United States

New York: Information Services Found Not Personal or Individual in Nature

Mar 30, 2015
From KPMG TaxWatch

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The New York Tax Appeals Tribunal recently addressed whether a taxpayer’s provision of information services to its customers was exempt from sales tax as information that is personal or individual in nature. Under New York law, sales tax is imposed upon receipts from the service of furnishing information, “including the services of collecting, compiling or analyzing information and furnishing reports.” However, there is a carve-out for receipts from furnishing “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 taxpayer at issue provided several financial reporting services: (1) Smart Loan, a modular system that, among other activities, tracked customer information for legal and regulatory compliance, and verified pricing and lending accuracy; (2) Lending Pit, an information tool allowing customers to view their own historical lending data, as well as benchmarks formulated by the company's use of data from other customers; (3) Board Reporting, a report evaluating a customer's lending program against industry benchmarks; and (4) Performance Analytics, a report evaluating a customer's lending program against other security lenders using the company’s proprietary scoring model. The Board Reporting and Performance Analytics were both components of the Lending Pit product. Following an audit, the Division of Taxation assessed sales tax on these services. The taxpayer appealed the assessment to the Division of Tax Appeals, which held that each of the services was an information service under New York law, but that only the Smart Loan service was excluded from tax as personal or individual in nature. The taxpayer filed an exception to the ALJ determination, arguing that the ALJ incorrectly concluded that the Lending Pit, Board Reporting and Performance Analytics services were not personal and individual in nature.

With regard to the Lending Pit services, the taxpayer primarily argued that the ALJ incorrectly concluded that the information the taxpayer received from each of its customers was made available to all of its customers as part of the Lending Pit service. The Tribunal observed that the taxpayer’s portrayal of its Lending Pit product (that it collected, analyzed and returned the same data to its customers) was inconsistent with the evidence on record. Notably, documents and press releases described the service as providing customers access to benchmarks created from data collected across all customers. Furthermore, the taxpayer’s subscriber agreements required subscribers to agree that the taxpayer could distribute their data in aggregate form. The taxpayer also advertised that it could provide subscribers the underlying Lending Pit data to use in their in-house systems. Therefore, the Tribunal concluded that the taxpayer failed to prove that the information provided to its customers was personal or individual in nature and therefore was not or could not be substantially incorporated into reports furnished to other persons. Further, the Tribunal determined that the Board Reporting and Performance Analytics reports were based on information generated by the Lending Pit database, and therefore were likewise not uniquely personal or individual in nature. For more information on In Re Sungard Securities Finance LLC, DTA No. 824336 (N.Y. Tax App. Trib. Mar. 16, 2015), please contact Dennis Prestia at (212) 872-6891 or Judy Cheng at (212) 872-3530.


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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.