Is a company's telephone verification of a mortgage applicant's job, income and landlord references a taxable investigation service under New York sales tax?

Plain-English summary

Equifax Services, Inc. offers mortgage loan verification services to lenders: it calls a mortgage applicant's employer, landlord and creditors to confirm, in real time, the facts the applicant put on the loan application -- current employment, income, rent payment history, and similar details. Each verification is a one-time check tied to a specific applicant and a specific customer at a specific moment; it has no ongoing value or use beyond that transaction, and any older records Equifax might reference only give "tips and leads" to help track down the current facts by phone.

Equifax asked whether these verification receipts were taxable under Tax Law § 1105(c), the provision taxing certain enumerated services. The Department said no. It found that simple telephone verification of an applicant's stated facts doesn't rise to the level of an "investigation" the way the Department had already found taxable in two recent, similar rulings -- one involving Marvin Rosenthal and another involving Resume Verification, Inc. The Department also noted that this kind of telephone confirmation work is excluded from Article 7 of the General Business Law, which licenses private investigators, citing the Compass Adjusters case. Because the service isn't a taxable investigation and isn't otherwise listed in § 1105(c), the receipts escape state and local sales tax.

The Department flagged one wrinkle it did not decide: New York City separately taxes "credit rating and credit reporting services" delivered to customers in the City, under Administrative Code § 11-2040(a)(1) (authorized by Tax Law § 1212-A(a)). Equifax hadn't raised that issue in its petition, so the ruling takes no position on whether the City's local tax might apply to some of this same activity.

What this means for you

Mortgage lenders and verification service providers

If your service is limited to confirming an applicant's own stated facts through direct phone contact with employers, landlords or creditors -- with no ongoing archival value beyond that one application -- it likely falls short of a taxable "investigation" service under § 1105(c). But watch the line: services that go further, digging into an individual's background or history rather than just confirming what they told you, have been found taxable in other Department rulings (the Rosenthal and Resume Verification opinions cited here).

Businesses delivering services into New York City

Even if a service escapes state and state-administered local sales tax as here, New York City imposes its own separate tax on credit rating and credit reporting services delivered to City customers. This ruling doesn't decide whether that City tax applies to mortgage verification work -- it simply wasn't asked -- so don't assume this opinion clears you of City tax exposure if you deliver similar services into the five boroughs.

Accountants and tax professionals

The key distinction here is between mere fact confirmation (nontaxable) and genuine investigation (taxable, per the Rosenthal/Resume Verification line of rulings and the Compass Adjusters case). Review exactly what the service does -- verify stated facts versus independently dig up new information -- before concluding either way, and separately check NYC Admin. Code § 11-2040(a)(1) exposure if the customer is in New York City.

Common questions

Q: Why isn't mortgage verification a taxable "investigation" service?
A: Because it's limited to confirming facts the applicant already provided, through direct interviews with the applicant's own references, rather than independently investigating the applicant's background.

Q: Does this ruling clear the service from New York City tax too?
A: No. The Department expressly declined to address New York City's separate local tax on credit rating and credit reporting services, since Equifax didn't raise it.

Q: Can another company rely on this ruling for its own verification service?
A: No. This is an advisory opinion binding the Department only as to Equifax and the specific facts it described; a service that goes beyond simple fact-confirmation could come out differently.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c) (services subject to sales tax)
• Tax Law § 1212-A(a) (authority for NYC local tax on credit rating/reporting services)
• Administrative Code of the City of New York § 11-2040(a)(1) (NYC tax on credit rating and credit reporting services)
• General Business Law Article 7 (private investigator licensing)

Prior rulings and cases referenced:

• Marvin Rosenthal, Adv Op Comm T&F, January 24, 1997, TSB-A-97(2)S
• Resume Verification, Inc., Adv Op Comm T&F, March 27, 1997, TSB-A-97(14)S
• Compass Adjusters and Investigators Inc. v Commissioner of Taxation and Finance, 197 AD2d 38

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_22s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(22)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S960731A

On July 31, 1996, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Equifax Services, Inc., P.O. Box 4081,
Atlanta, Georgia 30302-4081.
The issue raised by Petitioner, Equifax Services, Inc., is whether the
receipts from the sale of its mortgage loan services are subject to State and
local sales taxes under Section 1105(c) of the Tax Law.
Petitioner submitted the following facts as the basis for this Advisory
Opinion.
Petitioner is a Georgia corporation, authorized to do business in New York
State, with its principal office located in Atlanta, Georgia. Among various
business and financial services offered by Petitioner, it presently provides
mortgage loan services to prospective mortgagees (i.e., customers). The essence
of these mortgage loan services is the current, interpersonal verification by
Petitioner of the assertions made by mortgage loan applicants via telephone
interviews with the applicants’ creditors, employers, landlords, etc. Immediate,
current facts are generated from the personal interactions that occur during
these interviews and based on the personal knowledge of the interviewees.
Each mortgage application being verified deals exclusively with the
personal and individual facts concerning the mortgage loan applicant (i.e., the
individual or family), at a given moment in time and for a particular customer.
The verification has no continuing value or validity for any other purpose. If
there is any reference at all in the application to accumulated, archival
information (public or private), it only provides "tips and leads" to assist in
providing the service of current garnering of current facts and circumstances
concerning a particular loan applicant for a particular customer by telephone
inquiries and interviews.
Opinion
Petitioner’s mortgage loan services, consisting of the verification of
mortgage loan applications, are not included among the enumerated services the
receipts from the sale of which are subject to State and local sales taxes under
Section 1105(c) of the Tax Law. Petitioner’s verifications by telephone of the
assertions made by mortgage loan applicants do not rise to the level of
investigations as in the recent matters of Marvin Rosenthal (Adv Op Comm T&F,
January 24, 1997, TSB-A-97(2)S) and Resume Verification, Inc. (Adv Op Comm T&F,
March 27, 1997, TSB-A-97(14)S), and are of a nature excluded from the application
of Article 7 of the General Business Law as it pertains to licensing of private
investigators. (See, Compass Adjusters and Investigators Inc. v Commissioner of
Taxation and Finance, 197 AD2d 38.)

-2­
TSB-A-97(22)S
Sales Tax

It is noted that, pursuant to the authority of Section 1212-A(a) of the Tax
Law, Section 11-2040(a)(1) of the Administrative Code of the City of New York
imposes a local tax upon receipts from the sale of credit rating and credit
reporting services when the results of these services are delivered to customers
in any of the boroughs of New York City. Petitioner has not raised this as an
issue in its Petition for Advisory Opinion, and based on the facts submitted, no
determination is being made or opinion rendered in this regard.

DATED: April 17, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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