Does a forage testing lab have to collect sales tax on charges for testing farm feed and reporting the results, or is it exempt personal/individual information?

Plain-English summary

David J. Converse intends to own and operate a forage testing laboratory. It will test substances like grain, corn silage and haylage for crude protein, crude fiber and mineral content, and issue reports on the results. Customers will be farmers, feed corporations and the like, and at a customer's request a report may also be furnished to another party the customer names, such as a grain dealer. He asked whether he must collect sales tax on the testing charges.

The Department held the charges are not taxable.

• Analyzing information and reporting it is an "information service." Section 1105(c)(1) taxes the service of collecting, compiling or analyzing information of any kind and furnishing reports of it to others.
• But personal/individual information is carved out. That same section (and 20 NYCRR 527.3) excludes information that is personal or individual in nature and that is not, or may not be, substantially incorporated in reports furnished to other persons.
• These lab reports fit the exclusion. The findings are furnished only to the customer and the customer's designees. They aren't fed into reports circulated to other persons, so they are personal and individual in nature.
• Result: no State or local sales tax on Converse's charges to his customers.

What this means for you

Not every "information service" is taxable — the key is who else gets the information. New York taxes information services, but it exempts information that's personal or individual and isn't recycled into reports sold to others. Custom results generated for one client and shared only with that client (and people the client points you to) generally land on the exempt side.

Reports to a customer's designee don't break the exemption. Sending the client's own results to a third party the client designates — here, a grain dealer — is still furnishing the information to that client's circle, not building a shared database of everyone's results.

Watch the line. If you take the same test data and fold it into reports you furnish to other customers or the public, the personal/individual exclusion can stop applying and the service becomes taxable.

Common questions

Q: I analyze samples and send back a report — isn't that a taxable information service?
A: Analyzing information and reporting it is a § 1105(c)(1) information service, but it's exempt when the information is personal or individual and isn't substantially incorporated into reports furnished to others. Custom lab results given only to your customer qualify.

Q: I sometimes send the results to a grain dealer the farmer names. Does that make it taxable?
A: No. Furnishing the customer's own results to a designee the customer chooses is still within the personal/individual exclusion; it isn't circulating the data to other persons generally.

Q: When would my testing charges become taxable?
A: If you substantially incorporate the results into reports you furnish to other persons — turning individual results into shared or resold information — the exclusion may no longer apply.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1105(c)(1) — taxes information services (collecting, compiling or analyzing information and furnishing reports to others), but excludes information that is personal or individual in nature and not substantially incorporated into reports furnished to other persons
• 20 NYCRR 527.3 — defines the information service and the personal/individual exemption

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a81_12s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-81(12)S
Sales Tax
August 19, 1981

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S801105A

On November 5, 1980 a Petition for Advisory Opinion was received from David J. Converse,
R.D. #5, LaFave Rd., Watertown, New York 13601.
The issue raised is whether Petitioner is required to collect sales tax on charges for services
rendered by his laboratory.
Petitioner will own and operate a forage testing laboratory. The laboratory will test such
substances as grain, corn silage and haylage for crude protein, crude fiber, and mineral content, and
will issue reports on the results of such testing. Petitioner's customers will be farmers, feed
corporations and the like. At the request of his customers, reports may be furnished to parties other
than Petitioner's customers, such as a grain dealer.
Section 1105(c)(1) of the Tax Law imposes a tax on the receipts from every sale, except for
resale, of the service 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
. . . ."
Section 527.3 of the Sales and Use Tax Regulations provides that: "(a) . . . (2) The collecting,
compiling or analyzing information of any kind or nature and the furnishing reports thereof to other
persons is an information service. . . (b) . . . (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 incorporated into reports furnished to other persons by the person who has collected,
compiled or analyzed such information." 20 NYCRR 527.3.
The services to be rendered by Petitioner will constitute the furnishing of information, within
the meaning and intent of section 1105(c)(1) of the Tax Law. Inasmuch as the laboratory findings
are furnished only to Petitioner's customers and their designees, the reports are personal and
individual in nature and, therefore, qualify for the exemption provided within Section 1105(c)(1).
Accordingly, Petitioner's charges to his customers will not be subject to State and local sales taxes.

DATED: August 4,1981

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR