The Appellate Division, Third Department, affirmed the Tax Appeals Tribunal’s decision that a taxpayer was providing taxable information services for sales tax purposes.  The taxpayer provided services that measured the effectiveness of its customers’ advertising campaigns.  The services included providing a report analyzing surveys of customers/internet users, including a comparison of the client’s campaign results with industry specific benchmarking data from a database in which the taxpayer’s survey responses were aggregated and anonymized. The taxpayer also provided advice and recommendations for improving advertisement effectiveness.

The Appellate Division applied a rational basis standard of review and deferred to the Tribunal’s decision. First, the Appellate Division affirmed the Tribunal’s holding that the taxpayer provided information services and not consulting services because the primary function of the services was to collect and analyze information. Second, the Appellate Division affirmed the Tribunal’s holding that the services did not fall within the sales tax exclusion for information services furnishing information that “is not or may not be substantially incorporated in reports furnished to other persons” under Tax Law § 1105(c)(1), as portions of the taxpayer’s database data generally appeared in the reports furnished to customers.

Matter of Dynamic Logic, Inc. v. Tax Appeals Tribunal of the State of N.Y., 2024 NY Slip Op 01136, (App. Div.).