Matter of Savemart, Inc. v. State Tax Comm’n, 69 N.Y.2d 787 (1987)

The sale of customer lists in the bulk sale of a fuel oil distribution business is not subject to sales tax under Tax Law § 1105(c)(1) unless the seller is in the business of furnishing information.

Summary

This case addresses whether the sale of customer lists during the bulk sale of fuel oil distribution businesses is subject to sales tax under New York Tax Law § 1105(c)(1). The New York Court of Appeals held that the transfer of customer lists in these circumstances is not taxable because the sellers were not in the business of furnishing information. The court distinguished the situation from cases where businesses specifically compile and sell mailing lists or other information as their primary function.

Facts

Several fuel oil distribution businesses were sold in bulk sales of assets. As part of these sales, customer lists were transferred to the purchasers. The State Tax Commission assessed sales tax on the transfer of these customer lists under Tax Law § 1105(c)(1).

Procedural History

The taxpayers challenged the sales tax assessments. The Appellate Division’s judgment was reversed. The petition was granted, the determination of the State Tax Commission was annulled, and the matter was remitted to the Supreme Court, Albany County, with directions to remand to the State Tax Commission for further proceedings.

Issue(s)

Whether the transfer of customer lists in the bulk sale of a fuel oil distribution business constitutes the taxable furnishing of information under Tax Law § 1105(c)(1).

Holding

No, because the sellers were not engaged in the business of furnishing information, and the customer lists were not prepared at the purchaser’s request.

Court’s Reasoning

The court focused on the language of Tax Law § 1105(c)(1), which imposes a tax on:

“(c) The receipts from every sale, except for resale, of the following services:
(1) The furnishing of information by printed, mimeographed or multigraphed matter or by duplicating written or printed matter in any other manner, including the services of collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons, but excluding 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”.

The court emphasized that the statute and related regulations indicate that it is the sale of the service of furnishing information by a business whose primary function is to collect and disseminate information which is taxable, and not the mere sale of information incidentally.

The court distinguished the case from situations where businesses specifically compile and sell mailing lists or other information as their primary function, citing Matter of Mertz v State Tax Commn., 89 AD2d 396, Names in the News v New York State Tax Commn., 75 AD2d 145, and Matter of Drey Co. v State Tax Commn., 67 AD2d 1055. In those cases, the sale of mailing lists was deemed taxable because the businesses were in the business of providing such lists.

The court distinguished this case from Matter of Long Is. Reliable Corp. v Tax Commn., 72 AD2d 826, lv denied 49 NY2d 707. In the present case, the seller was not engaged in the business of furnishing information, and the record indicated that the seller did not prepare the customer list at the purchaser’s request.

The court concluded that because the fuel oil businesses were not in the business of furnishing information, the transfer of customer lists was not taxable under section 1105(c)(1). The critical factor was the nature of the seller’s business and whether the furnishing of information was its primary function.