Was demographic and marketing information taxable when customers selected regions and databases but the underlying information remained available to other customers?

Plain-English summary

The provider offered demographic and marketing data. A client chose a geographic region and one or more databases, paid according to those choices, and received information from a CD that was updated three or four times a year.

Rule 3.342(d)(1) excluded information gathered or compiled for a particular client only when it was proprietary to that client and could not be sold to others. Here, the same information remained available to many customers according to their needs. The Comptroller therefore treated the described information services as taxable.

What this means for you

Letting a customer choose a region, database, or report scope did not make shared source information proprietary. The letter focused on whether the provider could offer the information to other customers, including in another form or report.

Common questions

Were the described demographic and marketing services taxable? Yes.

What would make compiled information nontaxable under the cited rule? It had to be proprietary to one client and unavailable for sale to others.

Did customer selection alone satisfy that test? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.342(d)(1) — client-proprietary information

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9109L1130D11

Original ruling text

September 10, 1991

Dear ****:

I've researched your question concerning the taxability of *
and * .

I understand ** is an information delivery system providing
demographic and marketing data to clients. The client selects a region
and one or more of the databases offered. The fee is based on the size
of the region and the number and types of databases selected. The
information is on a CD and updated CD's are provided three or four times
per year.

Under Rule 3.342(d)(1), information gather or compiled on behalf of a
particular client is not subject to tax if the information is of a
proprietary nature to that client and may not be sold to others. The key
phrase is, "if the information is of a proprietary nature to that
client." In other words, the seller may not sell the information to
another customer even in another form or report. In this situation, the
information is available to many customers based on the customers'
needs. The information service is taxable.

I understand ** is the same service on a smaller scale. And
* is also a taxable service.

This opinion is based on the facts presented other facts, although
similar, may result in a different conclusion. If you have any questions
or need more information, please call. My number is 512/463-4614. Or
you may write to the Tax Administration Division.

Sincerely,

Adina Whittemore
Tax Administration Division