nature merely because such reports contained selected
statistics desired by such subscribers. The source of the information furnished was not limited to
petitioner but was available to everyone and therefore such information was not of the uniquely
personal nature contemplated by the exemption.
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 NYS 2d 544 (1986). In that instance,
Towne-Oller provided information reports to manufacturer's of health and beauty aids. Upon
petitioner's appeal, the court found that to obtain information for its reports, petitioner purchased
tapes from wholesalers and distributors which identified products they distributed and to what stores.
All of petitioner's reports were created from that data base. Some of the reports were directed to meet
the individual needs of a given customer. The reports were prepared at the request of a customer and
included a product positioning study, a distribution opportunity study and a manufacturer's special
report.
The court found that although there was some customizing of reports for individual
customers by the petitioner, the service provided was not of a personal and individual character. The
reports furnished contained general information, all of which was gleaned from one general source.

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The court found the reports to be unlike those furnished by the taxpayer in Matter of New York Life
Ins. Co. v. State Tax Comm., 80 A.D. 2d 675, 463 N.Y.S.2d 380, affd. sub nom. Matter of
Metropolitan Life Ins. Co. v. State Tax Comm., 55 N.Y.2d 758, 477 N.Y.S.2d 245, 431 N.E.2d 970
and, therefore, held that petitioner's activities were an information service and not excludable from
taxation.
In the Matter of Rich Products Corporation v. Roderick G. W. Chu et al., Constituting the
Tax Commission of the State of New York (132 A.D.2d 175) petitioner purchased written reports
from Selling Areas Marketing, Inc. (SAMI). Before issuing a report, SAMI's sales representatives
worked with the individual client to create a program of marketing data retrieval to answer specific
informational requests of the client concerning the sales performance of one or more of its products
in comparison with that of one or more of its competitors.
The court was in agreement with the determination of the State Tax Commission in the
Matter of Rich Products, Inc., TSB-H-86(126)S in that the fact that no two reports to different
customers were likely to be the same and that such reports were customized in some respects to
respond to the needs of the particular client was not dispositive of entitlement to the exclusion,
particularly where the information contained therein was derived from a single data repository which
itself was not confidential and was widely accessible. The court was of the view that evidence in the
record supported the Tax Commission's inference that the information in the reports is or may be
substantially incorporated in reports furnished to others. On the basis of the fact that a common data
base was used for all reports, the Tax Commission could reasonably infer that the significant and
ultimate information on comparative sales performances and of shares of the market of truly
competing products in most major markets will substantially overlap in the reports furnished by
SAMI to petitioner and its competitors. The court concluded that the purchased information's
"substantial incorporation" in reports to others was alone sufficient to disqualify the sales in question
for the exclusion and did not find a need to address whether the information was not personal or
individual in nature.
In the instant case the questionnaires completed by the client's consumers and submitted to
Petitioner are tailored to provide specific information desired by the client and by Petitioner, and to
be compatible with Petitioner's computer software systems to allow computerization and analyses
of such information.
Under the terms of the agreement between Petitioner and client, the Product Data (except for
that portion used in aggregated research and modeling) is the sole property of the client. The Product
Data section of the questionnaire is tailored to the client's specifications and a portion (approximately
1/4) of the information provided in the Consumer Analysis Report prepared by Petitioner reflects the
results of the total responses to that section of the questionnaire by all participating consumers.

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However, a substantial portion of the information furnished in the Consumer Analysis
Report, the NDL F/O/C/U/S and in the Market Development Index report results from consumer
responses to questions in the Demographic and Lifestyle Data sections of the questionnaire, the data
from such consumer responses being entered into Petitioner's "large" data base. Under the terms of
the agreement between Petitioner and client such data is the sole property of Petitioner for use by
Petitioner at Petitioner's sole discretion. The NDL F/O/C/U/S and the Market Development Index
report also contain data which reflects the results of comparing information from the Demographic
and Lifestyle Data sections of the questionnaires to information obtained from other sources
(purchased by Petitioner) or to information in Petitioner's "large" data base.
The statutory tests for excluding information services from sales tax are whether the
information provided is "uniquely" personal or individual in nature and whether the information is
not or may not be substantially incorporated in reports furnished to other persons.
Although the bulk of the information furnished in the Consumer Analysis Report results from
total consumer responses to the Demographic and Lifestyle Data sections of the questionnaire
developed for that particular client and although a lesser portion of the information provided in the
report reflects the total consumer responses to the Product Data section of the questionnaire, such
information does not meet the statutory test for exclusion from sales tax of being "uniquely" personal
or individual in nature as were the confidential character reports prepared by detective agencies in
New York Life Insurance Co. v. State Tax Commission, supra. Moreover, inasmuch as the
information is also entered into Petitioner's "large" data base and inasmuch as Petitioner accesses
such "large" data base when preparing reports for clients, the information furnished in the Consumer
Analysis Report also fails to meet the statutory test that the information furnished is not or may not
be substantially incorporated into reports furnished to other persons.
Likewise, as a majority of the information furnished in the NDL F/O/C/U/S and the Market
Development Index reports also results from consumer responses in the Demographic and Lifestyle
Data sections of the questionnaires, and as such reports also contain data reflecting the results from
the comparison of information from the Demographic and Lifestyle Data to information obtained
from other sources (purchased by Petitioner) or to information in Petitioner's "large" data base, such
information also fails to meet the statutory tests for exclusion from sales tax referred to above,
inasmuch as such information is not uniquely personal or individual in nature nor does it meet the
requirement that it is not or may not be substantially incorporated into reports furnished to other
persons.

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Accordingly, Petitioner is considered to be selling a taxable information service and
Petitioner's total charges to clients for the annual subscription fee, the Consumer Analysis Report,
the NDL F/O/C/U/S report and the Market Development Index report are subject to New York State
and Local sales tax.

DATED: October 19, 1989

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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