When a taxable information report is delivered to a client's offices both inside and outside New York, how much of the charge is subject to New York sales tax?

Plain-English summary

Paul R. Comeau, a Buffalo tax attorney, asked on behalf of several information-service companies how much New York sales tax they must collect when a single report is delivered to a corporate client that has offices in many different cities, states, and countries. The companies collect data, synthesize it into research and marketing reports, and deliver them either electronically (to client terminals or databases) or in hard copy (paper, disc, or tape mailed to the client). Some copies go to the client's New York offices and some to offices outside New York. The request assumed the underlying services are taxable information services under § 1105(c)(1).

The Department held that only the reports delivered in New York are taxable, and gave two allocation formulas:

• New York's sales tax is a "destination tax." Under § 525.2(a)(3), the point of delivery controls both whether tax applies and the rate. So a report delivered outside New York is not subject to New York sales tax.
• Electronic reports — allocate the tax by the number of the client's offices, within and without New York, that have access to the electronic reports.
• Hard-copy reports (paper, disc, or tape) — allocate the tax by the number of copies delivered within and without New York.
• Compensating use tax. If the client later brings into New York a report that was delivered out of state, the client owes New York compensating use tax on it under § 531.1(b)(3).

What this means for you

Bill New York tax only on the New York piece of a multistate information service

If you sell taxable information services to a company with offices in and out of New York, you do not charge New York tax on the whole fee. You charge it only on the portion delivered in New York — measured by offices with access for electronic delivery, or by copies delivered for physical delivery. Keep records of how many offices or copies are in New York versus elsewhere so you can support the split on audit.

The customer can still owe use tax later

The seller's job is to allocate tax based on where reports are delivered. But if the customer moves an out-of-state report into New York and uses it here, the customer owes compensating use tax. The delivery-based split does not permanently exempt a report from New York tax if it ends up being used in the state.

This is the anchor case for New York's report-allocation rule

The Department has applied this same two-part method (electronic by offices-with-access, hard copy by copies-delivered) in a series of later advisory opinions to national consumer-products and pharmaceutical companies buying multistate marketing reports. This Comeau opinion is the foundational statement of the rule.

Common questions

Q: Do I charge New York tax on the full price of a report sent to a multistate client?
A: No. Only the portion delivered in New York is taxable. New York's sales tax is a destination tax (§ 525.2(a)(3)).

Q: How do I split an electronic report between states?
A: By the number of the client's offices, within and outside New York, that have access to the electronic report.

Q: How do I split hard-copy reports (paper, disc, or tape)?
A: By the number of copies actually delivered within versus outside New York.

Q: What if the client later brings an out-of-state report into New York?
A: The client owes New York compensating use tax on that report under § 531.1(b)(3).

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(1) — tax on the service of furnishing information
• 20 NYCRR § 527.3 — sale of information services
• 20 NYCRR § 525.2(a)(3) — the sales tax is a "destination tax"
• 20 NYCRR § 531.1(b)(3) — compensating use tax on information services brought into New York

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a90_43s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-90 (43)S
Sales Tax
August 20, 1990

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S900420C

On April 20, 1990 a Petition for Advisory Opinion was received from Paul R. Comeau,
Hodgson, Russ, Andrews, Woods & Goodyear, 1800 One M & T Plaza, Buffalo, New York 14203.
The issue raised by Petitioner, Paul R. Comeau, is what is the proper amount of sales tax to
collect on the sale of information reports that are delivered to locations that are within and without
New York State.
Several information service companies (hereinafter "Sellers") provide professional research
and marketing advice for clients located throughout the United States and the world. For purposes
of this advisory opinion request, it is assumed that these services constitute information services
subject to sales tax pursuant to Section 1105(c)(1) of the Tax Law. As part of the provision of these
professional services, Sellers will collect data from various sources. The data is collated and
synthesized into reports. Paper and magnetic tape (hereinafter "hard copy") reports are then mailed
to clients, while electronic reports are transmitted to client terminals or data bases.
Among Sellers' clients are corporations which operate on interstate and/or international
levels. These corporations have offices in several different cities, states and countries. Each report
provided to a particular client is delivered to multiple addresses, with some reports delivered to the
client's New York State offices, and others delivered to the client's offices located in other states or
countries. In either case, the report, once delivered, may be reproduced by the client and distributed
among its offices in different cities, states and countries.
Section 527.3 of the Sales and Use Tax Regulations provides:
Sale of information services. Tax Law, §1105[c][1]) a) Imposition.
(1) Section 1105(c)(1) of the Tax Law imposes a tax on the receipts
from the service of furnishing information by printed, mimeographed
or multigraphed matter or by duplicating written or printed matter in
any manner such as by tapes, discs, electronic readouts or displays.
Section 525.2(a)(3) of the Sales and Use Tax Regulations provides:
The sales tax is a "destination tax," that is, the point of delivery or
point at which possession is transferred by the vendor to the
purchaser or designee controls both the tax incident and the tax rate.
For special rule relating to motor vehicles, see Part 540 of this Title.
TP-9 (9/88)

-2­
TSB-A-90 (43)S
Sales Tax
August 20, 1990

Section 531.1 of the Sales and Use Tax Regulations provides in part:
Imposition of compensating use tax
(b)

Taxable uses. The uses enumerated herein are subject to tax.
*

*

*

(3)
Information services which would be subject to tax under
subdivision (1) of section 1105(c) of the Tax Law.
Although sellers deliver information reports both within and without New York State, only
those reports which are delivered in New York State are subject to sales tax in accordance with
Section 525.2(a)(3) of the Sales and Use Tax Regulations. Therefore when the information reports
are delivered by electronic means to clients who have offices both within and without New York
State, sales tax should be allocated according to the number of the clients' offices within and without
New York State having access to the electronic reports. However, where such reports are delivered
by hard copy in paper, disc or tape form to clients who have offices within and without New York
State, sales tax should be allocated according to the number of copies of the reports delivered by
Petitioner within and without New York State. If sellers' customers later bring some reports into New
York State, such customers would be required to pay the compensating use tax on such reports in
accordance with Section 531.1(b)(3) of the Sales and Use Tax Regulations.

DATED: August 20, 1990

NOTE:

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.