Securities Rating Agency Not Entitled to Refund of Erroneously Remitted Sales Tax -

A New York State Administrative Law Judge upheld the denial of a securities rating agency’s request for a refund of sales tax, holding that the rating agency failed to prove that it did not collect the sales tax from its customers and to prove that it had refunded such amounts to those customers. Matter of Kroll Bond Rating Agency, Inc., DTA Nos. 826900 & 827411 (N.Y.S. Div. of Tax App., Oct. 5, 2017).

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 with each customer, and memorialized those fees in an engagement agreement. Although Kroll understood that the industry practice was not to collect New York sales tax on rating services, it was nevertheless unsure whether the service it provided was properly subject to sales tax. Therefore, on March 8, 2012, it requested an Advisory Opinion from the New York State Department of Taxation and Finance.