Can a legal publisher buy the statutes, court reports, and periodicals it researches tax-free — as resale, research materials, information services for resale, or production supplies?

Plain-English summary

The Lawyers Co-operative Publishing Company publishes legal reference works and runs a computer-based legal citation service. It buys statutes, legislative reports, court reports, administrative regulations, periodicals, and the like, then has its staff analyze, organize, and interpret them to produce legal texts, encyclopedias, advance sheets, newsletters, official reports, and an electronic citation database. It argued its purchases were exempt on four grounds: (1) component parts of what it sells; (2) research materials; (3) information services purchased for resale; and (4) supplies used in production.

The Department held the purchases are generally taxable and rejected all four theories — but flagged a separate newspaper-and-periodical exemption.

• (1) Not resale / not a component. Under § 1101(b)(4)(i), the resale exclusion applies only where property is resold "as such" or as a physical component part. The materials are neither; and they're not "actually transferred to the purchaser" of a taxable information service either.
• (2) Not research and development. The § 1115(a)(10) exemption covers only R&D "in the experimental or laboratory sense," and expressly excludes "research in connection with literary, historical or similar projects" — which describes exactly this activity. (Cf. 20 NYCRR § 528.11(b)(1).)
• (3) Not information services "for resale." Section § 1105(c) excludes information services purchased for resale, but (per 20 NYCRR § 527.3(c)(3)) only where the purchased service is resold "as such" or as "a part" of a taxable information service — meaning its embodiment is reproduced in whole or significant part in what's sold. Here the information is "analyzed, organized and interpreted," not reprinted; and even where some is reprinted, that's only one of several uses, not its sole use. The newspaper/broadcaster information-service exemption (20 NYCRR § 527.3(b)(4)) doesn't apply — the publisher is not a newspaper, radio, or TV broadcaster.
• (4) Not production supplies. Section § 1105-B exempts only supplies used "directly" in producing tangible personal property for sale by manufacturing. The publisher's manufacturing is turning paper and ink into finished books; the purchased materials are used in research, which is a "preamble" to production — not used "directly" in converting raw materials into the product. (Definitions: producing, 20 NYCRR § 527.4(b); manufacturing, § 531.2(b); accord Matter of Mohawk Power Corp. v. Wanamaker, 288 App. Div. 446, aff'd 2 N.Y.2d 764.)
• A separate exemption may still help. The Tax Law separately exempts purchases of "newspapers and periodicals" under § 1115(a)(5) (criteria in 20 NYCRR § 528.6) — which may cover the periodicals the publisher buys, even though the four theories above fail.

What this means for you

Buying source material to research is generally taxable. If you purchase publications, data, or reports and then rework them into your own product, those purchases usually don't fit the resale, R&D, information-service-resale, or production-supply exemptions.

"Research" here isn't the R&D exemption. The § 1115(a)(10) exemption is for experimental or laboratory R&D and excludes literary/historical-type research. Editorial or analytical research doesn't qualify — no matter how essential it is.

Reworking information isn't "resale" of an information service. To resell an information service tax-free, you must pass along its embodiment reproduced in whole or significant part — not merely reflect facts you derived from it after analysis. And using it for more than resale defeats the "sole use" requirement.

Check the newspaper/periodical exemption separately. Even when the production/research theories fail, purchases of qualifying newspapers and periodicals are exempt under § 1115(a)(5) (see 20 NYCRR 528.6). That's a distinct path worth applying item by item.

Common questions

Q: I buy reports and periodicals, then rewrite them into my own publications. Are those purchases exempt?
A: Generally no — they're not resold "as such," they're not experimental/laboratory R&D, they're not information services resold in substantial part, and they're used before (not "directly" in) manufacturing. But qualifying periodicals may be exempt under the separate § 1115(a)(5) newspaper/periodical exemption.

Q: Why doesn't the research-and-development exemption apply to my editorial research?
A: Because § 1115(a)(10) is limited to R&D "in the experimental or laboratory sense" and expressly excludes literary, historical, or similar research — which covers editorial/analytical work.

Q: When is buying an information service "for resale" tax-free?
A: When you resell that service's embodiment reproduced in whole or significant part, as such or as part of a taxable information service (20 NYCRR 527.3(c)(3)) — not when you merely analyze it and reflect derived facts in a different product.

Citations and references

Statutes:

• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1101(b)(4)(i) — "retail sale"; resale "as such"/as a physical component and transfer-with-service tests
• Tax Law § 1105(c)(1) — tax on furnishing information; resale and personal/individual exclusions
• Tax Law § 1115(a)(10) — R&D exemption, "experimental or laboratory sense"; excludes literary/historical research
• Tax Law § 1105-B — exemption for supplies used directly and predominantly in production for sale by manufacturing
• Tax Law § 1115(a)(5) — exemption for purchases of newspapers and periodicals

Regulations / cases:

• 20 NYCRR § 527.3(c)(3) — resale exclusion for information services incorporated into a resold information service; § 527.3(b)(4) — newspaper/broadcaster information-service exemption
• 20 NYCRR § 527.4(b) — "producing"; § 531.2(b) — "manufacturing"; § 528.6 — newspaper/periodical exemption criteria; § 528.11(b)(1) — R&D exemption scope
• Matter of Mohawk Power Corp. v. Wanamaker, 288 App. Div. 446, aff'd 2 N.Y.2d 764 — research is a preamble to, not "direct" use in, production

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_15s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(15)S
Sales Tax
May 3, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810921B

On September 21, 1981 a Petition for Advisory Opinion was received from The Lawyers Co­
operative Publishing Company, Aqueduct Building, Rochester, New York 14694.
Petitioner is in the business of publishing a wide variety of legal reference works and, in
addition, providing a computer-based legal citation service. The issue raised herein is whether its
purchase and use of publications utilized in such business constitute purchases and uses subject to
the sales and compensating use taxes imposed under Article 28 of the Tax Law or authorized under
Article 29 thereof.
Petitioner states that its business consists of researching various statutes, regulations and
court and agency decisions, and disseminating the results of such research to the legal community.
To accomplish this task, Petitioner purchases certain published materials, including statutes,
legislative reports, court reports, administrative regulations, periodicals and the like. These materials
are thereupon analyzed, organized and interpreted by Petitioner's staff. The results of this research
are then made available to the legal community in the form of published books (regularly
supplemented by newsletters and advance sheets), newsletters, advance sheets, specialized reports,
texts, encyclopedic publications, official court reports and codes for certain states, and an electronic
computer data base containing complete citations and histories for reported opinions. Petitioner's
publications are made available on both single item and subscription bases.
Petitioner asserts that the materials it purchases are exempt from sales and compensating use
taxes on any of four alternative bases. First, it is claimed that the materials purchased constitute
component parts of the product it sells. Second, it is urged that the purchased materials are akin to
exempt research materials. Third, Petitioner argues that the subject purchases constitute purchases
of information services for resale. Finally, it is contended that the materials in question constitute
supplies used in production. Petitioner cites in support of its position: (1) the exemption applicable
to the sale of information services to newspapers and radio or television broadcasters set forth at 20
NYCRR 527.3(b)(4); (2) the general exclusion applicable to information services purchased for
resale, as described at 20 NYCRR 527.3(b)(1); (3) the exemption applicable to the sale of tangible
personal property purchased for use in research and development, as described at 20 NYCRR
528.11; and, (4) an opinion of counsel of March 10, 1967, which held certain property used in
making films to constitute exempt production equipment.

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

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

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TSB-A-82(15)S
Sales Tax
May 3, 1982
Section 1105(a) of the Tax Law imposes the State sales tax on the receipts from retail sales
of tangible personal property. The term "retail sale" is defined, in relevant part, as a sale made for
any purpose other than "(A) for resale as such or as a physical component part of tangible personal
property or (B)," insofar as relevant herein, for use by the purchaser in providing any of certain
taxable services, including the service of the "furnishing of information by printed, mimeographed
or multigraphed matter," where "the property so sold is later actually transferred to the purchaser of
the service in conjunction with the performance of the service subject to tax." Tax Law,
§1101(b)(4)(i). Receipts from the furnishing of such information service are subject to tax, except
where purchased for resale (or where personal or individual in nature). Tax Law, §1105(c)(1).
Section 1115(a)(10) of the Tax Law provides for an exemption from sales tax with respect
to receipts from sales of the following:
"Tangible personal property purchased for use or consumption directly and predominantly
in research and development in the experimental or laboratory sense. Such research and
development shall not be deemed to include . . . research in connection with literary,
historical or similar projects."
Section 1105-B of the Tax Law provide an exemption from sales tax with respect to supplies
purchased ". . . for use or consumption directly and predominantly in the production of tangible
personal property . . . for sale, by manufacturing. . . . "
Petitioner's first contention is that the purchased materials constitute component parts of the
products sold. Insofar as the items in question may constitute tangible personal property, rather than
a taxable information service, the resale exclusion is not applicable because the items purchased are
resold neither "as such" nor as "a physical component part of tangible personal property." Tax Law,
§1101(b)(4)(i)(A). Nor, it may be added, would the exclusion contained in Tax Law,
§1101(b)(4)(i)(B) apply because, assuming Petitioner to be providing a taxable information service,
the items purchased would not be "actually transferred to the purchaser of the service in conjunction
with the performance of the service subject to tax."
Petitioner's second contention is that the items purchased are exempt as research materials.
As indicated above, the statutory exemption applicable to property used in research and development
refers solely to property used in research and development "in the experimental or laboratory sense,"
a sense manifestly inapplicable to Petitioner's activity. Indeed, such activity is in fact described by
the statutory exclusion from such exemption provision of "research in connection with literary,
historical or similar projects." Tax Law, §1105(a)(10). Cf., 20 NYCRR 528.11(b)(1).
Petitioner next contends that its purchases represent purchases of information services for
resale. Section 1105(c) of the Tax Law, which imposes the State sales tax on the sale of certain
information services, excludes from such imposition the purchases of such information services "for
resale." Tax Law, §1105(c). The meaning of this phrase is elucidated in a provision of the Sales and
Use Tax Regulations, as follows:

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Sales Tax
May 3, 1982
"The purchase of a service subject to tax under section
1105(c)(1) of the Tax Law by a vendor who will resell that service as
such or as a part of a service also subject to tax under section
1105(c)(1) is not a purchase at retail and is exempt from the sales tax.
Example 3: A vendor of an investment advisory service
purchases a commodity information service and a stock market
information service. Both services purchased by the vendor are
incorporated into the service he sells. The vendor may purchase the
services he uses for resale without payment of sales tax." 20 NYCRR
527.3(c)(3).
Assuming, arguendo, that Petitioner's purchases are of taxable information services and that the sale
of its products constitutes the rendering of taxable information services, Petitioner's purchases would
not constitute purchases of information services "for resale," within the meaning of section
1105(c)(1) of the Tax Law. The resale exclusion contained therein is applicable to information
purchased solely for resale "as such" or as "a part" of a taxable information service. It is clear that
the purchased information services are not purchased for resale "as such." Nor are they purchased
solely for resale as a part of a taxable information service. Resale as a part of an information service
refers to the instance where the embodiment of the purchased information service (e.g., a list, a
compilation, or a description of facts) is reproduced in whole or significant part in the "printed,
mimeographed or multigraphed matter" transferred to the customer. It is not sufficient that
information derived from the purchased information service be reflected in the second information
service, as in the present case where Petitioner has the information acquired by it "analyzed,
organized and interpreted" in order to produce, inter alia, legal texts, encyclopedias, procedural
guides, and the like. If in certain instances information derived from the purchased information
services are in fact reprinted in full or significant part in an information service produced by
Petitioner, the exclusion would nonetheless remain inapplicable because such use would constitute
only one of the several uses to which the purchased information is put, rather than its sole use. It may
be added here that Petitioner's citation of 20 NYCRR 527.3(b)(4) is not germane to the present
matter, inasmuch as the exemption there described is, as set forth in section 1105(c)(1) of the Tax
Law, applicable only to "information services used by newspapers, radio broadcasters and television
broadcasters in the collection and dissemination of news." Petitioner has not established, nor even
contended, that any of its products constitutes a newspaper, nor that Petitioner itself is a radio or
television broadcaster.
Petitioner contends, finally, that its purchases are of supplies used in production, and
consequently exempt from tax pursuant to section 1105-B of the Tax Law. Such exemption
provision, quoted supra, is applicable, insofar as it may pertain to the present instance, only to
property used "directly" in the production of tangible personal property for sale by manufacturing.
According to Petitioner's description, the purchased publications in question are utilized for research
(i.e., they are "analyzed, organized and interpreted") which is designed to enable Petitioner to
produce various legal publications. The term "producing" is defined in the Sales and Use Tax

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May 3, 1982
Regulations as "the manufacture of a product from raw materials and any process in which raw
materials . . . [lose their] identity when the production process is completed." 20 NYCRR 527.4(b).
The term "manufacturing" is defined in the Sales and Use Tax Regulations as "the production of
tangible personal property that has a different identity from its ingredients." 20 NYCRR 531.2(b).
The production or manufacturing process engaged in by Petitioner is that involving the
transformation of raw materials such as paper and ink into completed publications. The research in
which the publications purchased by Petitioner, and at issue herein, are utilized is but the preamble
to such production. While admittedly necessary to Petitioner's business, the items used in research
are not used "directly" in the process of converting raw materials into a finished product. They are
thus not "directly" used in the production of tangible personal property for sale and accordingly do
not enjoy the exemption provided for under section 1105-B of the Tax Law. This conclusion is in
accord with, and warranted by, Matter of Mohawk Power Corp. v. Wanamaker, 288 App. Div. 446,
aff'd 2 NY 2d 764. Finally, the opinion of counsel cited by Petitioner in this regard compels no
conclusion contrary to that expressed herein.
It is to be noted that while Petitioner's purchases are here found to be generally subject to tax,
the Tax Law does provide for an exemption with respect to all purchases of "newspapers and
periodicals." Tax Law, §1115(a)(5). The criteria for exemption under such statutory provision are
set forth in section 528.6 of the Sales and Use Tax Regulations.

DATED: April 15, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau