Is a real-time financial-data terminal service (stock tickers, quotes, market news) delivered over leased telephone lines to desk-top display units subject to the additional 5% telephone/telegraph tax on top of the regular information-service tax?

Subject

Whether the information services provided by Petitioner to its New York subscribers are subject to the additional tax imposed under Section 1105(c)(9) of the Tax Law.

What this means for you

A financial-data provider feeds real-time stock ticker displays, security quotes (bid, ask, high, low, volume), earnings forecasts, price monitoring, and wire-service news to banks, brokerage firms, fund managers, and institutional investors. It gathers raw data from exchanges and other sources worldwide, processes it at a central computer facility, and transmits it to subscribers over leased telephone lines; subscribers read the information on desk units that convert the electronic signal to a readable display -- they never hear it spoken aloud.

New York taxes "information services" -- collecting, compiling, or analyzing information and reporting it to others -- unless the information is personal or individual to one subscriber. Since this data goes out to many subscribers rather than being tailored to any one of them, it's a taxable information service. But New York also imposes an EXTRA 5% tax on top of that, specifically targeting information or entertainment services delivered by telephone or telegraph -- and that extra tax only reaches services the customer receives purely aurally (by listening), not services with a written or screen-based component. Because subscribers view this service on a desk-top display rather than hearing it read to them, the extra 5% surtax doesn't apply, even though the base information-service tax does.

Q&A

Q: We deliver financial data over telephone lines to subscribers' desk-top display units -- is our service taxable?
A: Yes, per this opinion, as a general information service under Tax Law § 1105(c)(1), since the content isn't personal or individual to any one subscriber.

Q: Does the extra 5% telephone/telegraph tax under Section 1105(c)(9) also apply to our service?
A: No, per this opinion -- that additional tax applies only to information or entertainment services the customer receives purely aurally by telephone, and this service is received visually on a display unit, not by listening.

Q: Does it matter that we transmit the data over leased telephone lines?
A: No -- per this opinion, what matters for the extra 5% surtax is how the customer ultimately RECEIVES the service (aurally versus visually/in writing), not the transmission medium used to deliver it.

Q: Can another financial-data provider rely on this opinion?
A: No. This advisory opinion binds the Department only as to the petitioner and the facts described here; another taxpayer cannot rely on it, though it's been cited as precedent in later Department opinions addressing similar on-line financial data services.

Citations

• Tax Law § 1105(c)(1) -- imposes tax on furnishing information (including collecting, compiling, or analyzing information and furnishing reports of it), excluding information that is personal or individual in nature and not substantially incorporated into reports furnished to other persons.
• Tax Law § 1105(c)(9)(I) and (II) -- imposes an additional 5% tax on information or entertainment services furnished by telephone or telegraph, but only for services the customer receives exclusively aurally.
• Quotron Systems, Inc. v. Gallman, 39 N.Y.2d 428 -- held Petitioner was not furnishing telegraph services and thus was not a utility subject to the corporation franchise tax under Tax Law § 186-a; cited here as background on the nature of Petitioner's service.
• NASDAQ, Inc., Adv. Op. Comm. T&F, August 29, 1989, TSB-A-89(31)S -- held that a similar financial-data service was subject to the information-service tax under § 1105(c)(1).

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_61s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (61) S
Sales Tax
November 29, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S930826B

On August 26, 1993 a Petition for Advisory Opinion was received from Quotron Systems,
Inc., 850 Third Avenue, 4th Floor, New York, New York 10043.
The issue raised by Petitioner, Quotron Systems, Inc., is whether the information services
provided by Petitioner to its New York subscribers are subject to the sales tax imposed under Section
1105(c)(9) of the Tax Law.
Petitioner provides real-time high-speed delivery of current financial news and information
services of various types, including displays of the New York and American Stock Exchange tickers;
quotes of the latest sales prices of a security, ,including its bid, ask, high, low, and volume; earnings
forecast and similar information; monitoring of the latest price for selected securities; display of
news from various wire services; and other related integrated financial information services to banks,
stock brokerage firms, fund managers and institutions investing in financial markets.
In order to provide its financial information services, Petitioner utilizes a highly sophisticated
communications network. Petitioner first feeds information obtained from all major financial
exchanges and other sources throughout the world (Petitioner does not own any of the financial
information transmitted to its subscribers) into its primary data center located in Silver Springs,
Maryland. The raw data is analyzed for accuracy and reasonableness and repackaged to provide
additional information services which Petitioner makes available to its subscribers, such as statistics
(e.g. the relationship of a particular stock price to the highs and lows of the market).
Petitioner transmits the information to its New York subscribers via leased telephone lines
that are linked to its central computer facility located in Silver Springs, Maryland. In order for the
subscribers to receive the data, Petitioner provides or leases desk units which convert the data from
electronic signals to readable form. Each desk unit is able to request and to receive the type of
information for which a subscriber has subscribed.
Petitioner's subscriber's do not receive any of the above services aurally.
Petitioner currently collects New York State and local sales taxes on receipts from the sale
of information services to its New York subscribers pursuant to Section 1105(c)(1) of the Tax Law.
Section 1105 of the Tax Law states, in part:
Imposition of sales tax.--...there is hereby imposed and there shall be paid a
tax ... upon:

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TSB-A-93 (61) S
Sales Tax
November 29, 1993
(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,
*

*

*

(9)(I) The furnishing or provision of an entertainment service or of an
information service, which is furnished, provided, or delivered by means of telephony
or telegraphy or telephone or telegraph service (whether intrastate or interstate) of
whatever nature, such as entertainment or information services provided through 800
or 900 numbers or mass announcement services or interactive information network
services. Provided, however, that in no event (i) shall the furnishing or provision of
an information service be taxed under this paragraph unless it would otherwise be
subject to taxation under paragraph one of this subdivision if it were furnished by
printed, mimeographed or multigraphed matter or by duplicating written or printed
matter in any other manner nor (ii) shall the provision of cable television service to
customers be taxed under this paragraph.
(II) Notwithstanding the rate and date set forth in the opening undesignated
paragraph of this section and notwithstanding the opening undesignated paragraph
of this subdivision, on and after September first, nineteen hundred ninety-three, in
addition to any other tax imposed under this section, and in addition to any other tax
or fee imposed under any other provision of law, there is hereby imposed and there
shall be paid an additional tax at the rate of five percent upon the receipts which are
subject to tax under subparagraph (I) of this paragraph. Such additional tax shall not
be imposed by section eleven hundred seven, eleven hundred eight or eleven hundred
nine of this article and shall not be included among the taxes authorized to be
imposed pursuant to the authority of article twenty-nine of this chapter.
The tax imposed under Section 1105(c)(9)(I) and (II) of the Tax Law applies only to
information and entertainment services which are provided, furnished or delivered by telephone and
which the customer receives exclusively aurally. The additional five percent tax does not apply to
information or entertainment services which involve a written component, such as those provided
from computer to computer or computer to written format.
In Quotron Systems, Inc. vs. Gallman 39 NY2d 428 the court concluded that Petitioner was
not engaged in the furnishing of telegraph services and thus was not a utility subject to the
corporation tax imposed by Section 186-a of Article 9 of the Tax Law. In the instant matter,
Petitioner's services continue to be of the same nature as discussed in Quotron Systems, Inc. vs.

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TSB-A-93 (61) S
Sales Tax
November 29, 1993
Gallman, supra. In NASDAQ, Inc. Advisory Op, Comm of T&F, August 29, 1989, TSB-A-89(31)S.
It was opined that services similar to those provided by Petitioner were subject to the sales tax
imposed under Section 1105(c)(1) of the Tax Law.
Accordingly Petitioner is considered to be sellinginformation services which are not personal
or individual in nature and thus are subject to the sales tax imposed under Section 1105(c)(1) of the
Tax Law. As Petitioner's services are not received aurally by Petitioner's customers, Petitioner's
receipts from the sale of information are not subject to the sales tax imposed under Section
1105(c)(9)(I) and (II) of the Tax Law.

DATED: November 29, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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