Sales Tax Slice: ‘Nothing Personal’ -- Health Reports Are Not a Taxable Information Service, New York Advises

In most states, services are exempt from sales and use tax unless specifically designated as taxable by statute. A minority of states subjects “information services” to tax. But the types of activities that are included within the definition of taxable “information services” vary among these states and can depend on a number of factors.

Information services are taxable in New York. But the state excludes from tax the furnishing of information that is personal in nature. The New York Department of Taxation and Finance recently issued TSB-13(30)S,  which was sought by a software developer that sells an online structured interview tool designed to measure the characteristics of the employer-customer’s workplace that supports employee health. The information gathered from the interviews is used to produce reports.

The department addressed if the reports produced by the software tool were subject to sales tax as an information service. New York’s general rule is that it imposes tax on information services; however, the furnishing of information which is personal or individual in nature is not considered a taxable information service. The department explained that the reports produced by the software tool fell under the exclusion because under the agreement that the software developer had with its customers, the software developer could not share the information or reports with anyone else. Therefore, the information was personal and individual in nature and not taxable as an information service.

In addition to New York, the following eight other states also impose sales tax on information services:
• District of Columbia: D.C. imposes tax on the sales of, or charges for, data processing and information services; however, information sold to a newspaper, radio or television station licensed by the Federal Communication Commission is not taxable if the information is gathered or purchased for direct use in newspaper or radio television broadcasts.
• Florida: The sale of information services is generally taxable in FL; however, information services provided solely via electronic transmission are exempt from tax.
• Hawaii: Services are generally subject to tax; information services are not specifically excluded from tax in HI, and are therefore generally taxable.
• New Jersey: The retail sale of information services is taxable in NJ; however, information used in providing personal or professional services is not subject to tax
• New Mexico: NM imposes tax on the license to use or provision of access to information to a customer located in the state or information provided in tangible form to a customer in the state.
• South Dakota: Services are generally subject to tax; information services are subject to tax because no specific exemption is available.
• Texas: Information services are taxable in TX; however, 20 percent of the price of information services and data processing services is exempt from tax.
• West Virginia: Information services are taxable in WV; however, the sale of electronic data processing is exempt from tax.

By Ean Hamilton

Follow us on Twitter at:  @BBNATax
Join BNA's State Tax Group on LinkedIn here .