When a company buys taxable information reports delivered to offices both inside and outside New York, how much of the charge is subject to New York sales tax?

Plain-English summary

Clairol, Inc. buys professional research and marketing reports from information-service companies. The reports are collated from various sources and delivered to Clairol's offices across many states and countries — some as hard copy (paper or magnetic tape) mailed to offices, others transmitted electronically to Clairol's terminals or databases. Any given report may go to several addresses, and Clairol may reproduce and redistribute it among its offices. Assuming (as the petition did) that these are taxable information services under Tax Law § 1105(c)(1), Clairol asked how much New York sales tax it must pay when a report reaches offices both inside and outside the state.

The Department held:

• Only reports delivered in New York are taxable. New York sales tax is a destination tax (§ 525.2(a)(3)): the point of delivery / transfer of possession controls both whether tax applies and the rate. Reports delivered outside New York are not subject to New York tax.
• Electronic reports — allocate by offices with access. When reports are delivered electronically to Clairol, which has offices inside and outside New York, tax "should be allocated according to the number of its offices within and without New York State having access to the electronic reports."
• Hard-copy reports — allocate by copies delivered. When reports are delivered by paper, disc, or tape, tax "should be allocated according to the number of copies of the reports delivered to Petitioner within and without New York State."
• Bringing reports in later triggers use tax. If Clairol later brings some reports into New York, it must pay compensating use tax on them under § 531.1(b)(3).

The Department followed Paul R. Comeau, TSB-A-90(43)S.

What this means for you

Buying an information service delivered in several states? New York taxes only the New York share

If a taxable information service is delivered to you at locations inside and outside New York, you don't pay New York tax on the whole thing — you pay on the portion delivered in New York, because New York's tax follows the point of delivery.

The allocation method depends on how the report arrives

Electronic delivery and physical delivery are measured differently. For an electronic feed, count the offices with access inside vs. outside New York; for physical copies, count the copies delivered inside vs. outside New York. Keep records that support whichever count applies so you can document the taxable fraction.

Watch the use-tax trap for reports you later move into New York

Even a report properly delivered (and taxed) outside New York can generate a New York liability: if you subsequently bring it into the state, compensating use tax applies to it.

Common questions

Q: We buy a taxable information report delivered to offices in several states. Is the whole charge subject to New York tax?
A: No. Only the portion delivered in New York is taxable, because New York sales tax is a destination tax (§ 525.2(a)(3)).

Q: How do we figure the New York portion?
A: For electronic reports, allocate by the number of your offices inside vs. outside New York that can access them; for hard-copy reports, allocate by the number of copies delivered inside vs. outside New York.

Q: What if we later bring an out-of-state report into New York?
A: You owe compensating use tax on it under § 531.1(b)(3).

Citations and references

Statutes, regulations, and prior opinions:

• Tax Law § 1105(c)(1) — tax on the furnishing of information services
• 20 NYCRR § 525.2(a)(3) — sales tax is a destination tax; point of delivery controls the tax incident and rate
• 20 NYCRR § 531.1(b)(3) — compensating use tax on information services taxable under § 1105(c)(1)
• 20 NYCRR § 527.3 — sale of information services (printed matter, tapes, discs, electronic readouts or displays)
• Paul R. Comeau, TSB-A-90(43)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a91_41s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-91 (41)S
Sales Tax
May 9, 1991

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK

COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S910404A

On April 4, 1991 a Petition for Advisory Opinion was received from Clairol, Inc., 345 Park
Avenue, New York, New York 10154.
The issue raised by Petitioner, Clairol, Inc., is what is the proper amount of sales tax to be
collected from it on the purchase of information reports that are delivered to locations that are within
and without New York State.
Information service companies (hereinafter "Sellers") provide professional research and
marketing advice to Petitioner who has offices located throughout the United States and the world.
For purposes of this advisory opinion request, it is assumed that these services constitute information
services subject to sales tax pursuant to Section 1105(c)(l) of the Tax Law. As part of the provision
of these professional services, Sellers collect data from various sources. The data is collated and
synthesized into reports. Paper and magnetic tape (hereinafter "hard copy") reports are then mailed
to Petitioner, while electronic reports are transmitted to Petitioner's terminals or data bases.
Petitioner operates on interstate and international levels. It has offices in several different
states and countries. Each report provided to it is delivered to multiple addresses, with some reports
delivered to its New York State offices, and others delivered to its offices located in other states or
countries. In either case, the report, once delivered, may be reproduced by Petitioner and distributed
among its offices in different states and countries.
Section 527.3 of the Sales and Use Tax Regulations provides:
Sale 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.
Section 525.2(a)(3) of the Sales and Use Tax Regulations provides:
The sales tax is a "destination tax," that is, the point of delivery or
point at which possession is transferred by the vendor to the
purchaser or designee controls both the tax incident and the tax rate.
For special rule relating to motor vehicles, see Part 540 of this Title.
Section 531.1 of the Sales and Use Tax Regulations provides in part:
Imposition of compensating use tax

-2­
TSB-A-91 (41)S
Sales Tax
May 9, 1991

(b)

Taxable uses. The uses enumerated herein are subject to tax.
*

*

*

(3)
Information services which would be subject to tax under
subdivision (1) of section 1105(c) of the Tax Law.
Although Sellers deliver information reports both within and without New York State, only
those reports which are delivered in New York State are subject to sales tax in accordance with
Section 525.2(a)(3) of the Sales and Use Tax Regulations. Therefore when the information reports
are delivered by electronic means to Petitioner, who has offices both within and without New York
State, sales tax should be allocated according to the number of its offices within and without New
York State having access to the electronic reports. However, where such reports are delivered by
hard copy in paper, disc or tape form to Petitioner, sales tax should be allocated according to the
number of copies of the reports delivered to Petitioner within and without New York State. If
Petitioner later brings some reports into New York State, it would be required to pay the
compensating use tax on such reports in accordance with Section 531.1(b)(3) of the Sales and Use
Tax Regulations. Paul R. Comeau, Adv Op Comm T & F, August 20, 1990, TSB-A-90(43)S.

DATED: May 9, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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