Are personalized behavioral-analysis reports on an individual a taxable information service, or are they exempt as personal or individual in nature?

Plain-English summary

Jon J. Ward prepares reports on the behavioral tendencies of particular individuals — as they apply to sports or business — based on information from a questionnaire the customer completes. Using a pre-written program (Managing For Success by Target Training International), he enters the information and generates a behavior analysis of that specific person (general characteristics, specific talents, communication ideas, ideal work environment, areas for development), which is then used in a confidential interview. He asked whether these reports are exempt as "personal or individual in nature."

The Department's answer, under Tax Law § 1105(c)(1) and Regulation § 527.3(b)(2):

• This is an information service, but the exclusion applies. Collecting, compiling, or analyzing information and furnishing reports is an information service. But § 1105(c)(1) excludes information that is personal or individual in nature and that is not, or may not be, substantially incorporated in reports furnished to others.
• These reports are personal and individual. Because each report concerns a particular individual and is built from information the customer supplies, the reports are personal and individual in nature — like the private-detective and insurance-appraisal reports in the regulation's examples, and like the background-character reports held excluded in New York Life Insurance Co. v. State Tax Commission (excluded even where shared with other insurers and partly reused for later reports on the same person).
• Contrast with common-database reports. This differs from Towne-Oller & Assoc., where reports — though tailored to each client — were not personal or individual because they were drawn from the same raw database used for other customers, derived from one general source.
• Result: not taxable. The behavioral reports are excluded from the § 1105(c)(1) tax.

What this means for you

Coaches, consultants, and assessment providers

If you produce reports about a specific person from information that person or your client supplies — and you don't reuse that information in reports to others — your reports can qualify for the "personal or individual" exclusion and escape the information-service tax, even though information services are generally taxable.

The exclusion turns on individuality and reuse

Two things matter: the report must be personal or individual (about a particular person or situation), and its information must not be substantially incorporated in reports to other customers. A report built from a shared, common database serving many clients is taxable; a genuinely individualized one is not.

Using pre-written software doesn't defeat the exclusion

Ward used an off-the-shelf analysis program, yet the reports still qualified — because each output was individualized to a particular person from client-supplied inputs. The tool used to generate the report isn't what controls.

Accountants and tax professionals

Straight application of the § 1105(c)(1) / Reg. § 527.3(b)(2) "personal or individual" exclusion, with the New York Life (excluded) vs. Towne-Oller (taxable, common database) line. Compare the same term's TSB-A-92(44)S, where merely reformatting a client's own data was treated as a sale of tangible personal property rather than an information service at all.

Common questions

Q: Are these behavioral-analysis reports taxable?
A: No. They qualify for the "personal or individual" exclusion in § 1105(c)(1) because each report concerns a particular individual and its information isn't substantially incorporated in reports furnished to others.

Q: What makes a report "personal or individual"?
A: It concerns a particular person or situation and its information is not, or may not be, substantially incorporated in reports furnished to other people.

Q: Does sharing the report with others destroy the exclusion?
A: Not necessarily. In New York Life, background reports stayed excluded even though the insurer shared them and reused some information for later reports on the same person.

Q: When is a similar report taxable instead?
A: When it's drawn from a common database used to serve many customers (as in Towne-Oller), so the information is likely substantially incorporated in reports to others.

Q: Does using off-the-shelf software make it taxable?
A: No. Ward used a pre-written program, but the individualized output from client-supplied information still qualified for the exclusion.

Citations and references

Statutes and authorities:

• Tax Law § 1105(c)(1) (tax on information services; exclusion for information personal or individual in nature and not substantially incorporated in reports to others)
• Sales and Use Tax Regulations § 527.3(b)(2) (personal or individual information not taxable; detective-report, insurance-appraisal, and payroll examples)
• New York Life Insurance Co. v. State Tax Commission, 80 A.D.2d 675; Towne-Oller and Assoc. v. State Tax Commission, 120 A.D.2d 874

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_41s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (41) S
Sales Tax
May 15, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920214A

On February 14, 1992, a Petition for Advisory Opinion was received from Jon J. Ward, PO
Box 418, Union Springs, New York 13160.
The issue raised by Petitioner, Jon J. Ward, is whether the preparation of reports on an
individual's behavioral tendencies based upon information furnished by his customers is an
information service which is "personal or individual in nature" within the meaning of the exclusion
from tax contained in Section 1105(c)(1) of the Tax Law and, therefore, not subject to sales tax.
Petitioner's business consists of preparing reports on the behavioral tendencies of particular
individuals as they apply to sports or business based upon information obtained from a questionnaire
completed by its customers. Using Managing For Success software, a prewritten program produced
by Target Training International, Ltd., information is entered into Petitioner's computer resulting in
a sophisticated behavior analysis on a particular individual to whom the information entered applied.
The reports are unique, individual and personal and are then used in a confidential interview to
produce performance enhancement. Reports give individuals a computer analysis as to their general
characteristics, specific talents, communication ideas, ideal work environment, and areas for personal
development.
Section 1105(c)(1) of the Tax Law imposes tax upon:
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, and excluding the
services of advertising or other agents, or other persons acting in a representative
capacity, and information services used by newspapers, radio broadcasters and
television broadcasters in the collection and dissemination of news.
Section 527.3(b)(2) of the Sales and Use Tax Regulations provides, in part, as follows:
(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.
TP-9 (9/88)

-2­
TSB-A-92 (41) S
Sales Tax
May 15, 1992
Example 1: The report submitted by a private detective agency to its
clients is a personal report, the charge for which is not taxable.
Example 2: Automobile insurance damage appraisals performed for
insurance companies are individual reports, the fees for which are not
subject to sales tax.
Example 3: A computer service company has a program consisting
of withholding tax tables. Using the same program, it computes the
payroll for several subscribers. The fee charged to each subscriber is
not taxable as it is for an information service, the results of which are
not incorporated into reports furnished others.
In New York Life Insurance Co. v. State Tax Commission, 80 AD2d 675, the court held that
background character reports prepared by private detective agency concerning applicants for health
and life insurance are considered "personal and individual in nature" and, thus, are excluded from
sales tax, even if the insurance company receiving such report shares it with other companies and
some of the information in the report is used by the company in preparation of subsequent reports
concerning the same person.
In contrast, in Towne-Oller and Assoc. v. State Tax Commission, 120 AD2d 874, 504
NYS2d 544, the court held that reports, although tailored to satisfy the information request of the
client, were not of a personal or individual character since the reports were created from the same
raw data base used in preparation of similar reports to other customers, and that data base was
derived from one general source.
Accordingly, pursuant to Section 527.3(b)(2) of the Sales and Use Tax Regulations, New
York Life Insurance Co. v. State Tax Commission, supra, and Towne-Oller and Assocs. v. State Tax
Commission, supra, reports prepared by Petitioner on the behavioral tendencies of particular
individuals, based upon information furnished to Petitioner by his customers, are personal and
individual in nature and are excluded from the sales tax imposed by Section 1105(c)(1) of the Tax
Law.

DATED: May 15, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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