New York State Sales Tax Memo

August 27, 2010

Several weeks ago the NYS Department of Taxation and Finance (the Department) advised us that the sale of abstracts of title and certain other information services will be subject to sales tax starting on September 1, 2010. This amounts to a complete reversal of long standing Department policy. (For a full copy of Technical Support Bulletin TSB-M-10(7)S, dated July 19, 2010, please go to www.nystax.gov).

Although representatives of the title industry are still continuing to speak to the Department to work out complete details as to the administration and implementation of the tax, starting on September 1, 2010, certain ground rules are clear.

First, and foremost, title insurance premiums are not subject to sales tax. Concurrently, at the present time in the Eastern and Downstate areas of New York State, sales tax paid by Globe Title, or any other title insurer, on its purchase of an abstract of title or tax search which is used as the basis for an insurable title product, can not be passed along to the insured party. An insurable title product would be, for example, an Owners or Loan Title Policy, Cooperative Leasehold Policy, or any endorsements thereto.

However, various searches furnished as part of our Title Report, such as C/Os, H&B, Fire, Sewer, etc., are subject to sales tax, which tax must be paid as part of the closing bill. The tax charged will be the sales tax rate in effect for the County where the closing takes place. This result applies, notwithstanding that the rate charged is higher than the rate in effect for a) the County where the property is located, b) Nassau County, where Globe Title is located, or c) the County where your office is located!

Additionally, non-insured title products, such as Attorney Searches, Judgment & Lien Searches, uninsured Cooperative Lien Searches, Special Searches, or any type of Accommodation Search (including copies of documents) will incur a sales tax on the full cost of the search that is billed to you or your client, the rate being that in effect at the point of delivery – generally your office. Furthermore, unlike those taxable items discussed above which are appurtenant to an ultimately insured Title Report, the sales tax on these non-insured title products is due upon delivery of the product to you or your client. Thus, we apologize for any inconvenience or burden this may place upon you or your client.

The one bright spot in all this is that recording charges, service charges to record documents, surveys and survey inspections, are not currently subject to sales tax.

Needless to say, I have yet to speak to anyone in the title industry who is the least bit pleased with the change in the Department’s policy. One last note, based upon the answers we are receiving from the Department to our own questions, the above is a preliminary analysis only. We will continue to keep you updated as we receive more clarification from the Department.

Of course, if you have any questions regarding this memo, do not hesitate to contact me.

Most importantly, if I don’t speak to you in the next week or so, enjoy your Labor Day weekend.