Are computer-generated financial reports, like loan amortization printouts made from a client's figures, a taxable information service or exempt personal information?

Plain-English summary

Philip M. Sherman, doing business as Sherman Data Finances, planned to sell computer-generated financial information. Each printout would be produced by running a program against data the client supplies — for a loan, for example, the client gives the principal, interest rate, and term, and the report shows the principal and interest in each monthly payment. He asked whether these reports are taxable.

The Department held the reports are a taxable information service.

• The exemption has two parts. Section 1105(c)(1) taxes furnishing information by printed matter (including analyzing information and furnishing reports), but excludes information that is (1) personal or individual in nature and (2) not — or may not be — substantially incorporated in reports furnished to other persons. Both parts must be met to be exempt.
• First part met; second part failed. The reports are prepared in a customized format to the customer's specifications, so they are "personal or individual in nature" (first criterion satisfied). But the second criterion asks whether the information is not / may not be substantially incorporated in reports to others — satisfied only if it hasn't previously been so used and couldn't reasonably be anticipated to be so used.
• This information is the kind sold to everyone. Given the nature of the information (e.g., loan amortization, the sort of thing sold as amortization tables in stationery stores), it is reasonably likely the information given to one customer would be substantially included in reports sold to others. So the second criterion fails, the exclusion doesn't apply, and the receipts are taxable (Rich Products, TSB-A-83(19)S; Roger Farber, TSB-A-82(3)S; New York Life Insurance Co. v. State Tax Commission). Other services Sherman might offer weren't ruled on.

What this means for you

"Customized to the client" isn't enough to be exempt personal information. New York's information-service exemption is two-pronged. Even a report tailored to one customer's numbers is taxable if the underlying information is the type that could be — and likely would be — substantially reused in reports sold to others.

Generic, formula-driven outputs tend to be taxable. Loan amortizations, standard financial calculations, and similar computations fail the "not incorporated in reports to others" prong because the same kind of result is widely marketable. If anyone could buy essentially the same figures, expect tax.

Truly unique, non-reusable analysis is where the exemption lives. To be exempt, the information should be genuinely individual and realistically not reusable in reports to other customers (no prior such use, and none reasonably anticipated). Compare TSB-A-84(18)S (Concept IV), which taxed printed membership lists on a related tangible-property/information rationale.

Common questions

Q: My reports are custom-made for each client from their own figures. Are they exempt?
A: Not necessarily. Being customized meets only the first prong. If the same kind of information would likely be substantially incorporated in reports sold to others, it's taxable.

Q: Why are loan amortization printouts taxable?
A: Because that information is the sort reasonably likely to be sold to many customers (amortization tables are commonly sold), it fails the "not incorporated in reports to others" prong of the § 1105(c)(1) exclusion.

Q: When would a report be exempt?
A: When it's both personal/individual and realistically not reusable in reports to others — the information hasn't been so used and couldn't reasonably be anticipated to be so used.

Citations and references

Statutes:

• Tax Law § 1105(c)(1) — tax on furnishing information, with the exclusion for personal/individual information not substantially incorporated in reports to others

Cases and prior guidance:

• Rich Products, TSB-A-83(19)S
• Roger S. Farber, TSB-A-82(3)S
• State Tax Commission Declaratory Ruling 79-01, TSB-H-80(97)S
• New York Life Insurance Co. v. State Tax Commission, 80 A.D.2d 675, aff'd 55 N.Y.2d 760 (1982)
• Opinion of Counsel, 1965 NYTB-3, p. 24; 1965 NYTB-4, p. 48

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1984.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a84_20s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-84(20)S
Sales Tax
July 20, 1984

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S820913A

On September 13, 1982 a Petition for Advisory Opinion was received from Philip M.
Sherman, 471 Claybourne Road, Rochester, New York 14618.
The issue raised is whether the services to be provided by Petitioner's company (Sherman
Data Finances, a sole proprietorship) will be subject to sales tax.
The services to be offered by Petitioner's company will be in the form of computer-generated
financial information. Each of the individual printouts generated by the computer for a particular
client will be prepared by applying a program in the computer to information provided by the client.
In the case of a loan, for example, the client would provide the amount of the principal of the loan,
its interest rate and its term. The application of the appropriate computer program to the information
supplied by the client would enable Petitioner to provide such client with a printout showing the
principal and interest paid or to be included in each monthly loan payment. Petitioner will offer a
variety of such computer-generated results, each calculated in the same general manner. In each
instance, the computer printout will be the result of the application of a computer program to data
supplied by a client.
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 . . . 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 information provided in the reports sold by Petitioner is prepared in a customized format,
according to the customer's specifications, and is thus "personal or individual in nature," thereby
satisfying the first of the two criteria for exclusion from the operation of section 1105(c)(1) of the
Tax Law. Opinion of Counsel, 1965 NYTB-3, p. 24; Opinion of Counsel, 1965 NYTB-4, p.48; Rich
Products, State Tax Commission Advisory Opinion, TSB-A-83(19)S. The second criterion is that
the information "is not or may not be substantially incorporated in reports furnished to other
persons." Petitioner has failed to cite any extant prohibition against such use of the information,
whether contractual, statutory or customary. It therefore remains to be determined whether the
information "is not" so used. This criterion is satisfied if (a) the information has not previously been
so used, and (b) at the time of the rendering of the report in question it could not reasonably have

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-84(20)S
Sales Tax
July 20, 1984

been anticipated that the information would be so used. State Tax Commission Declaratory Ruling
79-01, TSB-H-80(97)S; Roger S. Farber, State Tax Commission Advisory Opinion, December 17,
1981, TSB-A-82(3)S; New York Life Insurance Co. v. State Tax Commission, 80 AD 2d 675, aff'd
(no op) 55 NY 2d 760 (1982); Rich Products, supra. In the present instance, because of the nature
of the information described herein by Petitioner, it is fair to say that it is reasonably likely that the
information given to one customer will be substantially included in reports sold to others. This
conclusion is given support, for example, by the existence of loan amortization tables commonly
held for sale in stationery stores. See also Roger S. Farber, supra. Accordingly, receipts from the sale
of the service described by Petitioner would be subject to tax. Other services which may be provided
by Petitioner are not ruled upon herein.

DATED: July 2, 1984

s/FRANK J. PUCCIA
Director
Technical Services Bureau