Is a custom telephone-survey marketing research report a taxable information service, or is it exempt as personal or individual to the client?

Plain-English summary

Alan/Anthony, Inc. provides marketing research that gives clients feedback from their markets: consulting with client staff, writing a survey questionnaire, telephone-interviewing buyers and potential buyers, and tabulating and reporting the results. In its sample "Marketing Intelligence Agreement," it surveyed up to 156 paper/board mills to gather data on calcined clay usage, entered the interview data into a proprietary database designed and maintained by Alan/Anthony, and reported the results exclusively to the client (the data being the client's exclusive property, not shareable). It asked whether these services are taxable.

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

• This is an information service. Collecting, compiling, or analyzing information of any kind and furnishing reports to others is a taxable information service, and product and marketing surveys are expressly listed as information services. So Alan/Anthony's reports fall within § 1105(c)(1) in the first instance.
• But the "personal or individual" exclusion applies. Section 1105(c)(1) excludes the furnishing of information that is personal or individual in nature and that is not or may not be substantially incorporated in reports furnished to other persons. The Department distinguished Rich Products Corp. v. Chu, Towne-Oller & Assoc., and Hooper Holmes, Inc. — in which information came from a single common data source widely accessible, making it likely to overlap in reports to other customers (thus taxable).
• Result: exempt. Here the data (e.g., the calcined-clay information) is the client's exclusive property, cannot be shared or accessed by anyone but Alan/Anthony and the client, and is derived from surveying numerous separate entities (the 156 mills) rather than one common database. So the information is personal or individual and is not, or may not be, substantially incorporated in reports to others — the reports are exempt from the § 1105(c)(1) tax.
• Bundling caveat. If the reports cannot be purchased separately from other taxable services, the items are treated as one and the entire charge is taxable.

What this means for you

Market researchers running custom surveys

If you build a report by surveying many separate sources specifically for one client, keep the data as the client's exclusive property, and don't reuse it in reports to others, your report can qualify for the "personal or individual" exclusion and escape the information-service tax — even though collecting and reporting information is generally taxable.

The dividing line is the data source

The exclusion turns on where the data comes from and who can get it. Reports drawn from a single, widely accessible database are taxable because the information is likely to reappear (substantially) in reports to other customers. Reports built from client-exclusive, freshly surveyed data are not.

Custom formatting alone isn't enough

Courts have said that merely customizing a report for a client doesn't secure the exclusion if the underlying information comes from a common source. What saved this report was the exclusive ownership and the multi-source, non-common-database gathering.

Accountants and tax professionals

The opinion applies the § 1105(c)(1) "personal or individual" exclusion under the Rich Products / Towne-Oller / Hooper Holmes line: the key is whether the information is likely to be substantially incorporated in reports to others, which fails where data is client-exclusive and gathered from numerous entities rather than one common repository. Watch the bundling rule.

Common questions

Q: Is marketing research a taxable information service?
A: Generally yes — collecting, compiling, and analyzing information and furnishing reports is an information service under § 1105(c)(1), and marketing surveys are listed as such. But it can be exempt.

Q: Why were these reports exempt?
A: Because they qualified for the "personal or individual" exclusion: the data was the client's exclusive property, not shareable, and was gathered by surveying numerous separate entities rather than from one common database.

Q: What's the difference from the taxable cases?
A: In Rich Products, Towne-Oller, and Hooper Holmes, the information came from a single, widely accessible data source, making it likely to substantially overlap in reports to other customers — so it was taxable.

Q: Does customizing a report for a client make it exempt?
A: Not by itself. Customizing doesn't secure the exclusion if the underlying data comes from a common source; exclusive ownership and multi-source gathering are what mattered here.

Q: Could these charges still become taxable?
A: Yes, if the reports can't be purchased separately from other taxable services the firm provides, the entire combined charge is taxable.

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 (information services; product and marketing surveys listed as information services)
• Rich Products Corp. v. Chu, 132 A.D.2d 175; Towne-Oller & Assoc. v. State Tax Commn., 120 A.D.2d 873; Matter of Hooper Holmes, Inc. (Tax Appeals Tribunal, July 21, 1988)

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_51s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92(51)S
Sales Tax
June 19, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920116B

On January 16, 1992, a Petition for Advisory Opinion was received from Alan/Anthony, Inc.,
145 Avenue of the Americas, 2nd Floor, New York, New York 10013.
The issue raised by Petitioner, Alan/Anthony, Inc., is whether the providing of marketing
research services as described below is subject to sales and use taxes.
Petitioner's market research service provides clients with feedback from their markets.
Specific services include consultation with client personnel; the writing of a survey questionnaire;
telephone interviewing of the public (buyers and potential buyers) to learn their opinions, needs and
interests; and tabulation and written reporting of the survey results to the client.
Petitioner, as a sample of its typical marketing research service, submitted a "Marketing
Intelligence Agreement" entered into between Petitioner and one of its clients. Under this particular
agreement, Petitioner was required to conduct a market survey, in pertinent part, as follows:
1.

Contact and survey, through telephone research, up to 156 paper/board mills in the
United States and/or Canada in an attempt to interview the purchasing agent or like
person to gather data concerning the amount of calcined clay currently in use in
various paper grades. Client will give general direction and list of mills to be
contacted. List will be provided from either Lockwood Post's Directory or another
source available to client.

2.

Locate one purchasing agent or manager within each mill responsible for purchasing
calcined clay and interview him or her regarding usage amounts, applicants, and
types of products.

3.

Enter data from interviews into a proprietary database that is designed and
maintained by Petitioner, and report exclusively to its client the total calcined clay
usage sample groups, average clay usage per plant, average clay usage per unit of
plant output, etc. The information in this database is the exclusive property of the
client and cannot be shared or accessed by any parties except Petitioner and the
client.

4.

Seek to confirm through a primary source the amount of paper-grade calcined clay
currently being produced and shipped domestically and internationally to confirm a
trade industry report.

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TSB-A-92(51)S
Sales Tax
June 19, 1992
Section 1105 of the Tax Law states, in part, as follows:
Imposition of sales tax. . . . there is hereby imposed and there shall be paid a tax
. . . upon:
*

*

*

(c) 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.
Section 527.3 of the Sales and Use Tax Regulations states, in part, as follows:
Sales 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 and displays.
(2) The collecting, compiling or analyzing information of any kind
or nature and the furnishing reports thereof to other persons is an
information service.
(3) Among the services which are information services not credit
reports, tax or stock market advisory and analysis reports and product
and marketing surveys. (emphasis added)
Petitioner's market research business is to collect and furnish information. The reports the
client receives consist of data which has been collected, compiled and analyzed. Their sale therefore
constitutes the rendering of an information service within the meaning and intent of Section
1105(c)(1) of the Tax Law and Section 527.3(a) of the Sales and Use Tax Regulations.

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TSB-A-92(51)S
Sales Tax
June 19, 1992
The issue then is whether the information Petitioner markets is "personal or individual in
nature and is not or may not be substantially incorporated in reports furnished to others" In Rich
Products Corporation v. Chu (132 AD2d 175, 521 NYS2d 865, lv denied 72 NY2d 802, 530 NYS2d
554), the petitioner was a manufacturer and distributor of dairy and dessert products. In furtherance
of its marketing strategies and research, the petitioner purchased the services of Selling Areas
Marketing Inc. (hereinafter "SAMI"). SAMI collected data on the movement of grocery products
from various warehouses to identified markets throughout the United States. This information was
categorized and processed through SAMI's computer system. A SAMI sales representative, would
develop a program of data retrieval designed to answer specific informational requests concerning
one or more of its products in comparison with one or more of its competitors. SAMI prohibited the
disclosure of reports prepared for one customer to any other customer or the inclusion of any part
of a previously issued report in reports furnished to its other customers. The court found that these
facts, that no two reports to different customers were likely to be the same and that the reports were
customized in some respects to respond to the needs of a particular customer, were not dispositive
of entitlement to the exclusion particularly where the information contained in the reports was
derived from single data repository which itself was not confidential and was widely accessible. The
court said that to rule otherwise would be inconsistent with its previous holding that the exclusion
did not necessarily apply to information furnished in response to specific client requests (citing,
Matter of Towne-Oller & Assoc. v. State Tax Commn., supra; Matter of Allstate Ins. Co. v. Tax
Commn. of State of New York, supra; Matter of Twin Coast Newspapers v. State Tax Commn.,
supra. The court also concluded that since a common database was used for all reports, it was
reasonable to infer that the information on comparative sales performances and market share of
competing products in major markets would substantially overlap in the reports furnished by SAMI
to the petitioner and SMI's other customers. This likelihood of "substantial incorporation" in reports
to others was, in the court's view, enough to disqualify the sales in question from the exclusion
without a need to address whether the information was personal or individual in nature. (emphasis
added)
In the matter of Towne-Oller & Assoc. v. State Tax Commn. (120 AD2d 873, 502 NYS2d
544), the petitioner provided marketing reports which were created from data which the petitioner
purchased from wholesalers and distributors of the products involved. The petitioner charged its
customers a subscription fee which varied based upon the number of categories of reports requested
by the customer. Some of the reports were tailored to meet a customer's specific requirements. In
holding the petitioner's activities to be a taxable information service, the court distinguished the
reports from those in Matter of New York Life Ins. Co. v. State Tax Commn. finding that:
"Although there is some customizing of reports for individual customers by petitioner, the
service provided is not of a personal and individual character. The service is furnished on a
monthly basis and the reports furnished contain general information as well. All the
information is gleaned from one general source." (emphasis added)

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TSB-A-92(51)S
Sales Tax
June 19, 1992
In the matter of Hooper Holmes, Inc. (Tax Appeals Tribunal, July 21, 1988), the Tribunal,
relying on the Appellate Division decision and the intervening decision in Matter of Rich Prods
Corp. v. Chu (supra), held that the petitioner's services were not within the exclusion of Section
1105(c)(1) of the Tax Law. The Tribunal found that the fact that the information contained in the
reports was widely accessible and derived from a single source precluded the service from being
within the "personal or individual" exclusion.
The facts in the instant case can be distinguished from Rich Products Corporation, supra,
Towne-Oller, supra, and Hooper Holmes, Inc., supra, in that the data gathered by Petitioner, as for
example the data concerning calcined clay, is the exclusive property of the client and cannot be
shared or accessed by any parties except Petitioner and its client. In addition, the information
gathered is not from one general source or common database, but rather is derived from surveying
numerous entities, as for example the 156 paper board mills. Accordingly, such marketing research
reports furnished by Petitioner to its clients are exempt from the imposition of the sales tax imposed
by Section 1105{c)(1) of the Tax Law, since the information furnished is personal or individual in
nature and is not or may not be substantially incorporated in reports furnished to other persons.
It is noted that if the reports furnished to its client cannot be purchased separately from the
sale of other taxable services provided by Petitioner, the combination of the items listed must be
considered as one, and the entire charge for all items would be subject to sales tax.

DATED: June 19, 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.