Are a materials lab's concrete strength-test reports a taxable information service?

Plain-English summary

Fortunato Sons Inc., a contractor, buys the services of a materials testing laboratory that tests concrete samples for strength and standards in connection with its construction contracts. It asked whether the lab's charges are subject to sales tax.

The Department held the lab's test reports are a non-taxable information service.

• A test report is an "information service." Section 1105(c)(1) taxes collecting, compiling, or analyzing information and furnishing reports of it. The lab's report — a compilation of data from analyzing a test sample — falls within that definition.
• But it fits the personal/individual exclusion. Section 1105(c)(1) excludes information that is personal or individual in nature and that is not, and may not be, substantially incorporated in reports furnished to others (20 NYCRR 527.3(b)(2)). The regulation's Example 1 (a private detective agency's report to its client) illustrates the exclusion.
• Both conditions are met. Because each concrete sample is unique, so is its test result — the report is personal and individual. And to keep the exclusion, the report may be sold to only one person (the contractor); the data can't be substantially reused in reports to others.
• Copies to designees are fine. If, at the contractor's request, the lab furnishes copies of that report to the contractor's designees, that does not defeat the exclusion (Declaratory Ruling 78-02; David J. Converse).
• Result: test reports meeting both criteria are a non-taxable information service.

What this means for you

Uniquely tied-to-you analysis can escape the information-services tax. When a lab or analyst tests your specific sample and the result is inherently individual — like a strength test on a unique batch of concrete — the report qualifies for the personal/individual exclusion and isn't taxable.

Exclusivity is the price of the exclusion. The report has to be for you alone. If the provider could substantially reuse the same information in reports it sells to others, it becomes a taxable common-source information service. Selling the result to a single customer is what keeps it exempt.

Copies to your own people don't cost you the exemption. Having the lab send duplicates of your report to your designees at your request is fine — that's still your single, personal report, not information resold to others.

Common questions

Q: Is a lab's test report on my materials taxable?
A: Generally not, if the report is personal and individual — for example, a strength test on your unique concrete sample — and the lab doesn't substantially reuse the information in reports to others. Then it fits the § 1105(c)(1) exclusion.

Q: What makes it "personal and individual"?
A: The information must be uniquely tied to you and not reusable for other customers. Because each concrete sample and its result are unique, the report qualified.

Q: Can the lab send copies to others?
A: It can send copies of your report to your designees at your request without losing the exemption. What it can't do is substantially incorporate the information into reports it sells to other people.

Citations and references

Statute and regulation:

• Tax Law § 1105(c)(1) — taxes information services but excludes information personal or individual in nature and not (and not able to be) substantially incorporated in reports to others
• 20 NYCRR 527.3 — information services and the personal/individual exclusion (Example 1: a private detective agency's report to its client)

Rulings cited:

• Declaratory Ruling 78-02, TSB-H-80(97)S; David J. Converse, TSB-A-81(12)S — furnishing copies to the customer's designees doesn't defeat the exclusion

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1986.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a86_30s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-86(30)S
Sales Tax
July 28, 1986

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S840529B

On May 27, 1984 a Petition for Advisory Opinion was received from Fortunato Sons Inc.,
150 Knickerbocker Avenue, Bohemia, New York 11716.
The issue raised is whether Petitioner is required to pay sales tax on charges by a materials
testing laboratory ("Laboratory") for the services of testing concrete samples for strength and
standards.
Petitioner is a contractor who purchases the testing services in conjunction with its
performance of construction contracts.
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, 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....(Emphasis added).
Regulation Section 527.3 further explains Section 1105(c)(1) of the Tax Law:
"(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.
"Example 1. The report submitted by a private detective agency to its clients
is a personal report, the charge for which is not taxable."
The report prepared by the Laboratory represents a compilation of data derived from analysis
of a test sample. The sale of this report in written form, therefore, constitutes the rendering of an
information service within the meaning and intent of the statutory provisions set forth above.

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

-2­
TSB-A-86(30)S
Sales Tax
July 28, 1986

Since each concrete sample is unique, as is the test result obtained from it, the report
generated by the Laboratory is "personal and individual in nature", thus satisfying the first condition
for exclusion from taxation. (Tax Law 1105(c)(1), supra).
The second condition for exclusion mandates that the information may not be substantially
incorporated in reports to other persons. Consequently, the test report may be sold to one person
only, the Petitioner. If, however, on request of the Petitioner, the Laboratory furnishes copies of the
report to its designees, such services will not negate the above quoted exclusion provided in the Tax
Law. See State Tax Commission Declaratory Ruling 78-02, TSB-H-80(97)S; David J. Converse,
State Tax Commission Advisory Opinion, August 4, 1981, TSB-A-81(12)S.
Accordingly, laboratory test reports purchased by the Petitioner which meet both criteria
contained in the exclusionary clause of Tax Law 1105(c)(1) constitute a non-taxable information
service.

DATED: July 28, 1986

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth herein.