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Sales Tax State Activity Update - March 2005

New York Clarifies Human Resource Management

The Department of Taxation and Finance ruled in an Advisory Opinion that Health and Welfare Administration, Retirement Administration, COBRA/Flex Spending (FSA) Services were not subject to sales and use tax if separately stated but, Pre-Employment Screening and Selection Service Administration were in fact subject to sales tax.

Services

1. The Health and Welfare Administration's on-going services, in part, include maintaining benefit plan rules, determine benefit eligibility, process benefit related charges from hiring and firing, employee family status change information, maintain a call center, provide management reports, and provide system/database maintenance. The information processed is not derived from a common database.
2. Retirement Service Administration in part includes daily valuation record keeping via a common database, investment selection tools, investment performance monitoring, employee communication, interactive Web Site, call center, loan withdrawal processing, rollover processing, disbursement processing, and management reports. The service involves processing client data and also relies on external data such as security prices.
3. Cobra and Flex Spending Account Administration in part consists of processing open enrollment documents, initial COBRA notifications, setup participants into COBRA services, administering enrollments, billing and carrier interaction for clients, issue documents to participants, collect payments from participants, furnish reports, and management of established accounts. Flexible Spending Account Administration includes enrollment processing, employee contribution administration, summarizing activity by employee and forfeiture reporting. The petitioner receives the data from the client and arranges it into manageable records.
4. Pre-employment Screening and Selection Service Administration in part includes criminal record checks, worker compensation history, motor vehicle records, employment and personal reference checks, credit histories, and verification of education. The petitioner obtains background information through source document retrieval, public record database searches, and a network of third-party couriers. The information is not proprietary in nature, and is equally available to other parties.

Ruling

The department ruled that pursuant to Section 1105(c) (1) the information services outlined in 1,2,and 3 are personal and individual in nature and therefore exempt from tax. In addition the services are not enumerated as taxable in Section 1105.

The pre-employment Screening and Selection Service is not personal and individual in nature because it comes from public record databases and national network third party couriers. The information obtained is equally available to other parties and may be substantially incorporated in reports furnished to other persons and is therefore a taxable information service pursuant to Section1105( c) (1).

Read the full advisory opinion here.

(New York Office of Tax Policy Analysis Technical Services Division, Advisory Opinion, TSB-A-04 (25)S November 12, 2004)

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