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Understanding how information services are treated under New Jersey’s Sales and Use Tax is important for businesses that sell access to data, reports, databases, subscription services, or related digital offerings to customers in the state. Unlike many general services, New Jersey taxes certain categories of information services, and the taxability depends on what the customer is actually purchasing.
What Are Information Services?
In New Jersey tax law, information services are defined as the furnishing of information of any kind that has been collected, compiled, or analyzed by the seller, and provided to the purchaser through any method or medium, unless the information is personal or individual and not incorporated into a report furnished to others. This means the key question is whether the buyer is primarily paying for the data itself, rather than for other services tied to it.
When Information Services Are Taxable
Effective October 1, 2006, the sale of information services delivered to customers in New Jersey became subject to the state’s sales and use tax (New Jersey’s current combined tax rate is 6.625%).
To be taxable:
- The information must be collected, compiled, or analyzed by the seller.
- It must be provided through a medium: a physical report, online access, a subscription database, email, etc.
- The purchaser’s primary object in the transaction must be the information itself.
Examples of taxable information services include:
- Mailing lists delivered in hard or electronic copy.
- Credit reports are sold to businesses or individuals.
- Subscriptions to statistical or research databases accessible online.
- Weather alerts, legislative tracking services, and industry trend reports are delivered for a fee.
Essentially, when the deliverable is a data feed, report, analysis, or compiled information set, it is treated as an information service subject to sales tax.
When Information Services Are Not Taxable
Not all services involving information are taxable. New Jersey explicitly excludes services where information gathering or compilation is incidental to a larger professional or custom service, such that the information itself is not the primary object of the transaction.
Common examples that are not treated as taxable information services include:
Legal Services: Attorneys routinely gather facts, conduct legal research, and prepare written documents, including contracts, wills, and court filings. Even though these services involve compiling and analyzing information, clients are not paying for the information itself. Instead, they are paying for the attorney’s legal expertise, judgment, and advice. The research and documents are simply tools used to deliver legal representation, which is why legal services are not treated as taxable information services in New Jersey.
Professional Services (Accounting, Engineering, Consulting, and Payroll Processing): Many professional services depend heavily on data and records. Accountants review financial statements, payroll providers process employee information, consultants analyze business metrics, and engineers evaluate technical data. In each case, the information collected supports professional decision-making and the development of customized solutions. Clients are purchasing expert guidance, compliance support, or strategic recommendations, not access to raw data or reports, making these services generally non-taxable.
Real Estate Appraisals and Inspections: Real estate appraisers and inspectors produce written reports, but those reports are only one component of a broader professional service. The real value comes from on-site evaluations, market knowledge, and professional conclusions about a property’s value or condition. Because the report reflects professional judgment rather than a sale of compiled information, these services are typically excluded from taxable information services.
Multiple Listing Services (MLS): Multiple Listing Services allow real estate brokers to share property listings, coordinate transactions, and cooperate within the industry. MLS platforms are designed to facilitate professional collaboration rather than sell information as a standalone product to consumers. As a result, MLS access is generally not treated as a taxable information service under New Jersey law.
In these cases, even though information is collected and used, the true object of the payment is the professional service, not the information by itself.
Personal or Individual Information Exception
The law also carves out an exception for purely personal or individual information that is not incorporated into reports furnished to others. For instance:
- Internal analytics or customer behavior reports that a service provider generates only for the contracting customer may not be taxable if they are not provided to others.
Impact on Digital and SaaS Providers
The rise of digital services and cloud-based tools has raised questions about whether software and online platforms are subject to sales tax in New Jersey. Generally:
- SaaS (Software-as-a-Service) offerings are not taxable unless they qualify as a taxable information service, meaning the transaction delivers compiled or analyzed information to the customer rather than simply providing remote access to software.
- Platforms that deliver compiled data, such as legal research tools (e.g., LexisNexis, Westlaw) or curated analytics, are likely taxable because the buyer is essentially purchasing the information content.
Practical Implications for Businesses
For businesses selling digital products, reports, or data-driven services to customers in New Jersey:
- You must determine whether your primary deliverable is information itself or a broader service that uses information only incidentally.
- If taxable information services are provided to customers in New Jersey, you are responsible for registering for sales tax, collecting it from your customers, and remitting it to the state.
- Misclassifying a taxable information service as exempt can lead to compliance issues and potential penalties.
Conclusion
In New Jersey, information services are a specific category of services that are generally taxable when the product sold is compiled or analyzed information delivered for customer use. However, when data gathering is part of a broader professional or custom service, and the information itself is not the object of the sale, the transaction may be exempt from sales tax.
Understanding this distinction is critical for companies offering digital content, analytics, subscription databases, and data-driven tools to customers in New Jersey. Accurate classification helps ensure proper sales tax compliance and financial reporting.
If you’re unsure how New Jersey sales tax rules apply to your business, professional guidance can help you avoid costly mistakes. At The Chamberlain Accounting Firm, we provide accounting, bookkeeping, and tax return services for individuals and businesses throughout Bergen County, New Jersey, and surrounding communities, as well as in other states, and maintain efficient and compliant financial operations. Contact us today or call us at (201) 464-1011 for trusted support.
Disclaimer: This article is provided for general informational purposes only and does not constitute accounting, tax, or financial advice. The information contained herein is not intended to be relied upon for specific tax, accounting, or financial decisions, and may not reflect current tax law or guidance. No opinion expressed herein may be used for the purpose of avoiding penalties under federal, state, or local tax laws. Readers should consult with a qualified accounting or tax professional regarding their specific circumstances. This communication does not create an accountant-client or advisory relationship.
