New York Tax Department “Clarifies” Sales Tax on Reports Derived from Public Documents

The New York Department of Taxation and Finance recently issued a “clarification of existing Tax Department interpretation,” concerning the application of New York’s sales and use tax on “information services” to reports derived from publicly-available documents. For many companies, this “clarification” may well constitute a complete reversal of prior Department advice, as the Department itself has acknowledged.

New York tax law has, for many years, included a broadly-worded tax on “information services” that, by its terms, and under much of the Department’s prior authority, made the service of providing information reports (whether written, electronic, or even oral) taxable, unless the reports were comprised of information that was uniquely “personal” to the recipient. See N.Y. Tax Law § 1105(c)(1). In that regard, even if the particular compilation of information would be of interest only to the recipient, when the source data used to create the report was information that would be useful to many different entities or persons (such as public documents), a report was not deemed to be sufficiently “personal” to be exempt from tax.

Per to the Department’s new “clarification,” which took effect on September 1, 2010 (see TSB-M-10(7)S (July 19, 2010), the Department had previously articulated its policy that “the sale of public documents by private entities” does, indeed, constitute the sale of a taxable information service. See State Farm Mutual Automobile Insurance Co., Adv. Op. Comm. T&F, TSB-A-04(29)S (December 28, 2004). However, as the Department went on to explain in its recent clarification:

“Despite the issuance of this Advisory Opinion in 2004, some taxpayers may have continued to reasonably rely on correspondence from the Tax Department predating this Advisory Opinion. That correspondence, which gave advice to the contrary, also indicated that the Tax Department would provide notification if the advice in the letter was reversed.”

Thus, the Department acknowledges that it was actively advising companies in a manner that it now admits is contrary to New York tax law and its own existing policy, and that, despite such advice, tax is due on the sale of information services derived from public documents.  It is not entirely clear what prompted the Department to “clarify” its policy on the sale of information culled or compiled from public documents at this time. But, the recent TSB suggests that the Department feels the clarification serves to “better reflect controlling judicial case law and administrative decisions.”

In light of this express mea culpa from the Department, the Department has determined that it “will not assess any sales tax due that was not collected, or any related penalty and interest, for sales of public documents made during” tax periods prior to September 1, 2010. Thus, while sellers of information services must begin (or continue) to collect sales and use tax on such information services as of September 1, 2010, companies will not be exposed to liability for uncollected/unpaid tax for prior periods.