The New York Department of Taxation and Finance has issued an Advisory Opinion concluding that a company’s litigation support service is not subject to New York sales tax imposed on information services. Although it is considered an information service because it includes analyzing, compiling, and organizing customer information, the service does more that merely recast or reformat the customer’s information in that it adds to intelligence contained in the original documents. The company’s litigation support services are considered to be personal and individual in nature, and therefore not subject to New York State and local sales tax on information services. Furthermore, the taxpayer organizes and analyzes the customer’s own documents and does not provide the original documents, or the analysis, compilation, or organization, to any party other than the customer. The fact that the customer, in the context of a litigation discovery process, may provide the original documents to a third party does not change this result, because neither the taxpayer nor the customer is providing the information furnished by the taxpayer to others or incorporating the same into reports furnished to others.
The Advisory Opinion also concluded that the taxpayer’s deliverables (i.e., DVDs, CDs, hard drives, text files and electronic storage) are exempt from sales tax. Although Tax Law section 1105(a) imposes sales tax on the receipts from every retail sale of tangible personal property, nontaxable information services are not subject to tax regardless of the form in which the information is provided to customers. Tangible personal property that is an integral part of the provision of such services is not separately taxable. Accordingly, because the taxpayer’s deliverables are an integral part of the provision of the taxpayer’s nontaxable information services, the deliverables are not considered to be a receipt for tangible personal property. However, the taxpayer’s purchases of tangible media that is uses to deliver its services to its customers are subject to State and local sales and use tax. (TSB-A-10(20)S, New York Commissioner of Taxation and Finance, May 6, 2010)