NYS TRIBUNAL REVERSES ALJ AND HOLDS THAT BOND RATING AGENCY IS ENTITLED TO REFUND OF SALES TAX -

The New York State Tax Appeals Tribunal reversed the determination of an Administrative Law Judge and held that a securities rating agency was entitled to a refund of erroneously remitted sales tax. Matter of Kroll Bond Rating Agency, Inc., DTA Nos. 826900 & 827411 (N.Y.S. Tax App. Trib., Oct. 1, 2018). In ruling for the rating agency, the Tribunal concluded that the agency had established that it, and not its customers, had paid the sales tax for which a refund was sought.

Facts. Kroll Bond Rating Agency, Inc. (“Kroll”) is a small securities rating agency that was formed in 2010 to compete with larger rating agencies like Standard & Poor’s and Fitch. Kroll negotiated its fees for its rating services individually for each customer, and memorialized those fees in an engagement agreement. The engagement agreements did not contain any mention of sales tax. Although it understood that the industry practice was not to collect New York sales tax on rating services, Kroll was nevertheless unsure whether the services it provided were properly subject to sales tax. Therefore, in March 2012, Kroll requested an Advisory Opinion from the New York State Department of Taxation and Finance.