Sales, Use and International Tax Articles
Sales, Use and International Tax Activity Update - April 2010
Data Mining Delved into for New York Online Advertiser
A taxpayer's data mining, data warehousing, and online advertising services are not subject to New York sales and use tax.
The taxpayer provides its data mining and data warehousing services by gathering data from consumer Web sites via internally developed software that is embedded on the customer's Web sites.
Upon gathering this data, the software streams the data to the taxpayer's servers where it is analyzed. The taxpayer then issues a report that is custom in nature to the particular customer's business. Tax Law §1105(c)(1) excludes from tax the sale of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to others.
Because the information conveyed by the taxpayer through its data mining and data warehousing services relates exclusively to the client's Web site and the taxpayer is prohibited from selling the same information to third parties, the information qualifies for this exclusion.
The taxpayer also provides advertising services where online advertising clients hire the taxpayer to assist in running advertising campaigns to attract customers to their Web sites.
The taxpayer's sales of advertising services are also not taxable because of the exclusion in Tax Law §1105(c)(1) for the services of advertising or other agents, or other persons acting in a representative capacity. Assuming that any report delivered as a part of this service relates only to the taxpayer's customer's Web site, may not be furnished to a third party, and does not contain data from a common database, the report would not constitute an information service subject to tax.
The Advisory Opinion can be viewed on the New York Department of Taxation and Finance Web site.
Subscribe to CyberTax News and receive the latest indirect tax news, including rate changes, rule updates, compliance issues, and more, delivered directly to your email.
Call 800.355.3500 to Speak to a Sales Representative.
