August 17, 2010
Important Changes in New York Sales Tax for Providers and Users of Information Services - Abstracts of Title and Risk Management Analysis Reports
NYS Tax & Finance ("Tax Department") has issued a memorandum (TSB-M-10-(7)S, Sales and Use Tax Treatment of Certain Information Services) setting forth significant changes in the sales and use taxability of information services. Of particular interest are changes which effect those selling or purchasing abstracts of title and risk management analysis reports. While previous advice from the Tax Department indicated sales of abstracts of title and risk management analysis reports were exempt from sales tax, effective September 1, 2010 the sale of such reports is now deemed to be a taxable information service. Generally, information that is personal and individual in nature is exempt from sales tax. Though these reports may address a client’s personal situation, they are not considered personal and individual in nature because they generally contain information obtained from a common database and similar information is included in reports issued to others.
This change in policy can be far reaching causing a myriad of previously untaxed services to be taxable. In cases where both taxable and non-taxable services are being provided a single price charged for both elements can cause the entire charge to be taxable. Therefore, when selling or purchasing such services, a separate charge (line item) should be made to distinguish the taxable and non-taxable components.
The memorandum can be accessed at http://www.tax.state.ny.us/pdf/memos/sales/m10_7s.pdf for further explanation of these changes in policy. All companies/individuals who sell or purchase abstracts of title reports or risk management analysis reports will now be subject to onerous sales and use tax compliance. This may mean sales tax registration and collection responsibilities, or exposure to use tax and the related reporting issues. Now more than ever it is important to become registered for sales and use tax purposes so that quarterly or annual returns can be filed, even if only to start the statute of limitations tolling.
Please contact your Marcum SALT Group representative should you have any questions and to address how these changes may impact your business. You must be prepared to take the necessary actions to meet these new sales and use tax obligations.