Were the requesting company's survey, data-analysis, consulting, and online-reporting charges taxable?

Plain-English summary

South Carolina Private Letter Ruling #19-1 holds that the requesting company's full charge was nontaxable because the true object was customized professional service, not access to online software.

The company studied each client's business, designed and conducted tailored surveys, gathered data from e-commerce, text messages, contact centers, social media, and other sources, analyzed the results, and delivered client-specific insights and solutions. It presented its work verbally, in writing, through meetings, and through online reporting software.

Clients used the reporting software to access their own data, view real-time feedback, filter information, generate reports, and review insights. The temporary online license was included in the service price. Although South Carolina can treat website and application-service-provider access as taxable communications, the Department concluded that this access was only incidental to the company's survey design, research, analysis, and consulting.

Because the professional services were the basic purpose of the transaction, the entire charge—including the online reporting component—was not subject to South Carolina sales and use tax.

What this means for you

Research and analytics firms

Document the client-specific work performed: survey design, implementation, external-data gathering, analysis, interpretation, and recommendations. Those facts drove the professional-service conclusion.

Software-enabled service businesses

Online access does not automatically control the tax result. Compare the independent value of the software with the provider's human and customized work and identify what the customer is primarily buying.

Contract and billing teams

Describe the deliverable as the tailored research and analysis service when that matches reality. The software here was included in the service fee and functioned as one channel for delivering and exploring the provider's work.

Common questions

Q: Did clients manipulate data through the website?
A: They could filter their data and generate reports, but the provider had already designed the surveys, gathered and analyzed data, and produced client-specific insights.

Q: Why was this different from taxable SaaS access?
A: The Department found that professional research and analysis—not the online tool—was the true object of the specific transaction.

Q: Does this ruling make all analytics platforms nontaxable?
A: No. It is a private letter ruling limited to the requesting taxpayer and stated service mix.

Citations and references

• S.C. Code Ann. § 12-36-60 — tangible personal property and taxable communications
• S.C. Code Ann. §§ 12-36-910 and 12-36-1310 — sales and use tax
• S.C. Regulations 117-308 and 117-329 — professional services and communications
• SC Revenue Ruling #03-5 — application-service-provider guidance considered by the ruling

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: PLR19-1.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29211

SC PRIVATE LETTER RULING #19-1

SUBJECT:

Data Collection and Analysis Services
(Sales and Use Tax)

REFERENCES:

S.C. Code Ann. Section 12-36-60 (2014)
S.C. Code Ann. Section 12-36-910 (2014)
S.C. Code Ann. Section 12-36-1310 (2014)
SC Regulation 117-308
SC Regulation 117-329

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

A Private Letter Ruling is an advisory opinion issued to a specific taxpayer by
the Department to apply principles of law to a specific set of facts or a
particular tax situation. It is the Department’s opinion limited to the specific
facts set forth, and is binding on agency personnel only with respect to the
person to whom it was issued and only until superseded or modified by a
change in statute, regulation, court decision, or another Departmental
advisory opinion, providing the representations made in the request reflect an
accurate statement of the material facts and the transaction was carried out as
proposed.

QUESTION
Are charges by ABC Company (“ABC”) for its services (developing surveys tailored to each
client, conducting surveys, gathering data from other sources, analyzing the data obtained, and
providing the results and other information to clients) as described in the facts, which include
online access to reporting software, subject to South Carolina sales and use tax?
CONCLUSION
No. The true object of ABC’s transactions is its nontaxable professional services (developing
surveys tailored to each client, conducting surveys, gathering data from other sources, analyzing
the data obtained, and providing the results and other information to clients). The portion of
ABC’s charges attributable to providing clients online access to its reporting software is
incidental to the provision of professional services. ABC is providing professional services, and
not a taxable communication service. Therefore, the entire charge for ABC’s services, as
described in the facts, is not subject to South Carolina sales and use tax.
1

FACTS
ABC studies its clients’ businesses, develops and designs surveys, collects and analyzes data,
and delivers the results to its clients, along with insights and solutions derived from the data.
ABC’s services focus on three major areas: (1) the client’s customers and their experience with
the client; (2) the client’s employees and how engaged they are with the client; and (3) enhancing
a client’s brand and perceptions of the brand.
ABC’s services include (1) data collection and analysis (i.e., developing surveys tailored to each
client, conducting surveys, gathering data from other sources, and analyzing the data obtained)
and (2) presenting the information with insights and solutions, both in person and through online
access to its reporting software.
ABC gathers data from multiple sources including conducting surveys, analyzing e-commerce
activity, text messages, and whatever other communication channels the client’s customers may
utilize (e.g., customer comments submitted through a client’s online contact center). Surveys
include online surveys, mobile device surveys, and telephone surveys. Surveys may be pushed
out over e-mail as well. For certain clients, ABC hires a third party to compile various reviews
on social media. Social media results are compared to the survey results, and material
differences are investigated.
ABC’s services are primarily driven by surveys. ABC consults with clients on all phases of the
survey process, from design and implementation to understanding what the results mean, and
how the results can be used to improve a client’s business. ABC delivers its data and analysis
verbally, in writing, and through presentations. 1 The survey data is the client’s property.
ABC provides clients access to survey data and configurable reports through its ABC online
reporting software (“reporting software”), which is included in the cost of ABC’s services.
Clients use the reporting software to access their data (including real-time customer feedback),
filter the data, generate reports, and review insights. 2 The reporting software may be accessed
through ABC’s website or web-based application. ABC grants clients a temporary license to
access the reporting software during the contract period.
LAW AND DISCUSSION
Code Section 12-36-910(A) imposes the sales tax and provides:
A sales tax, equal to [six] 3 percent of the gross proceeds of sales, is imposed upon
every person engaged or continuing within this State in the business of selling
tangible personal property at retail.
1
ABC provides three different levels of service with varying levels of help planning for surveys, insight, and faceto-face (in person or over the Internet) meetings. Clients can select one of the levels and add on services as
appropriate.
2
While clients typically access their reports through the online reporting software, ABC provides paper copies upon
request.
3
Code Section 12-36-1110 increased the state sales tax rate from 5% to 6% beginning June 2007.

2

Code Section 12-36-1310(A) imposes a complementary use tax and provides:
A use tax is imposed on the storage, use, or other consumption in this State of
tangible personal property purchased at retail for storage, use, or other
consumption in this State, at the rate of [six] 4 percent of the sales price of the
property, regardless of whether the retailer is or is not engaged in business in this
State.
Code Section 12-36-60 defines the term “tangible personal property,” in part, to mean:
[P]ersonal property which may be seen, weighed, measured, felt, touched, or
which is in any other manner perceptible to the senses. It also includes services
and intangibles, including communications, laundry and related services,
furnishing of accommodations and sales of electricity, the sale or use of which is
subject to tax under this chapter . . . (Emphasis added)
Therefore, the term “tangible personal property” includes by definition certain services and
intangibles, such as communications, which are subject to South Carolina sales and use taxes
under Chapter 36 of Title 12. Communications are subject to sales and use taxes under Code
Sections 12-36-910(B)(3) and 12-36-1310(B)(3), each of which imposes the tax on the:
[G]ross proceeds accruing or proceeding from the charges for the ways or means
for the transmission of the voice or messages . . . (Emphasis added)
SC Regulation 117-329.4 lists examples of taxable communication services and includes
“charges to access an individual website (including Application Service Providers).” See SC
Regulation 117-329.4(k). SC Revenue Ruling #03-5, in describing Application Service
Providers, says that “some Internet websites . . . allow a customer use of software on that
website. Companies that provide customers access or use of software in this manner are
generally referred to as Application Service Providers (ASP).”
Since ABC provides clients online access to its reporting software through its website and webbased application, the issue is whether ABC provides a taxable communication service or
nontaxable professional services.
ABC’s services include (1) data collection and analysis (i.e., developing surveys tailored to each
client, conducting surveys, gathering data from other sources, and analyzing the data obtained),
and (2) presenting the information with insights and solutions, both in person and through online
access to its reporting software. SC Regulation 117-308, regarding professional, personal, and
other services, provides further guidance on this issue. This regulation provides, in part:
The receipts from services, when the services are the true object of the
transaction, are not subject to the sales and use tax, unless the sales and use tax is
specifically imposed by statute on such services (i.e., accommodation services,
communication services). . . . (Emphasis added)
4

Code Section 12-36-1110 increased the state use tax rate from 5% to 6% beginning June 2007.

3

The so-called "true object" test is generally used to delineate sales of services from sales of
tangible personal property. The "true object" test is best described in 9 Vanderbilt Law Review
231 (1956), wherein it is stated:
The true test then is one of basic purpose of the buyer. When the product of the
service is not of value to anyone other than the purchaser, either because of the
confidential character of the product, or because it is prepared to fit the
purchaser's special need - a contract or will prepared by a lawyer, or the accident
investigation report prepared for an insurance company this fact is evidence
tending to show that the service is the real purpose of the contract. When the
purpose of a contract is to produce an article which is the true object of the
agreement, the final transfer of the product should be a sale, regardless of the fact
that special skills and knowledge go into its production. Under this analysis,
printing work, done on special order, and of significant value only to the
particular customer, is still a sale. The purchaser is interested in the product of the
services of the printer, not in the services per se. Similarly, it would seem that
contracts for custom-produced articles, be they intrinsically valuable or not,
should be classified as sales when the product of the contract is transferred.
The Vanderbilt Law Review article, in quoting Snite v Department of Revenue, 398 Ill. 41, 74
N.E.2d. 877 (1947), also establishes the following general rule:
If the article sold has no value to the purchaser except as a result of services
rendered by the vendor, and the transfer of the article to the purchaser is an actual
and necessary part of the services rendered, then the vendor is engaged in the
business of rendering service, and not in the business of selling at retail. If the
article sold is the substance of the transaction and the service rendered is merely
incidental to and an inseparable part of the transfer to the purchaser of the article
sold, then the vendor is engaged in the business of selling at retail, and the tax
which he pays ... [is measured by the total cost of article and services]. If the
service rendered in connection with an article does not enhance its value and there
is a fixed or ascertainable relation between the value of the article and the value of
the service rendered in connection therewith, then the vendor is engaged in the
business of selling at retail, and also engaged in the business of furnishing service,
and is subject to tax as to the one business and tax exempt as to the other.
While the above quotes do not establish rigid rules, they do provide general guidance in
determining the purpose of a transaction, and are particularly helpful in addressing the issue at
hand.
If the true object of ABC’s transactions is a taxable communication service (online access to the
reporting software), then any professional services provided as part of the transaction are
incidental to the sale of the taxable communication service, and the entire charge is subject to
tax. If, on the other hand, the true object is nontaxable professional services (developing surveys
tailored to each client, conducting surveys, gathering data from other sources, analyzing the data
obtained, and providing the results and other information to clients), then the communication
service provided as part of the transaction is incidental to the provision of professional services,
and the entire charge is not subject to the sales or use tax.
4

Based on the above, ABC is in the business of providing nontaxable professional services
(developing surveys tailored to each client, conducting surveys, gathering data from other
sources, analyzing the data obtained, and providing the results and other information to clients).
The true object of ABC’s transactions is its nontaxable professional services. The portion of
ABC’s charges attributable to providing clients online access to its reporting software is
incidental to the provision of professional services. ABC is providing professional services, and
not a taxable communication service. Therefore, the entire charge for ABC’s services, as
described in the facts, is not subject to South Carolina sales and use tax.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
June 13
, 2019
Columbia, South Carolina

CAVEAT: This advisory opinion is issued to the taxpayer requesting it on the assumption
that the taxpayer’s facts and circumstances, as stated, are correct. If the facts and
circumstances given are not correct, or if they change, then the taxpayer requesting the
advisory opinion may not rely on it. If the taxpayer relies on this advisory opinion, and the
Department discovers, upon examination, that the facts and circumstances are different in
any material respect from the facts and circumstances given in this advisory opinion, then
the advisory opinion will not afford the taxpayer any protection. It should be noted that
subsequent to the publication of this advisory opinion, changes in a statute, a regulation, or
case law could void the advisory opinion.

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