New York Judge Rules Job Applicant Verification Services Not Subject to Sales Tax

On October 6, 2022, Administrative Law Judge Kevin R. Law of the New York Division of Tax Appeals ruled in favor of the petitioner regarding a December 2018 assessment just shy of $140,000 for certain business activities. Employment Screening Services, LLC provides screening services for its clients, including identification, education, and professional verification. Criminal, bankruptcy, and drug screening services are also available. The data compiled in the reports produced by the petitioner are only provided to the client requesting the service.

The state contended that the services provided by the petitioner, Employment Screening Services, constituted protective and detective services subject to sales tax under NY Tax Law § 1105 (c)(8), or, in the alternative, were subject to sales tax as information services under NY Tax Law §§ 1105 (c) (1) and (9). Judge Law found that, by definition, Employment Screening Services is providing an information service. However, the petitioner’s activities qualify for a narrow exemption for furnishing information that is personal or individual in nature and may (or may not be) substantially incorporated in reports furnished to other persons, or clients, in this case. In his opinion, Judge Law stated that the reports were, by definition, individual and personal in nature because they were tailored and customized based upon a specific applicant.

We will keep you updated with future information service developments.

TECHNICAL INFORMATION CONTACTS:

Tony Gulotta
Principal
Ryan
212.871.3901
tony.gulotta@ryan.com

Brian Stromen
Principal
Ryan
763.445.4200
brian.stromen@ryan.com

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.