New York Advisory Opinion TSB-A-96(4)S: Are a company's "stock watch" and "NOMINEX" services -- which identify a client's beneficial stockholders and monitor changes in stock ownership -- excluded from New York sales tax as personal/individual information not incorporated into reports for other clients?

Plain-English summary

Kissel-Blake, Inc. helps corporate clients "unravel the ever-changing puzzle of corporate ownership" by identifying their beneficial stockholders. It offers two services for this purpose. The "stock watch service" is an ongoing, two-phase program that provides hourly monitoring of trading activity and price movements in a client's common stock, daily monitoring of all SEC filings, weekly monitoring/analysis of broker and bank positions, and analysis of daily trading and quarterly deposit activity -- all aimed at flagging early-stage stock accumulation by institutions or other investors who might be preparing a hostile move. The "NOMINEX service" is Petitioner's service-marked, in-house computer system that tracks share-position levels: it starts with an extensive telephone survey of SEC 13-F filing institutions and various nominee banks, recycles unidentified positions into a second survey using Petitioner's own proprietary NOMINEX database, and delivers in-depth confidential reports with charts showing exactly where and how a client's stock is held. Petitioner emphasizes that it doesn't simply print out a database query -- starting from a client's own raw portfolio data, it investigates who's really behind various investment and fiduciary accounts, and the resulting information is private, confidential, and by contract cannot be shared with any other customer.

The Department ruled these receipts are not taxable. Tax Law § 1105(c)(1) generally taxes "information services" -- collecting, compiling, or analyzing information and furnishing reports of it to others -- but specifically excludes furnishing information that is personal or individual in nature and is not, or may not be, substantially incorporated into reports furnished to other persons. Because Petitioner's stock watch and NOMINEX services are built from each individual client's own confidential portfolio data, tailored uniquely to that client's specific stockholder list, and contractually barred from being shared with any other client, they fall within this personal-information exclusion. The Department also confirmed, separately, that neither service constitutes a "protective and detective service" taxable under § 1105(c)(8) (a category covering things like alarm/security systems, detective agencies, and guard services), since stockholder identification research doesn't fit that category. So receipts from both services escape tax under both potentially applicable provisions.

What this means for you

Stockholder identification, proxy solicitation, and investor-relations research firms

If your research is genuinely client-specific -- built from that client's own data, analyzed and reported confidentially, and contractually barred from being reused or resold to other clients -- it likely qualifies for the personal/individual information exclusion from New York's information-services tax, even though it involves substantial data collection and analysis.

Information service providers evaluating this exclusion generally

The key factors the Department weighed were: (1) whether the underlying data/analysis is unique to one client rather than a repackaged product sold to many, and (2) whether confidentiality is contractually enforced. A generic report compiled once and resold to multiple customers would NOT qualify for this exclusion, even on a similar subject matter.

Common questions

Q: Would a generic "who owns this stock" report sold to any interested buyer qualify for the same exclusion?
A: No -- the exclusion specifically requires that the information NOT be substantially incorporated into reports furnished to OTHER persons. A report built once and resold to multiple customers would likely be taxable as a standard information service, unlike Petitioner's client-specific, non-shareable research.

Q: Why did the Department also address the detective-services tax under Section 1105(c)(8)?
A: Because some of Petitioner's investigative-style research (tracking down who's behind various accounts) could superficially resemble detective work, so the Department addressed it directly to confirm the services don't fall within that separately enumerated taxable category either.

Q: Does the ongoing, ever-updating nature of the "stock watch service" change the analysis?
A: No -- the ruling doesn't treat the service's continuous/subscription-style delivery as relevant; what matters is that the underlying information remains personal to each specific client and isn't incorporated into reports shared with others.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(1) (information services tax; personal/individual information exclusion)
• Tax Law § 1105(c)(8) (protective and detective services tax)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_4s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (4)S
Sales Tax
January 25, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S950420A

On April 20, 1995, a Petition for Advisory Opinion was received from Kissel-Blake, Inc.,
25 Broadway, New York, New York 10004.
The issue raised by the Petitioner, Kissel-Blake, Inc., is whether receipts from its "stock
watch service" and "NOMINEX service" are excluded from sales tax under the provisions of Section
1105(c)(1) of the Tax Law. This section of the law excludes 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 from the tax as it applies to information services.
The petition sets forth the following facts.
Petitioner is in the business of providing its clients with information as to the identities of
their stockholders. Petitioner's brochure describes its function as follows:
Unfortunately, most corporations lack the know-how and experience to unravel the ever­
changing puzzle of corporate ownership, making it virtually impossible to identify
accumulation activity on a timely basis. Kissel-Blake has the exceptional ability to act as the
corporation's eyes and ears in the financial community while, at the same time, functioning
as an early warning mechanism.
Petitioner offers two services to its clients for the purpose of identifying beneficial
stockholders, the "stock watch service" and the "NOMINEX service."
"NOMINEX" is a service mark designation for a computer-based system that employs
Petitioner's in-house, custom designed programs. "NOMINEX" technology is the heart of
Petitioner's ability to identify and quickly reach shareholders and other key decision makers on
matters involving takeover defense, tender offers, investor relations and proxy soliciting
assignments. "NOMINEX" is the method used by Petitioner to prepare detailed reports on
shareholder data. These highly informative documents provide corporate management with
comprehensive descriptions of beneficial stockholder bases registered in "street" names. In addition,
clients are given records of the names and telephone numbers of those individuals who have the
investment and/or voting control over the stock positions detailed in the reports.
Constant vigilance over the movement of stock ownership enables a client to stay prepared
in the event of a hostile attempt to take partial or full control of its Board, restructure the company
and deal more effectively with shareholder activism. Petitioner's "stock watch service" is an
ongoing, two-phase program designed to assist clients by monitoring trading, stock transfer and

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Sales Tax
January 25, 1996
depository ownership activities in clients' common stock and by analyzing data with the objective
of identifying stock accumulation at early stages. The "stock watch service" provides hourly
monitoring of trading activities and price movements of clients' common stock in the market, daily
monitoring of all Securities and Exchange Commission (SEC) filings, weekly monitoring and
analysis of broker/bank positions, and analyzing daily trading and quarterly deposit activities. By
so monitoring, Petitioner contracts to provide its clients with information as to accumulation of their
stock by institutions and other investors.
Petitioner's "NOMINEX service" keeps track of share position levels. It provides current and
timely profiles of beneficial shareholders from clients' nominee positions. The shareholder
identification effort is initiated by an extensive telephone survey of SEC 13-F filing institutions,
bank participants in Cede, Kray, Philadep and other nondepository bank nominees. Remaining
unidentified positions are recycled and a second survey is undertaken using the exclusive
"NOMINEX" database of corporate and international investment accounts. Following the
completion of the two surveys, the clients receive in-depth, confidential reports containing all of the
accumulated data and a number of charts highlighting where and how the clients' stock is held.
Petitioner gets its information from many sources, which in turn yields the information
desired by clients based upon raw portfolio data provided by clients. Petitioner does not merely print
out from a database a client's stockholder list; Petitioner receives a stockholder list from the client
then applies what it knows about street names, investigates who is behind various investment
accounts, learns who is behind various fiduciary accounts, and provides information to the client as
to who holds the client's stock and who is buying it. Information as to clients' stockholders is
provided in the reports, and under contract the information cannot be provided to any other
customers. The Petitioner, from all kinds of sources and from all kinds of information, culls and
gives clients lists of the names behind their stockholder accounts. Petitioner's contracts with its
clients are private and confidential, and the very nature of its service is that of service to a particular
client for a particular list of stockholders.
Section 1105(c)(1) of the Tax Law imposes tax on receipts from every sale, except a sale 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, and excluding the services of advertising or other agents, or other
persons acting in a representative capacity, and information services used by newspapers,
radio broadcasters and television broadcasters in the collection and dissemination of news,
and excluding meteorological services.
Section 1105(c)(8) of the Tax Law imposes tax on receipts from every sale, except a sale for
resale, of:

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Sales Tax
January 25, 1996
Protective and detective services, including, but not limited to, all services provided by or
through alarm or protective systems of every nature, including, but not limited to, protection
against burglary, theft, fire, water damage or any malfunction of industrial processes or any
other malfunction of or damage to property or injury to persons, detective agencies, armored
car services and guard, patrol and watchman services of every nature other than the
performance of such services by a port watchman licensed by the waterfront commission of
New York harbor, whether or not tangible personal property is transferred in conjunction
therewith.
The information that is furnished by Petitioner to clients is private, confidential and unique
to each client. The research efforts conducted by Petitioner are tailored in each instance to maintain
confidentiality and to meet the unique needs of the client. In the instant case, the "stock watch
service" and "NOMINEX service" that are provided by Petitioner are considered to be the furnishing
of information which is personal or individual in nature and the information is not or may not be
substantially incorporated into reports furnished to other persons. In addition, these services are not
protective or detective services within the meaning of Section 1105(c)(8) of the Tax Law.
Accordingly, receipts from the sale of these services are not taxable as receipts from the sale of an
information service pursuant to Section 1105(c)(1) of the Tax Law or as receipts from the sale of a
protective or detective service pursuant to Section 1105(c)(8) of the Tax Law.

DATED: January 25, 1996

/s/
DORIS S. BAUMAN
Director
Technical Services Bureau

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