A taxpayer’s services measuring the effectiveness of advertising campaigns constitute taxable information services, according to a Jan. 14 ruling by the New York Division of Tax Appeals.

The taxpayer measured its clients’ advertising effectiveness using end user surveys. The taxpayer provided the resulting data to its clients with corresponding analysis. While the taxpayer retained the rights to copy, distribute, resell, modify and otherwise use the data it collected from end users, its clients were authorized to furnish the survey data to third parties. The taxpayer also offered a subscription-based ad effectiveness benchmarking product, which was powered by anonymized and aggregated results from the surveys. The benchmarking product allowed subscribers to compare the effectiveness of their advertising campaigns to industry peers.

The New York Division of Taxation audited the taxpayer and took the position that the taxpayer’s services constituted taxable information services under Tax Law § 1105(c). The taxpayer took the position that it furnished nontaxable consulting services where the information provided was merely a component of the service.

In ruling against the taxpayer, an administrative law judge held that the taxpayer’s services fell “squarely within the realm of Tax Law § 1105(c),” explaining that the “process of collecting, compiling and analyzing information is the very essence of an information service.” Additionally, the judge noted that the relevant regulation provides that  “[t]he collecting, compiling or analyzing information of any kind or nature and the furnishing reports thereof to other persons is an information service,” including, “analysis reports and product and marketing surveys.” 20 NYCRR 527.3(a)(2), (3).  Further, the fact that the survey data could be shared by the taxpayer’s clients and was included in the benchmarking product rendered the statutory exclusion for “the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons” inapplicable.

In the Matter of Dynamic Logic, Inc. (By Kantar LLC, as Successor-in-Interest), DTA No. 828619 (N.Y. Div. Tax App., ALJ Det’n Jan. 14, 2021).