ADP Automotive Claims Services, Inc. v. Tax Appeals Tribunal

• Decision Date: 04 March 1993
• Citation: 594 N.Y.S.2d 96,188 A.D.2d 245
• Parties: Matter of ADP AUTOMOTIVE CLAIMS SERVICES, INC., Formerly Known as ADP Collision Estimating Services, Inc., Petitioner, v. TAX APPEALS TRIBUNAL et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 96

594 N.Y.S.2d 96

188 A.D.2d 245

Matter of ADP AUTOMOTIVE CLAIMS SERVICES, INC., Formerly

Known as ADP Collision Estimating Services, Inc., Petitioner, v. TAX APPEALS TRIBUNAL et al., Respondents.

Supreme Court, Appellate Division,

Third Department.

March 4, 1993.

Morrison & Foerster (Arthur R. Rosen, Saul Heckelman and Craig B. Fields of counsel), New York City, for petitioner.

Robert Abrams, Atty. Gen. (Daniel Smirlock and Nancy A. Spiegel, of counsel), Albany, for Com'r of Taxation and Finance, respondent.

Before WEISS, P.J., and LEVINE, MAHONEY, CASEY and HARVEY, JJ.

MAHONEY, Justice.

Proceeding pursuant to CPLR article 78 (initiated in this court pursuant to Tax Law § 2016) to review a determination of respondent Tax Appeals Tribunal which sustained a sales and use tax assessment imposed under Tax Law articles 28 and 29.

Petitioner operates a computer-generated information service known as Audatex which, among other things, assists its customers (predominately insurance companies and automotive repair shops) in the preparation of automobile damage appraisals. The process works as follows. An appraiser employed by the customer performs an actual inspection of the damaged vehicle, fills out an Audatex worksheet listing the vehicle's make, model and year, identifying the damaged parts, indicating whether the damaged parts can be repaired or must be replaced ¹ and delineating the hourly labor rate. This worksheet is then transmitted to Audatex. Upon receipt, the Audatex computer, which contains a database of descriptions, stock numbers and prices of manufacturers' parts and estimated installation times, automatically "looks up" the parts, pricing and labor times, eliminates labor time attributable to included operations or overlap ², adds this information to the worksheet, performs the necessary mathematical calculations and generates a cost estimate for repair of the damage. This estimate is then transmitted to the customer.

While it is undisputed that the cost estimate can be prepared manually inasmuch as information contained on the Audatex computer regarding description, number, price and estimated labor time is readily available in widely circulated publications such as the Crash Estimating Guide, petitioner's service is attractive because it eliminates the necessity of having to look up the cost of each particular part, the labor time and having to determine how much, if any, of the labor time must be eliminated as an included operation or overlap. In addition, it reduces mathematical calculation errors and increases appraiser productivity by freeing them up to inspect more vehicles. In addition to the foregoing service, Audatex also offers management reports to its insurance company customers. These reports contain statistical breakdowns of the cost estimates Audatex has prepared for a particular customer and are used by the customer to compare the relative efficiency of its various appraisers.

In 1985, the Department of Taxation and Finance conducted an audit of petitioner and concluded that because the cost estimate reports were generated from a common data bank which was not confidential and was widely accessible, they and the management reports constituted taxable information services within the meaning of Tax Law § 1105(c)(1). Accordingly, it issued three notices of determination covering the period September 1, 1982 to November 30, 1986 seeking past due sales taxes and interest totaling approximately $489,000. The notices of determination were upheld by the Division of Tax Appeals and respondent Tax Appeals Tribunal, prompting petitioner to seek review here.

Under Tax Law § 1105(c)(1), the "furnishing of information * * * including the services of collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons" is subject to sales tax. This rule is subject to exception, however, in situations where, inter alia, the information furnished "is personal or individual in nature and * * * is not or may not be substantially incorporated in reports furnished to other persons" (Tax Law § 1105[c][1]. Here, petitioner urges that neither the cost estimates nor the management reports qualify as information services within the meaning of Tax Law § 1105(c)(1) and, even if they do, they meet both necessary elements of the exclusion. We disagree.

Addressing first the cost estimate service, because Audatex simply does not convert the information received from the appraisers from one form into another but affirmatively analyzes it, adds information regarding cost and labor time and generates a report which contains intelligence that the customer did not have originally, there can be little doubt but that this service falls within the definition of information services upheld in Matter of Finserv Computer Corp. v. Tully, 94 A.D.2d 197, 198-199, 463 N.Y.S.2d 923, affd. on opn. below, 61 N.Y.2d 947, 475 N.Y.S.2d 279, 463 N.E.2d 620. It is likewise evident that this service lacks the characteristics necessary to qualify for the exclusion. While, admittedly, the cost estimates are customized to each particular situation, it is now clear that this is not the sole determinative factor by which the status of a service as personal or individual in nature is...