Are data-processing, remote-access, and information-storage billing services subject to New York sales tax when the resulting data isn't shared with other customers?

Plain-English summary

Cincinnati Bell Information Systems (CBIS) provides billing and customer-care services to telecom, cable, and internet companies. CBIS takes each customer's own raw account data, runs it through proprietary software to generate bills, produces management reports from that data, lets customers remotely query and view their own processed data, and stores the data -- each for a separate fee. Under its contracts, everything a customer discloses to CBIS stays confidential and isn't shared with other clients. CBIS asked whether any of these services are taxable information services.

The Department said no, none of them are taxable. Tax Law § 1105(c)(1) taxes the business of collecting, compiling, or analyzing information and furnishing reports of it to customers -- but it specifically excludes information that is "personal or individual in nature" and not incorporated into reports sold to other people. Because CBIS processes each customer's own confidential data and reports back only to that same customer, never bundling it into a product sold to anyone else, the processing fee, the management-report fee, the remote-access fee, and the storage fee are all exempt personal/individual information services. The Department cited its own prior rulings on this same point -- CyCare Systems (processing) and Northeastern Computer Services (remote access) -- as controlling precedent.

What this means for you

Data processing, billing, and IT service bureaus

If you process a customer's own confidential data and return results only to that same customer -- never pooling it into a product sold to other clients -- your processing, reporting, remote-access, and storage fees fall outside New York's taxable information-services category, even though "collecting, compiling, or analyzing information and furnishing reports" sounds like it should apply.

Businesses buying outsourced billing or data-processing services

Confirm your vendor isn't reselling your data, even in aggregated or anonymized form, into reports sold to other customers -- doing so could convert an otherwise-exempt personal information service into a taxable one.

Accountants and tax professionals

This is a clean application of the § 1105(c)(1) personal/individual information exclusion to remote computer-access billing services, and pairs well with other rulings applying the same test to individualized reporting services.

Common questions

Q: When is an information or reporting service taxable in New York?
A: Under Tax Law § 1105(c)(1), collecting, compiling, or analyzing information and furnishing reports of it is generally taxable -- but only when that information is or may be incorporated into reports sold to more than one customer.

Q: Is my data exempt just because it's confidential under my contract?
A: Confidentiality helps show the information is personal to you, but the real test is whether the vendor could fold your data into reports sold to other customers, not simply whether your contract has a confidentiality clause.

Q: Does remote access to my own processed data change the analysis?
A: No. Remote access and ad hoc querying of your own data is treated the same as a delivered report for purposes of the personal/individual information exclusion.

Q: Can another billing-services company rely on this ruling?
A: No. It's an Advisory Opinion binding the Department only as to Cincinnati Bell Information Systems and the facts it described.

Citations and references

• Tax Law § 1105(a) (tax on retail sales)
• Tax Law § 1105(c)(1) (information services; personal/individual exclusion)
• CyCare Systems, Inc., TSB-A-93(18)S (March 22, 1993)
• Northeastern Computer Services, TSB-A-88(33)S (June 24, 1988)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_57s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(57)S
Sales Tax
August 6, 1998

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S980409A

On April 9, 1998, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Cincinnati Bell Information Systems, 600 Vine
Street, Cincinnati, OH 45202.
The issue raised by Petitioner, Cincinnati Bell Information Systems, is
whether its data processing, remote access, and information storage services and
related reports are subject to sales tax.
Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner provides billing and customer-care services to companies in the
telecommunications, cable television, and Internet service provider industries.
Petitioner primarily serves its customers by processing data and creating bills
using proprietary software. The raw data from which the bills are calculated is
provided by Petitioner’s customers. Petitioner processes this raw data through
its computer program which creates new data suitable for generating individual
bills. For this service, Petitioner charges a monthly processing fee based on
the number of accounts processed. Petitioner also generates management reports
based on the processed data. Charges for management reports are billed on a per
report basis.
Petitioner’s customers have remote access to the processed data via
terminals connected to computers owned by Petitioner. Customers using remote
access are able to view the processed data and request ad hoc reports. Charges
for remote access are based on the number of queries the customer performs and/or
the amount of time the customer’s terminal is connected to Petitioner’s computer.
The customer is also generally charged a separate information storage fee.
Petitioner has long-term written agreements with all of its customers.
Under the terms of these agreements all information disclosed to Petitioner is
considered proprietary and confidential and cannot be disclosed to outside
parties.
Applicable Laws and Regulations
Section 1105(a) of the Tax Law imposes tax on “[t]he receipts from every
retail sale of tangible personal property, except as otherwise provided in this
article.
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-98(57)S
Sales Tax
August 6, 1998

(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, 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,
and excluding meteorological services.
Opinion
Petitioner provides billing and customer-care services to companies in the
telecommunications, cable television, and Internet service provider industries.
Petitioner primarily serves its customers by processing data and creating bills
using proprietary software. The raw data from which the bills are calculated is
provided by Petitioner’s customers. Petitioner processes this raw data through
its computer program which creates new data suitable for generating individual
bills.
Petitioner also generates management reports based on the processed
data. Petitioner’s customers also have remote access to the processed data via
terminals connected to computers owned by Petitioner. Customers using remote
access are able to view the processed data and request ad hoc reports. The
information disclosed to Petitioner by its customers is considered proprietary
and confidential and cannot be disclosed to outside parties.
The billing and customer-care services Petitioner provides to its customers
whereby Petitioner processes raw data provided by its customers through a
computer program to create new data suitable for generating individual bills are
not among the enumerated services subject to tax under 1105(c) of the Tax Law.
See CyCare Systems, Inc., Adv Op Comm T&F, March 22, 1993, TSB-A-93(18)S.
Therefore, the monthly processing fee charged by Petitioner in connection with
the number of accounts processed is not subject to tax. Further, the fee charged
for generating management reports which are personal and individual in nature and
which are not or may not be substantially incorporated in reports furnished to
other persons will not be subject to sales tax.

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TSB-A-98(57)S
Sales Tax
August 6, 1998

The fees paid by customers for remote access to the processed data are not
subject to tax, assuming the accessed data is personal and individual in nature
and is not or may not be substantially incorporated in reports furnished to other
persons. See Northeastern Computer Services, Adv Op Comm T&F, June 24, 1988,
TSB-A-88(33)S. In addition, fees charged for storing such data are not subject
to tax.

DATED: August 6, 1998

NOTE:

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

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