New York Addresses the Taxation of Information Services


On July 19, 2010, the New York State Department of Taxation and Finance ("Department") issued TSB-M-10(7)S addressing the sales and compensating use tax imposed on information services. The Department has characterized the memorandum as an attempt to clarify the application of the primary function analysis used to determine whether a service is an information service. While the new guidance provided by the Department pays lip service to the primary function analysis, in reality it pre-supposes that the primary function of certain services is providing information, thus transforming the primary function test from a subjective to an objective analysis. The Department's position is in clear conflict with prior precedent on this issue.

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