Is a service that helps students find college scholarships, grants and loans by running their data through a computer and giving them a printout of funding sources a taxable information service?

Plain-English summary

Roger S. Farber, doing business as RSF & Associates, ran an independent academic-guidance and consulting service that helped high-school students find sources of college scholarships, grants, loans and other funds. A student filled out a profile form about the student and their parents; RSF reviewed, coded and ran that data through a computer analysis, which produced a printout of recommended funding sources the student was most qualified for. The student then followed up on those leads. He asked whether he had to collect sales tax on his fees.

The Department held the service is a taxable information service, and the fees are subject to sales tax.

• This is a taxable "information service." Section § 1105(c)(1) taxes the furnishing of information, "including the services of collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons." The regulation lists credit reports, market surveys and prospect lists as examples of taxable information services (20 NYCRR 527.3(a)(3)). RSF's business was, the Department noted, analogous to computer-dating services, which had already been held taxable.
• The "personal or individual" exclusion did not apply. The statute excludes information that is "personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons." Because RSF's database would, under certain conditions, recommend the same funding source to more than one student, the information was not personal and individual, so the exclusion was unavailable.
• Result. The receipts from RSF's consultation service are subject to New York State and local sales tax.

What this means for you

"Analyzing data and handing back a report" is usually a taxable service in New York. If you collect, compile or analyze information and deliver reports — even highly customized ones — you are likely providing a taxable information service under § 1105(c)(1).

Reuse is what kills the "personal and individual" exclusion. The narrow escape hatch is for information that is truly individual to one customer and not folded into reports for others. The moment the same underlying data or the same result can go to another client, the exclusion is gone.

Customizing the delivery doesn't make it personal. Running each student's inputs through the system produced an individualized printout, but the sources themselves were drawn from a shared database and could be recommended to others — so the output was still taxable.

Common questions

Q: My reports are tailored to each client. Doesn't that make them "personal and individual"?
A: Not by itself. The exclusion turns on whether the information may be substantially incorporated into reports furnished to others. If your underlying data or results can be reused for other clients, the service is taxable.

Q: Does it matter that a computer does the analysis?
A: No. Compiling and analyzing information by computer and furnishing a report is exactly what § 1105(c)(1) taxes.

Q: I only give students "leads" they follow up on themselves. Is that still an information service?
A: Yes. Furnishing the compiled list of sources is the taxable information service, regardless of who acts on the leads.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(1) — tax on furnishing, collecting, compiling or analyzing information and furnishing reports; "personal or individual" exclusion
• 20 NYCRR 527.3(a)(3) — examples of taxable information services (credit reports, market surveys, prospect lists)

Department guidance referenced in the opinion:

• Letter of Counsel, February 27, 1967 (computer-dating services held taxable)

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_3s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(3)S
Sales Tax
February 22, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810804B

On August 4, 1981 a Petition for Advisory Opinion was received from Roger S. Farber,
DBA/RSF & Associates, P.O. Box 1017, Monticello, New York 12701.
The issue raised is whether an independent academic guidance and consulting service, which
helps high school students locate sources of college scholarships, grants, loans and other sources of
funds is required to collect sales tax on receipts from the consultation service rendered.
Student applicants complete a profile form which provides Petitioner with information
relating to the student and his parents. Petitioner states that such data is vital to the program as "these
factors are directly related to the qualifications of the source providing the funds."
The data submitted by the student and his parents are reviewed, coded and subjected to
computer analysis. Such analysis results in the production of a printout of recommended sources of
funding for which the student is most qualified. The student may then follow up on the leads
furnished on such printout. Under certain conditions, a particular source of funds will be
recommended to more than one student, due to the presence of factors common to a number of
applicants.
Section 1105(c) of the Tax Law imposes a tax on: "The receipts from every sale, except for
resale, of the following services: (1) The furnishing of information by printed . . . matter . . . ,
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 . . . ."
The Sales and Use Tax Regulations explain that "credit reports, tax or stock market advisory
and analysis reports and product and marketing surveys" are among the services which constitute
taxable information services. 20 NYCRR 527.3(a) (3).
Example 3 contained in such section of the Regulations provides that: "A firm which supplies
to business concerns listings of prospective customers' telephone numbers is providing a taxable
information service and must collect the appropriate tax on the charges for such service."
Example 4 contained in such section illustrates the manner in which the sales tax applies to
fees for research performed for a customer, as follows: "A computer service company owns a service
program consisting of analyses of law cases and statutes. It is asked by a customer to research all

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

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

-2­
TSB-A-82(3)S
Sales Tax
February 22, 1982

references to the word 'assessment'. The fee for the printout received by the customer constitutes a
taxable receipt from an information service, as the citations listed may be given to another subscriber
requesting the same information."
Petitioner's business is in some regards analogous to computer dating services, which have
been held subject to the tax at issue herein. Letter of Counsel, February 27, 1967.
Inasmuch as data stored in Petitioner's data base will at times be furnished to more than one
client, it cannot be held that the information furnished is personal and individual in nature and not
to be "substantially incorporated in reports furnished to other persons," within the meaning of
Section 1105(c)(1) of the Tax Law. Accordingly, the information service provided by Petitioner does
not qualify for the exclusion provided in Section 1105(c)(1) of the Tax Law and the receipts from
such service are accordingly subject to New York State and local sales taxes.

DATED: December 17, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau