Sales Tax on Information Services: Navigating Aggressive State Policies

Understanding Taxable Features of a Database or Service for Multi-State Compliance

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, August 11, 2011

Recorded event now available

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Program Materials

This teleconference will explore common state approaches and latest developments in sales taxation of information services. The panel will discuss the differing rationales, potential tax exemptions, and possible pitfalls for buyers and sellers of information-based services.

Description

Whether an information service such as a database triggers sales tax is one of the more confusing aspects of multi-state tax compliance. For example, some states tax generally available information services, yet exempt billings that can be considered "personal or professional services."

Information customized to a particular customer might not be taxed; though in some states, it might be if the data was gathered from consumer reports also sold to other parties. A basic mailing list might be deemed a taxable information service, while contract computer programming might be exempt.

This area of sales tax compliance is evolving—and complex. States such as New York, New Jersey and Texas are changing interpretations to tax more information services. Corporate taxpayers (acting both as buyers and sellers) and tax advisors must stay abreast of the trends and latest developments.

Listen as our panel of veteran sales tax advisors helps clarify the divergent state policies toward taxing or exempting information services.

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Outline

  1. Common aspects of state sales tax treatment of information services
    1. Enumerated, exempt professional services
    2. Application of true object tests
    3. If real intent of transaction is to obtain information, the service is typically taxable
    4. Information that is available to multiple buyers is usually taxable
    5. Databases individualized for particular customer are typically exempt
    6. Data that is individual customer-specific are usually exempt
    7. Terms of access license rarely determine taxability; underlying information does
    8. An individual buyer’s customizing reports for its own uses don’t make them exempt
    9. A buyer’s ability to select information to be searched doesn’t make it taxable
    10. Examples of frequently taxable, exempt information services across multiple states
  2. Examples of specific states’ handling of information services and sales tax
    1. New York State “primary function” test for taxing information services
      1. Based on examination of nature of services sold
    2. New Jersey
    3. Massachusetts
    4. Connecticut
    5. Others
  3. Tax-sourcing issues that come into play
  4. How to address taxation of information services in a multi-state context as a corporate taxpayer

Benefits

The panel will, by using specific state examples and multi-state trends, explore:

  • What typically qualifies as "information."
  • The level of customization that turns a database into a taxable information service.
  • When a specific exemption might apply.
  • How to make a legitimate argument that information services your company is buying or selling should be tax-exempt.

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Irwin Mittleman
Irwin Mittleman
Sales Tax Consultant
Meridian Global Services

His state and local tax career spans more than 25 years, including stints as a New Jersey state auditor and in tax...  |  Read More

Aaron Young
Aaron Young

Partner
Reed Smith

He is assigned to the firm's state and local tax group and has a particular emphasis on the Northeast states. He...  |  Read More

Martin Eisenstein
Martin Eisenstein

Managing Partner
Brann & Isaacson

He works on interstate and international tax and business law matters for corporate clients in a wide range of...  |  Read More

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